Business Stakeholders

This section explains Business Stakeholders. A business stakeholder is any individual or group that has an interest or concern in the activities and performance of a business. Stakeholders can be affected by the business's actions, and their actions can also impact the business in various ways. Understanding the role and needs of stakeholders is crucial for business management, as businesses must balance the often conflicting interests of different groups.

Types of Stakeholders

Stakeholders can be broadly categorised into two groups:

Internal Stakeholders

Internal stakeholders are individuals or groups within the business. They are directly involved in the operation of the business.

Employees: They work within the business and are affected by its decisions regarding wages, working conditions, and job security.

Owners/Shareholders: They invest in the business and expect to receive returns, usually in the form of dividends or capital growth.

Managers: They are responsible for running the business on a day-to-day basis and making decisions that affect its performance and direction.

External Stakeholders

External stakeholders are individuals or groups outside the business that can be affected by or have an influence on the business.

Customers: They purchase the products or services the business offers. Their satisfaction is crucial for business success.

Suppliers: They provide the raw materials, components, or services the business needs to operate. Their relationship with the business is important for maintaining consistent quality and supply.

Government: The government sets laws and regulations that the business must comply with (e.g., tax laws, health and safety regulations).

Community: The local community in which the business operates can be affected by issues such as environmental impact, job creation, or the business’s corporate social responsibility.

Banks and Investors: They provide financial resources to the business and expect a return on their investments or loans.

Stakeholder Objectives

Each stakeholder group has its own set of objectives. These objectives can vary greatly and sometimes even conflict with one another. Some common stakeholder objectives include:

Employees:

• Fair wages and benefits
• Job security
• Good working conditions
• Career development opportunities

Owners/Shareholders:

• Profit maximisation
• Increasing share value
• Long-term sustainability and growth of the business

Customers:

• High-quality products or services
• Competitive prices
• Good customer service

Suppliers:

• Fair payment terms
• Consistent orders and long-term relationships

Government:

• Compliance with laws and regulations
• Contribution to the economy through taxes and job creation

Community:

• Employment opportunities
• Positive environmental and social impact

How Stakeholders Are Affected by Business Activity

Business activities can impact stakeholders in different ways, depending on the nature of the business and its operations. Some examples include:

Employees: Business decisions regarding pay rises, job cuts, or changes in working conditions can significantly impact employees' satisfaction and loyalty.

Owners/Shareholders: A company’s financial performance directly affects shareholders, who may experience changes in dividend payouts and share values.

Customers: The quality of a product or service, pricing strategies, and customer service all affect customer satisfaction and loyalty.

Suppliers: A business’s purchasing decisions, payment terms, and order volumes can affect the financial stability and planning of suppliers.

Government: Government revenue is influenced by the taxes a business pays, as well as compliance with laws related to environmental standards, health, and safety.

Community: A business's operations may create job opportunities, but it may also cause negative impacts, such as pollution or traffic congestion.

How Stakeholders Affect Business Activity

Stakeholders can influence business decisions and actions. For example:

Employees: If employees are dissatisfied with working conditions, they may strike or protest, which can disrupt business operations.

Owners/Shareholders: Shareholders may demand changes in management or business strategy if they believe profits or share values are declining.

Customers: Customer feedback can drive product or service improvements. Businesses often adjust their offerings to meet changing customer preferences and demands.

Suppliers: Suppliers can affect business operations by altering the prices of raw materials or changing delivery schedules, which can impact a business's production process.

Government: Government regulations and policies (such as changes to tax rates or environmental laws) can force businesses to alter their operations.

Community: Community groups may pressure a business to adopt more environmentally friendly practices or contribute to local social initiatives.

Conflict Between Stakeholder Groups

Conflict between stakeholders is common because each group has its own objectives, which may not always align. Some examples of stakeholder conflict include:

Employees vs. Owners/Shareholders: Employees may demand higher wages or better working conditions, while owners or shareholders might prioritise profit maximisation and cost-cutting measures.

Customers vs. Suppliers: Customers may demand lower prices or higher quality products, putting pressure on suppliers to reduce costs or improve their services, which can strain the relationship.

Owners/Shareholders vs. Government: Business owners or shareholders may seek to minimise taxes or reduce compliance costs, while the government may introduce new regulations that increase costs.

Community vs. Business: The local community might protest against a business’s environmental practices, such as pollution or the use of non-renewable resources, which can affect the company’s public image and profitability.

Resolving Stakeholder Conflict

To manage and resolve conflicts, businesses need to engage in communication, negotiation, and compromise. Effective stakeholder management involves balancing the needs and interests of various groups to avoid damaging relationships and to ensure the long-term success of the business. Some strategies include:

Consultation: Businesses should involve stakeholders in decision-making processes, seeking feedback and addressing concerns.

Negotiation: In some cases, stakeholders may need to negotiate to find a middle ground that benefits all parties.

Corporate Social Responsibility (CSR): Businesses can adopt CSR strategies to demonstrate their commitment to social, environmental, and ethical practices, which can help mitigate conflicts with the community or government.

Conclusion

Understanding the different stakeholders in a business, their objectives, and how they are affected by business activities is essential for making informed business decisions. Conflicts between stakeholders are inevitable, but effective communication and stakeholder management can help balance interests and contribute to the long-term success of the business.