Understanding the role and importance of stakeholders Flashcards
What are stakeholders?
Stakeholders are groups or individuals who have an interest in a business
There are two types of stakeholders primary and secondary. Define them
Primary are affected by a particular business activity - increase production - employees
Secondary does not have a direct functional or financial relationship with the business but are affected and can influence its actions - local community
Shareholder’s possible nature of stakeholder needs
Steady return on investment (dividends). Investment that does not lose value. Preferential treatment as customers- for example, lower prices.
Employees’ possible nature of stakeholder needs
Steady and regular income. Safe working conditions. Job security
Customer’s possible nature of stakeholder needs
Reliable supply of goods. Clear pricing policies. Safe products. After-sales service and technical support.
Supplier’s possible nature of stakeholder needs
Frequent and regular orders. A sole-supplier agreement. Fair prices.
Creditor’s possible nature of stakeholder needs
Repayment of money owed at an agreed date. Profitable returns on investments. Minimal risk of failure to repay money owed.
Local community’s possible nature of stakeholder needs
Steady employment. Avoidance of pollution and noise. Provision of facilities for the local community.
A business has a social responsibility what does this mean?
A term describing the duties a business has towards stakeholder groups such as employees, customers and the government.
How should you treat stakeholders that have:
High stakeholder power, Low stakeholder interest.
Keep satisfied
Powerful groups who have little interest in the company’s activities. Eg. investors who want high financial returns.
Managers need to engage and consult with this group to increase their level of interest.
How should you treat stakeholders that have:
Low stakeholder power, Low stakeholder interest.
Not a powerful group. Might supply small quantities of low-value materials or a customer that purchases small and declining amounts of the businesses products. Managers don’t worry too much about this group and minimal effort is required.
How should you treat stakeholders that have:
Low stakeholder power, High stakeholder interest.
Keep informed
Do not have a lot of power but have a lot of interest. Could be a group of residents near the manufacturing business- concerned how production affects their lives. Manager can keep them informed on low-risk matters and careful management can enhance the company’s reputation.
How should you treat stakeholders that have:
High stakeholder power, High stakeholder interest.
The most powerful and interested in business. Likely to have a major influence on management decisions. For example, could include a customer who wants to buy a lot of the businesses products. Managers need to keep this group happy by possibly involving them in decision making.
Why would stakeholder mapping be important?
Analysing the position of stakeholders is important and mapping their power vs interest can help a business make decisions in relation to stakeholders needs and their ability to influence it.
Influences on the relationships with stakeholders: External factors
Market conditions (level of sales, the strength of competitors) The power of stakeholder groups Government policies (laws and codes of conduct)
Influences on the relationships with stakeholders: Market conditions
Refers to the number of features of a market, such as the level of sales, the rate at which they are changing and the number and strength of competitors
Why might a business’s objective have the strongest influence on its relationship with the stakeholder?
The objective can be something like being ethical which obviously would have a high priority with meeting stakeholders needs
Why might a business that is focussed on maximising profits or achieving rapid rates of growth have a very different relationship with its stakeholders?
Such businesses seek to minimise costs to make lots of profit which means that decisions don’t meet the needs and objectives of many stakeholders
What is Stakeholder engagement
A process by which managers involve individuals and groups who may be affected by their decisions in those decisions
