Who stakeholders are and their objectives
A stakeholder is any individual or group with an interest in a business — anyone affected by what it does, or able to affect it.
The specification names eight, and each wants something different. Those differences are the whole point of the topic, because they are what produce the conflicts later.
Common mistake
Shareholders and stakeholders are not the same word or the same idea. Shareholders own part of the business and are one type of stakeholder; stakeholders include everyone with an interest, most of whom own nothing.
- Stakeholder
- any individual or group with an interest in a business — anyone affected by what it does, or able to affect it
Stakeholders and businesses
The relationship runs both ways, and the specification asks for both directions.
How stakeholders are affected by business activity. A decision to expand creates jobs for the community and orders for suppliers, but may bring traffic and noise. A decision to cut costs may mean redundancies for employees, lower prices for customers, and squeezed payments for suppliers. A decision to relocate can devastate one local community while benefiting another.
How stakeholders impact business activity. Influence flows the other way too, and some groups have far more of it than others:
• Customers can stop buying, which is the most direct power any stakeholder has. • Employees can leave, work less productively, or take industrial action. • Shareholders can vote out directors or sell their shares, pushing the share price down. • Suppliers can raise prices, delay deliveries or refuse credit. • Pressure groups can generate publicity that damages reputation and changes customer behaviour. • The government can pass laws, change taxes, or fine a business that breaks the rules. • The local community can object to planning applications.
Conflicts between stakeholder groups
Because stakeholders want different things, satisfying one often means disappointing another. A business cannot please everyone, and questions on this topic are usually asking you to show that.
Worked example
A supermarket decides to open a new store on the edge of a small town. Analyse the impact on two stakeholder groups with conflicting interests.
- Choose two groups likely to disagree, and say what each wants.
- The local community wants jobs and convenient shopping, so many will gain — but others want to protect existing shops and avoid extra traffic.
- Existing local shops, as competitors and part of the business community, may lose customers and close.
- Say how each group can act on it: the community can object to the planning application; customers decide the outcome by where they shop.
- Reach a judgement, because these questions ask you to weigh rather than list.
Answer: The local community gains jobs and cheaper, more convenient shopping, but also gets more traffic — and small local shops may lose enough trade to close, which costs other local jobs. The two conflict directly, and the outcome rests on customers: the store only harms local shops to the extent that local people choose to use it.
How businesses handle conflict, which is worth a line in an evaluation: they usually prioritise the stakeholders with the most power over them — customers and shareholders — while doing enough to keep others satisfied. Consulting stakeholders before a decision, and explaining the reasons, reduces opposition even when someone still loses out.
Before you practise
- The eight stakeholders: shareholders, employees, customers, managers, suppliers, local community, pressure groups, the government.
- Each wants something different, which is what creates conflict.
- Stakeholders are affected by business activity — jobs, prices, pollution, orders.
- Stakeholders also impact business activity — customers stop buying, employees leave, government legislates.
- Customers usually have the most direct power, because they can simply take their money elsewhere.
- A business cannot satisfy every stakeholder, so it prioritises those with most influence over it.
- Shareholders are one type of stakeholder, not a synonym for the word.