3.2.3 Flashcards
what are stakeholders
groups or individuals who have an interest in a business.
internal stakeholders
employees
managers
shareholders
employees and managers
- good income
- job security
- safe working conditions
- opportunity for development/ promotion
- meet their targets
shareholders
return on investment
increased value of shares
ethical business practices
growth of the company
external stakeholders
suppliers
customers
local community
government agencies
suppliers
regular trade
fair prices
paid on time
customers
reliable products
good service
value for money
clear and fair pricing
local community
employment investment in local area
no pollution
government agencies
abide by legislation and rules
fair and open trade
employment opportunities
tax
shareholder v stakeholder concept
The concept of managing stakeholder expectations is closely linked to that of social responsibility. Meeting the needs of stakeholders, especially the external stakeholders, encourages ethical practices by reducing the negative impact of a business’s decisions on a third party.
downsides with meeting stakeholders needs
Meeting stakeholders’ needs can be expensive and time-consuming. Indeed, it can often compromise profitability in the short term. For example, investing in employee medical cover may benefit the business in the long run, but will increase short-term costs. The major conflict that many large businesses face is focusing on the needs of shareholders or the wider stakeholder groups.
overlapping and conflicting interests
Sometimes stakeholder interests are aligned, but often satisfying one set of needs can lead to conflict elsewhere.
stakeholder mapping
A stakeholder map is a tool to assess the interest and power of stakeholders in order to make decisions about how to manage them.
keep satisfied
May be key customers who account for a significant percentage of sales. Keep them happy, consult and involve them in key decisions.
keep informed
Perhaps local residents who are concerned with the business actions.
Communicate key decisions only. Possibly consult on low-impact decisions.
manage closely
High power but low interest. May be key shareholders who are only interested in return on investment. Satisfy needs but try to increase their interest and involvement in the business.
monitor
Minimal effort - make sure information is available to this group through newsletter or website.
The likelihood of stakeholder conflict can be reduced through
effective communication and in some circumstances consultation.
partnership
- decisions taken jointly
- implement actions together
- shared responsibility
participation
- extensive two-way communication
- given responsibility for certain decisions
consultation
- collect views / opinions
- share ideas as proposals
push communication
- inform
- one-way communications
- emails, newsletters, mailshots
pull communication
- information available for stakeholders if they choose to access e.g. website
internal influences on stakeholder relationships
management and leadership
objectives
size /ownership
management and leadership
Differing leadership styles will determine how managers view employees.
objectives
Profit objectives will be more aligned to shareholder interests.
Growth objectives may be more aligned with employees interests.
size/ownership
A sole trader will not have the pressures of meeting shareholder expectations and may not have as big an impact on the local community.
external influences on stakeholder relationships
market conditions
stakeholder power
government policy
market conditions
Demand and the
competitiveness of a market will change the priorities of a business.
stakeholder power
Majority shareholders and key customers will be given greater focus than a
stakeholder with limited power to influence the business.
government policy
A business will have to meet its legal requirements, no matter how this impacts its stakeholders.
For example new employment legislation.
