A2 Stakeholders
Stakeholders are any individuals or groups that have a vested interest in the activities of a business.
Internal stakeholders have a direct relationship with the organisation and include owners, managers and workers.
External stakeholders do not have a direct relationship with the organisation but may still be affected by their activities. These include government, local community and pressure groups.
Internal Stakeholders
Managers will want good pay and working conditions as they are employees of the company. In addition to this, they may wish for the company to grow and become more profitable. This may provide them with bonuses in the short term and larger functions to manage in the longer term. Their impact is the performance of their department.
Employees want good pay and working conditions. This may include job security, good working relationships and motivating work. Employees may be concerned if the company they work for is unprofitable as it would affect how secure they feel in their job. Their impact is the quality of products and services and therefore customer satisfaction.
Owners (shareholders) will take a share of the profits and will therefore be interested in how profitable the company is. They will also be concerned about the strategic plans of the directors as this will affect the future value of their shares in the company. Their impact is strategic decisions and choice on whether to invest further.
External Stakeholders
Suppliers want their customers (other businesses) to make regular orders and make payments on time. They may wish to keep prices high but may keep them low to develop good relationships and repeat orders. Their impact is on overall costs and liquidity depending on credit terms offered.
Lenders (usually banks) want businesses to repay their loans on time with interest. Interest is the reason lenders lend money in the first place. If they are concerned about the reliability of a business, they may check their liquidity, offer loans at higher interest rates or refuse the loans. Their impact is whether a project can go ahead or on overall costs depending on interest rates agreed.
Competitors want to increase their market share and revenue so will analyse the behaviors of their business rivals and aim to offer products that appeal to consumers. Their impact is the pressure to constantly innovate or risk losing customers.
Trade receivables are business customers who have received a product or service from a business and are processing the payment. They want businesses to give them time to pay which improves their liquidity and allows them time to authorise and process the payment. Their impact is on liquidity depending on how long the business has to wait for payment.
Trade payables are suppliers whom have provided a business with a product or a service and are awaiting payment from that business. Businesses want trade payables to pay on time as late payments have a negative impact on liquidity and create work to chase. Their impact is on liquidity depending on payment terms given.
Customers want high quality products, a range of choices and all for low prices. Where there is competition in the market, they can easily switch to another business to purchase their products from. It is therefore important for businesses to stay aware of changing customer needs. The impact of customers is the revenue received from repeat custom and word of mouth.
Local communities may want businesses to offer employment to boost the area. They may also want the business to reduce their impact on the environment, for example by minimising pollution and depletion of resources. Their impact can be whether they choose to buy products and campaigning against unethical business behavior.
Governments want businesses to create jobs. This relieves the pressure on the welfare system as less people need to rely on benefits and more income taxes are paid which funds the benefits system. Governments will also want businesses to pay tax on their profits and to care for the environments in which they operate. Their impact is on costs due to taxation and costs of adhering to regulations.
Interest groups are formed by groups of individuals who share common causes and seek to put pressure on businesses and governments to change their behavior. Objectives may be to reduce pollution, ban animal testing, stop human trafficking and improve pay and working conditions. Their impact can be negative press which can lead to a negative impact on brand image.
Stakeholder Case Study
Libby and Kay from The Splash Foundation discuss the stakeholders involved in the charity.
www.splashfoundation.org