1.5.1 Business Stakeholders Flashcards
Business stakeholder:
any individual/organisation who has a vested interest in the activities and decision making of a business
What can stakeholders be grouped into?
- Internal (internal to the business)
- Connected (connected by a relationship based on a contract)
- External (relationship not based on a legal contract)
Examples of internal stakeholders:
- employees
- managers
- shareholders/owners
Examples of connected stakeholders:
- customers
- suppliers
- creditors (who the business owes money to)
Examples of external stakeholders:
- competitors
- government
- society/the wider community
What is the difference between a stakeholder and a shareholder?
- stakeholders have an interest in the business
- don’t own the business
- they may work work for or transact with the business
- shareholders own the business
- they may also work with in the business
- mainly interested in growing the value of their shareholding
- a shareholder is an example of a stakeholder
Possible conflicts between stakeholder groups:
- different stakeholders may want different things from a business, which means that there could beconflictbetween them - overcoming a conflict will often requirenegotiationand willingness tocompromise
- The owners of a retail business decide to grant permission to extend the business’ opening hours on weekdays - owners believe this will increase profits, but the decision is likely to cause conflict with the other stakeholders
- managers might have to work longer hours
- employees may need to work different shifts, including working later
- some customers may want even longer opening hours, eg 24 hours a day
- suppliers could impact their customers by changing delivery routes and times
- the local community could be disturbed by increased traffic and noise
- pressure groupsmay be unhappy if longer opening hours are against their cause, eg groups promoting families spending more time together or improved work-life balance
- the government may require additional resources to monitor the impact on the local area, eg additional policing to deal with any shoplifting that takes place later in the evening
- no business can ignore its customers - if it can’t sell its products/services it won’t survive
- a business may want to hold onto its money for as long as possible, but suppliers will become unhappy if they’re not paid on time
- if a business doesn’t have happy workers it may become unproductive
- but a company may not mind being unpopular in the local community if it sells most of its products somewhere else
Who is a shareholder and what do they decide?
- owners of the business (in a limited company) - most important stakeholder
- decide what happens to the business and make a profit if the business is successful
What are the objectives of shareholders (in relation to the business)?
- owners - most important stakeholder
- high share price
- return on investment + profits and dividends
- success and growth of the business
- proper running of the business
How are shareholders/owners affected by business activity?
- may not decide to grow the business and authorise opening new stores
- will expect to see sales increase over time
- however, opening a new store will cost money, which may affect profits in the short term and could affect the amount of dividends they will receive
How do shareholders/owners impact business activity?
- Owners have the most impact, as they make decisions about the activities of the business and provide funding to enable it to start up and grow
- Shareholders influence the objectives of the business
What are the objectives of managers (in relation to the business)?
- rewards, including basic pay and other financial incentives
- job security and working conditions
- promotion opportunities + job satisfaction & status - motivation, roles, responsibilities
- good working wage
- benefit most when objectives of a business are based on profitability, growth and ethics
How are managers affected by business activity?
- take on additional responsibilities and set new targets
- may have opportunities for career progression, and could become demotivated if they are not given such opportunities
How do managers (owners) impact business activity?
- managers make some recommendations and decisions that influence the business’ activity
What are the objectives of employees (in relation to the business)?
- rewards, including basic pay and other financial incentives
- job security and working conditions
- promotion opportunities + job satisfaction & status - motivation, roles, responsibilities
- good working wage
When do employees benefit the most from a business?
- benefit most when objectives of a business are based on profitability, growth and ethics
How are employees affected by business activity?
- have increasedjob security as a business grows
- could also have opportunities for promotion to new roles
- some employees could feel resentful if they are not offered opportunities
How do employees impact business activity?
- employees may have a limited amount of influence on business decisions
- however, they can also affect the business directly, e.g. by refusing to work or not working as well as they should
What are the objectives of customers (in relation to the business)?
- value for money
- product quality and customer service
- benefit when business objectives based on customer satisfaction
How are customers affected by business activities?
- will benefit from having more choice about where to shop, but they may remain loyal to existing businesses
- through good marketing activity by the business, some may be tempted to try the new store
How do customers impact business activity?
- customers buy products and services and give feedback to businesses on how to improve them
- customers are also able to influence others by recommending the business to friends or by warning them against using the business
What are the objectives of suppliers (in relation to the business)?
- if business/firm is profitable and grows they’ll need more materials and the supplier will get more business
- so suppliers benefit most when firm sets objectives based on profitability and growth
How is a business related to a supplier?
- a firm/business buys its raw materials from suppliers
How are suppliers affected by business activity?
- benefit from increased orders to equip and stock the new store, which might lead to an increase in their profits
- if they are unable to cope with the extra demand, there is a risk that the business will use other suppliers
How do suppliers impact business activity?
- Suppliers can have a significant impact on a business if there are any changes in the quality of the goods they supply or the reliability of their deliveries
What are the objectives of the local community (in relation to the business)?
- local community where business is based will suffer if firm causes noise and pollution
- may gain if the firm provides good jobs and sponsors local activities
- if business employees local people, these employees will then have more money to spend in local shops - good for local economy
- so local community may benefit most when objectives are based on minimising environmental impacts, ethical considerations, growth and profitability
How is the local community affected by business activity?
- will benefit as a new store is likely to bring new jobs
- however, they may be unhappy with increased traffic or noise
How does the local community impact business activity?
- if a business affects a large number of local residents negatively, they may protest or object through the local council
- they can also support businesses by buying products and services
What is a pressure group and what can they do?
- an organisation that tries to influence what people think about a certain subject
- can influence the decisions a firm makes by creating bad publicity for the firm if they don’t agree with the firm’s actions
What are the objectives of pressure groups (in relation to the business)?
- ethical considerations
- minimising environmental impacts
How are pressure groups affected by business activity?
- may protest against the new store if they feel their cause is adversely affected, eg if the store would increase pollution
- this could deter other businesses from coming to the area
How do pressure groups impact business activity?
- pressure groups can improve working conditions for employees and help them to get fair pay
- they can also try to influence customers’ opinions of a business
What are the objectives of the government (in relation to the business)?
- the gov will receive taxes if the firm makes a profit
- the more profits a company makes the more they will have to pay the gov in taxes
- gov may benefit most when business objectives based on profitability, growth, or job creation
How is the government affected by business activity?
- may be pleased to see new jobs being created and may expect to see increases in tax revenues as a result
- however, other businesses could lose customers, which would reduce their profits and the tax they have to pay as a result
How does the government impact business activity?
Governments can pass new laws, change tax levels or amend levels of government spending in ways that affect the business, e.g. by providing increased grants or funding
Examples of stakeholders:
- Shareholders/owners
- Managers
- Employees
- Customers
- Suppliers
- Local Community
- Pressure Groups
- The Government
- Trade Unions
- Competitors
- The media
