Unit 1 (I.T.B.M) Topic 4 "Stakeholders" Flashcards
Unit 1 Introduction to Business Management
Define Stakeholders giving examples.
The groups or individuals who have an interest in a business, its activities, or its outcome.
Examples:
1) Owners (Shareholders)
2) Managers || 3) Employees
4) Suppliers || 5) Customers
6) Banks, other organizations
7) Government
8) Local community
Top tip: When addressing questions about stakeholders, avoid discussing too many groups, as it hampers analytical depth and argument development. Focus on two or three key stakeholders, selecting those most relevant to the context. If applicable, choose an internal and an external stakeholder to demonstrate your understanding of different types.
Define Internal and External stakeholders giving examples.
Internal stakeholders:
Individuals and groups within a business. Ex: Managers, Employees, Shareholders, ..etc
External stakeholders:
Groups outside a business. Ex: people living near the business manufacturers, Customers, The government, suppliers, banks, ..etc
Stakeholders’ rights, and responsibilities.
1)Right
2)Responsibility
Employees:
1) To be treated and paid fairly.
2) Work effectively and on time.
Suppliers:
1) Paid on time and kept informed of changes.
2) Provide good quality products meeting the set specifications on time.
Owners/Shareholders:
1) Receive a share of profits while keeping informed by management.
2) To treat management fairly.
Customers:
1) To be supplied with the right quality products on time.
2) Pay on time, don’t lie.
Government:
1) To be paid taxes and businesses to obey the law.
2) Protect businesses, customers, employees and the environment.
Managers:
1) Rewarded appropriately, and treated with respect.
2) Carry out duties to their best. Protect business data and customers.
Banks and other lenders:
1) Paid promptly and on time.
2) Not to charge high interest rates or to withdraw loans without a reasonable period of notice.
The local community:
1) Live in an area that is free from excessive noise or other pollution
2) Cooperate with the business in its daily activities.
How can stakeholders be affected by business decisions? Mention Possible responses from stakeholders.
The impact can be positive or negative. Sometimes, one group may benefit, and another may suffer. For example, Cutting wages would not be liked by staff but may enable higher rewards for investors (shareholders).
Possible responses from stakeholders:
1) Shareholders can sell their shares. investing in somewhere else. (Maybe a competitor)
2) Banks can refuse to lend more or charge more for businesses.
3) Employees can leave and work elsewhere, as a group they may take strike action.
4) Suppliers can refuse to supply the business or demand better payment terms.
The impact of stakeholder aims on business decisions.
Most stakeholder groups will have their own aims in their relationship with a business.
1) Employees:
Aim to improve working conditions, maximize pay and benefits, and secure stable employment. Businesses that focus on these factors, like Google, attract talented and productive employees.
2) Customers:
A key influence on business decisions, especially when customers have many alternatives. For example, a supermarket raising prices could lose customers and profits.
3) Suppliers:
Critical for maintaining operations. Major or sole suppliers have a significant influence on decisions, as businesses rely on timely and correct supplies to continue trading.
4) Owners and Shareholders:
Highly influential in business decisions. In the UK Shareholders can vote to remove directors, and in small companies, owners often directly control decisions, reducing the chance of internal disagreement.
The difference between Shareholder and Stakeholder concepts
Shareholder concept: Focuses on maximizing returns for shareholders (owners of the company). This is typical in businesses where profit and stock value are key priorities, such as publicly traded companies.
Stakeholder concept: Broadens the focus to consider the interests of all stakeholders (employees, customers, suppliers, community, etc.). This is common in businesses aiming for long-term sustainability and corporate social responsibility (CSR), balancing profitability with ethical practices and broader societal impact.
Many companies today adopt a balanced approach, striving to deliver financial returns to shareholders while also considering the needs of other stakeholders for sustainable growth. This dual focus is increasingly common in modern business practices.
The Stakeholder’s Map (Quadrants) and why is it useful?
*Figure 1.4.2
Not all decisions will be liked by all stakeholders. Managers must consider stakeholders’ objectives, power, and organization in decision-making, as ignoring key groups can lead to their opposition.
A stakeholder map prioritizes stakeholders based on their power and interest (helping in decision-making):
1) Quadrant A: stakeholder group with low influence and interest, needs minimal attention; general updates like newsletters or website posts suffice.
Ex: small suppliers, small customers.
2) Quadrant B: stakeholder group with limited power but is interested in the business’s activities, Managers should keep them informed and consult on low-risk issues to enhance reputation, such as environmental groups and neighborhood associations monitoring noise levels.
Ex: local residents who are concerned about a manufacturing plant’s impact.
3) Quadrant C: This area of the map represents powerful groups with low interest in the company’s activities, such as investors focused solely on financial returns. Managers should engage with this group to potentially increase their interest, as involving stakeholders can provide valuable perspectives and favorable publicity.
4) Quadrant D: These powerful and interested stakeholders, like major customers preferring reliable, ethical suppliers, significantly influence management decisions. Managers should keep them satisfied by involving them in decision-making.
How can a conflict arise from stakeholders when changing business objectives or because of the stakeholders’ aims?
*Table 1.4.2
Conflicts may arise when stakeholders have differing aims, making it impossible to satisfy all groups simultaneously. For instance, investors may seek lower costs to boost profits, potentially leading to lower employee pay and local community disruption if the business relocates. Meeting government demands for environmentally friendly practices may increase costs, raising prices for customers.
The impact of decisions on stakeholders depends on circumstances, such as market demand and competitive pricing. New product launches can also create conflicts; while they may benefit shareholders and employees, they could lead to higher prices for consumers and reduced sales for competitors.
As business objectives shift, stakeholder treatment may change. Emphasizing environmental issues can enhance social responsibility, while a focus on profits might lead to cost-cutting in training and development. Managers often struggle to satisfy all stakeholders, especially during significant strategic changes, and may aim to please as many as possible.
