3.4.3 Shareholders Vs Stakeholders

Question 1

define a stakeholder

Answer 1

• a person group or organisation that is affected by the the organisations actions
• employees, owners, suppliers, unions, customers etc.

Question 2

what are internal stakeholders

Answer 2

• people within the business who have a direct interest in the businesses survival and wellbeing

Question 3

why are stakeholders important in decision making

Answer 3

• a business will have to consider the objectives of stakeholders when making decisions and making business objectives

Question 4

what is the most important stakeholder

Answer 4

• the owners, they get profit for success and make decisions about the direction of the business

Question 5

what are the 3 internal stakeholders

Answer 5

• owners
• employees, interested in earning a fair wage in good working conditions with job security
• managers and directors, make key decisions to please owners and employees as well as external stakeholders

Question 6

what is an external stakeholder

Answer 6

• people or groups outside a business that have an interest in their activities

Question 7

name and explain the external stakeholders

Answer 7

• consumers, want high quality at low prices
• suppliers, want to be paid fairly and on time
• local community, want a better standard of living and employment, doesn’t want pollution or job cuts
• government, wants to generate money from the business and for them to create job and act within the law
• pressure groups, want business behaviour to be in line with what they stand for

Question 8

a business can take a stakeholder approach or a shareholder approach. explain the difference

Answer 8

stakeholder approach- considering all stakeholder objectives and interests when making decisions.

shareholder approach- shareholders have more influence than other stakeholders. maximising profit and dividends is a priority

Question 9

why are shareholders likely to come into conflict with the other stakeholders

Answer 9

• it would be ideal to try and please all stakeholders but sometimes this isn’t financially possible
• employees want a good wage, nice working conditions, perks etc. this has a negative affect on profit and dividends
• consumers want high-quality low priced products which is unprofitable
• environment, sometimes businesses will put the environment at risk to maximise profits
• government, breaking the law or tax avoidance

Question 10

why are shareholders likely to come into conflict with the other stakeholders

Answer 10

• it would be ideal to try and please all stakeholders but sometimes this isn’t financially possible
• employees want a good wage, nice working conditions, perks etc. this has a negative effect on profit and dividends
• consumers want high-quality low priced products which is unprofitable
• environment, sometimes businesses will put the environment at risk to maximise profits
• government, breaking the law or tax avoidance

Question 11

stakeholders don’t always disagree and when they have common interests it can raise profits.

Answer 11

when there is disagreement between stakeholders the business must try to satisfy as many as possible and who to prioritise.

Question 12

what is stakeholder mapping

Answer 12

• plots stakeholders on two dimensions, interest in the business and power/influence over the business
• allows them to set objectives that keep stakeholders as happy as possible
• stakeholders with lots of power and interest in the business would be prioritised more by a business than stakeholders with little interest and power

Question 13

how can relationships with stakeholders be managed

Answer 13

• they must ensure they maintain good relationships with stakeholders as it could have a negative effect on the business e.g. staff striking or leaving
• consultation before decision making
• communicating with stakeholders to keep them well informed