3.2.3 Understanding the role and importance of stakeholders

Question 1

Stakeholder

Answer 1

• An individual or group which has an interest in the activities and performance of an organisation
• E.g. Customers, Employees, Governments

Question 2

Internal Stakeholders

Answer 2

Groups inside the business (owners, shareholders) that have direct control

Question 3

External Stakeholders

Answer 3

• Everyone other than internal stakeholders, they have indirect control
• E.g. Pressure groups - banks, local community

Question 4

Primary stakeholder

Answer 4

Have a direct relationship with the business

Question 5

Secondary stakeholder

Answer 5

Have an indirect relationship with the business, although affected by the actions of the business

Question 6

Key stakeholder

Answer 6

Have a significant influence within the business, can be internal or external, primary or secondary

Question 7

Trade Union

Answer 7

An organisation formed to represent and protect the rights of workers in a particular industry

Question 8

What is stakeholder mapping

Answer 8

• Maps the power of each stakeholder group against the degree of interest
• This helps managers understand how important each stakeholder group is and therefore how involved they should be in the decision making process

Question 9

Why is stakeholder mapping useful

Answer 9

• Stakeholder needs should be considered when making decisions
• This can help avoid resistance to change
• Businesses use stakeholder mapping to help inform decision making as stakeholders often have overlapping needs and wants from a firm

Question 10

Stakeholders and conflict

Answer 10

• It is difficult for a firm to meet the needs of all stakeholders
• Stakeholders may join together to increase their power (community supports workers)
• Stakeholders may also conflict in which case the actions of one group may weaken the other. E.G. suppliers may lower prices to try and encourage business to stay in the UK which may reduce the power of shareholders wanting the business to relocate for lower costs

Question 11

Traditional View

Answer 11

• Shareholder approach or shareholder value - firm set up by owners to meet their needs
• Maximise profits according to its shareholders

Question 12

Alternative view

Answer 12

Stakeholder approach or stakeholder value perspective - businesses are a network of different groups, all of whom work together to create mutually beneficial results

Question 13

Why must firms manage the relationship with different stakeholders

Answer 13

Businesses that ignore some groups of stakeholders could face public criticism which may lead to a loss of customers or industrial action

Question 14

What are the main methods for managing stakeholder relationships

Answer 14

Consultation , Communication , Collaboration