Business Organisation

&EnvironmentStakeholders

1

Stakeholders

• Person or organization that has a

direct interest in and is affected by the

performance of a business

• They include owners, managers,

employees, customers, suppliers,

investors, competitors, the local

community and the government2

Stakeholders

3

Internal Stakeholders

They are members of the organization

i.e. employees, shareholders (owners),

managers and directors.

4

Employees

They have a stake (an interest) in the

organization they work for.

They strive to improve on their pay

and other financial benefits, working

conditions, job security, training, etc.

These can only be offered to

employees if the business is

performing well.5

Managers and Directors

People who plan, organize and

control the daily running of the

business.

Directors are senior executives who

are elected by the company’s

shareholders to oversee business

operations. 6

Senior managers and directors will

aim to maximize their own benefits

such as their annual bonuses and

other perks, and therefore they are

likely to aim for profit maximization

for the company.

7

Shareholders (Stockholders)

Owners of the private and public

limited companies by purchasing

shares in these companies.

Shareholders have two main objectives

and that is maximize on the share

dividend payments and achieve a rise

in the value of the share price (known

as capital gains).8

External Stakeholders

They do not form part of the business

i.e. customers, suppliers and the

government but have a direct interest

or involvement in the action of the

organization.

9

Customers The key stakeholder group who determines

the financial performance of a business.

No business can survive without customers,

they are the ones who provide a business

with revenues.

Customers can simply choose to spend their

money elsewhere, threatening the survival

of a business. So it is vital that business pay

attention to the needs of their customers.10

Suppliers

Provide stocks of raw materials,

component parts, finished goods and

other resources for production.

Also provide business services such as

maintenance and technical support.

Aim for regular contracts with clients at

good prices and request that customers

pay their outstanding bills on time.11

Competitors

Rival businesses of an organization,

interested in the activities of a business

for several reasons:

Incentive to be innovative and produce

new products

Remain competitive, respond to rival

businesses

Benchmark performance, compare

performance

12

Government

Have a significant influence on business

behaviour.

Ensure that there is no unfair business

practices, health and safety standards

at work are met, correct payment of

corporation tax, employment legislation

and consumer protection laws are being

upheld, etc

13

Pressure Groups Consist of individuals with a common interest

who seek to place demands on organization to

act in a particular way or to influence a

change in their behaviour.

Try to achieve their objectives by aiming to

influence government policy, such as lobbying

for a change in legislation, e.g. include

organizations set up to protect the

environment, campaigning against smoking,

deforestation, etc 14

Local Community

Places demands on the businesses that

operate in their community e.g. job

creation and opportunities, need to be

considerate of the local environment,

sponsorship of local and fund-raising

events, etc.

These considerations are paramount to the

local community’s acceptance of

businesses setting up in the area.15

Stakeholders’ Conflicts

Different stakeholder groups have

varying interests in an organization

and therefore conflict will arise.

Business cannot necessarily meet the

needs of all its stakeholders

simultaneously

16

Sources of Conflicts

If owners want more profit, may

need to cut staff benefits, this will

upset employees;

If suppliers want payment on time

and full price in one transaction, this

may harm cashflow of the business,

conflict may arise between the

business and its suppliers. 17

Other source of potential conflict is

that some stakeholders have more

than one interest in an organization

e.g. managers who are employees of

a company, may also be shareholder

of the company; a customer is also

likely to be a member of the local

community

18

Stakeholders and CUEGIS

19

Most strategies aim for a ‘best fit’

compromise so that the needs of all

stakeholder groups are reasonable

addressed.

The outcome of any negotiation

Stakeholders and CUEGIS

20

Stakeholder Mapping Model

Using a stakeholder mapping model

(developed by Gerry Johnson and Kevan

Scholes), managers of a business can

assess how to deal with conflicting

stakeholder objectives and prioritize

their actions.

21

Assesses the relative interest of

stakeholders in a business and their

relative power (or influence) on business

behaviour. Stakeholder groups would be

placed into the grid as follows:

Level of interest

Level of

Power22

Low High

Low A (min effort)

B (keep informed)

High C (keep satisfied)

D (max effort)

Analyzing from the stakeholder mapping

model, it is likely that stakeholders in:

A will receive least attention from

decision-makers.

D will receive the most attention.

B just need to be kept informed.

C must be kept satisfied, perhaps by

consulting these stakeholders groups

on key decisions.23

Limitation of the stakeholder mapping

model is that it is static as relative

power and level of interest of

stakeholders is likely to change with

time e.g. environmental pressure

groups have gain much support in

recent times whereas the power and

image of many trade unions have

deteriorated.24

Use of Public Relations Firms

Another way to deal with stakeholder

conflict is to use public relations (PR),

using a good PR firm to handle negative

publicity.

They will publicize the good work that

the business is doing to repair or

promote good public relations. 25