STAKEHOLDERS

Unit 1.4 - Business Management IB Y5

 ¿WHAT ARE STAKEHOLDERS?

• They are any individuals or group who have a direct interest in a business
because the actions of the business will affect them directly. NOT OWNERS.
Usually is interested in its success.
• They are called stakeholders because they have a stake or interest in the
business. Sometimes it is directly financial (shareholders, lenders, suppliers or
employees) and other times it is less direct, such as the community in which
the business operates.

• IMPORTANT DIFFERENCE:
• Shareholders (accionistas) are always stakeholders in a corporation, but
stakeholders are not always shareholders. A shareholder owns part of a
company through shares of stock (hence the name), while a stakeholder has
an interest in the performance of a company for reasons other than stock
performance or appreciation.
 INTERNAL AND EXTERNAL
STAKEHOLDERS

• 2 types of stakeholders:
• Internal stakeholders: work within the business
• External stakeholders: outside the business

• In practice, there are grey areas between internal and external stakeholders.:
• Employees of a business live in the community where the business is located (they are
internal and external)
• Consultants to a business: they are part of the community, but once hired they are internal
for a while.
• Small shareholders: they are internal because they own a fraction, but it is so small that they
have 0 decision nor influence, and in most aspects is considered in a way external.
INTERESTS OF INTERNAL STAKEHOLDERS

• Each member will have different interests in a business, and some can have
many interests.

• Shareholders: focus on returns of investment

• CEO or managing director: focuses on coordinating the business strategy
and delivering profit and ROI that satisfy the shareholders.
• Senior managers: focus on strategic objectives for their functional areas
• Middle managers: tactical
• Foremen and supervisors
• Employees and unions: protecting rights and working conditions
INTERESTS OF EXTERNAL STAKEHOLDERS

• Government (all levels): how the business operates in the environment

• Suppliers: maintaining a stable relationship
• Customers and consumers: the best product that meet their needs
• People in the local community: impact of the business in the area
• Financers: ROI
• Pressure groups: how the business impacts on their area of concern
• Media: impact of the business in terms of news and stories.
 NOT STAKEHOLDERS

• COMPETITORS: although a business may have an indirect impact on

competitors through its actions in the marketplace, the competition DOES
NOT have anything directly at stake with the business itself (nor does it want
it to succeed).
• The competitor wants the business to fail most of the times.
 MUTUAL BENEFIT AND CONFLICT BETWEEN
STAKEHOLDER INTERESTS

• Groups of people with common interests (like success of a business) may also have some differences in
opinion in some aspects. Possibility.

• Consider this situation: pay rise for employees.

• ¿How would different parties feel about this?

• Shareholders: usually against, as it means less ROI
• CEO + senior managers: support in a way because employees will be happier, but also worried for ROI as
they directly deal with owners.
• Managers: may be worried about pay rise being the only motivator, when they fight to motivate employees in
other ways.
• Local community: favour the pay rise as the employees would have more money to spend/better life in the
local community (restaurants, shops, etc). However, if this were to threaten the existence of the business they
would not support it.
 INTERESTS: DIFFERENT BUSINESSES

• In any important decision, there will be different reactions and opinions

amongst stakeholders.
• One feature of successful businesses is that interests are sufficiently satisfied
most of the time. Managing the interests is not particularly complicated in
common situations.
• Small businesses have few stakeholders.
• Though it is true that in theory all businesses have external stakeholders, in
reality, in small businesses mostly, the external ones have a small stake.
Decisions are mostly inconsequential. It is required to make profit and be in
compliance with laws.
 INTERESTS: DIFFERENT BUSINESSES

• In large businesses, coordinating interests is a bigger challenge.

• For instance if a factory is in a small town, it becomes the biggest stakeholder.
20% reduction in workforce for instance might lead to reduced expenses for
the business and CEOs + shareholders will be happy, but not the workers who
would be dissatisfied and angry, thus you could have problems: (it affects)
• Many former employees would struggle to find new jobs, thus government
expenses increase
• People would move away from the town – depressing real estate market
• Number of children decrease –lay offs of teachers in schools
• Local businesses suffer.
 STAKEHOLDER ANALYSIS

• Large businesses or those businesses that have

complicated stakeholder interests often perform
a stakeholder analysis.
• The first step is to prioritize or rank the
interests of various stakeholders.
• One conceptual approach to this step is to
determine how close each stakeholder is to
decision making in the business.
• Owners and managers are central, next
employees, suppliers. Then government,
community. Decision makers try to satisfy
stakeholders closer to the center.
 STAKEHOLDER MAPPING

• Another conceptual approach for analysis.

• This one was created by Johnson and Scholes and called the
power-interest model.
• By placing each stakeholder in a group, the business can
decide on the best strategy.
• A: rarely a problem. Safely ignored or limited attention.
• B: important to make this group feel included. Newsletters,
events, etc.
• C: they have the power to influence other groups. Need to
make them feel important. Keep them satisfied.
• D: most important. Not just communicate but consult with
them before major decisions are made. Focus on this group
more than others. Failure may have very negative
consequences for the business.
 IN - CLA SS
( FA ST ) TA SK
ANSWER A
ANSWER B