Meeting the Needs

of Stakeholders

Who are Stakeholders?

Stakeholders

are groups of people who have

an interest in a business organisation
They can be seen as being either external to
the organisation, or internal
But some may be both!

STAKEHOLDER DEFINITION

Any group or individual that can affect, or is affected

by, the performance of the organisation (Freeman
1987)
Individuals or groups who depend on the organisation
to fulfil their own goals and on whom, in turn, the
organisation depends (Johnson & Scholes 1999)
The firm is a system of stakeholders operating within
the larger system of the host society that provides the
necessary legal and market infrastructure for the firms
activities (Clarkson, 1994)

EXPECTATION AND PURPOSES

Corporate Governance
Whom should the
organisation serve?
How should purposes
be determined?
Organisational
purposes
Mission
Objectives
Shareholders
Whom does the
organisation serve?

Business ethics
Which purposes should
be prioritised? Why?

Cultural context
Which purposes are
prioritised? Why?

STAKEHOLDER MAPPING I
To

assist entrepreneurs/managers to
understand the socio/economic/political
context
To identify potential strategies
To identify the orientation of different
stakeholders
To establish socio/economic and political
priorities and trends

STAKEHOLDER MAPPING II

Used in relation to a particular strategic

development

e.g. launch/withdrawal of a product/service

Identifies the relationship that needs to be

established with the various groups of
stakeholders
Identifies key blockers & facilitators of change
Underlines the importance of ethical issues
for managers
Relates power and interest

THE DEFINITION OF POWER

The

extent to which individuals or groups are

able to persuade, induce or coerce others
into following certain courses of action
(Johnson & Scholes 1999)

WHY CONSIDER
STAKEHOLDERS?

Failure to account for stakeholders often leads to poor performance,

failure or even disaster
Nutt (2002) analysis of 400 strategic decisions - half failed
because didnt attend to interests and information held by key
stakeholders.
Increased globalization, interconnected nature of the world (Bryson
and Bromiley, 1993)
Increasing tendency to make organisations more visibly accountable
to shareholders and also the wider community.
Emphasis on markets, participation, flexibility, and deregulation
(Peters 1996).
To manage is to govern. (Feldman and Khademian, 2002)
As entrepreneurial ventures grow they are likely to have increasing
numbers of stakeholders who can impact performance

DIFFERENT TYPES OF
STAKEHOLDER GROUPS
Primary: a firm cannot exist without their
continuing participation
Primary stakeholders include: shareholders &
investors, employees, contractors, customers
& suppliers
Secondary: those who influence or affect or
are influenced/affected by, the corporation, but
they are not engaged in transactions with the
corporation or essential for its survival
Secondary stakeholders include: media, action
groups, government agencies, trade unions,
regulatory authorities

DIFFERENT TYPES OF STAKEHOLDERS

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STAKEHOLDER THEORY
(Donaldson and Preston, 1995)
Takes account of the various needs of the
different interested parties
Stakeholder power is key
Stakeholder interests are not always consistent
Stakeholders are rewarded in different ways
Stakeholders are not affected in the same way
by every strategic decision

ACTIONS FOR THE

ENTREPRENEUR/MANAGER

Identify the stakeholders & identify key individuals

Identify the orientation of different stakeholders
Establish political priorities and trends in the political environment
Assess the strength of the stakeholder influence on the company
behaviour
Evaluate stakeholder attitudes towards the business mission,
strategies, activities
Identify potential strategies to influence the perceptions of individual
stakeholders
Win over antagonistic stakeholders

Types of Stakeholder

Owners (I)
Shareholders (I)
Managers (I)
Staff or employees (I)
Customers (E)
Suppliers (E)
Community (E)
Government (E)

I = Internal

E = External

Internal and External

Stakeholders
Internal stakeholders are those who are
members of the business organization

Owners and shareholders

Managers
Staff and employees
External stakeholders are not part
of the firm

Characteristics of Stakeholders
1. Owners and Shareholders

The number of owners and the roles they carry out differ
according to the size of the firm
In small businesses there may be only one owner (sole trader)
or perhaps a small number of partners (partnership)
In large firms there are often thousands
of shareholders, who each own a small part
of the business

Characteristics of Stakeholders
2. Managers:

organize
make decisions
plan
control
are accountable to the owner(s)

Characteristics of Stakeholders
3. Employees or Staff:

A business needs staff or employees

to carry out its activities
Employees agree to work a certain number
of hours in return for a wage or salary
Pay levels vary with skills, qualifications, age, location, types of
work and industry
and other factors

Characteristics of Stakeholders
4. Customers:

Customers buy the goods or services produced by firms

They may be individuals or other businesses
Firms must understand and meet the needs
of their customers, otherwise they will fail
to make a profit or, indeed, survive

Characteristics of Stakeholders
5. Suppliers:

Firms get the resources they need to produce goods and

services from suppliers
Businesses should have effective relationships with their
suppliers in order to get quality resources at reasonable prices
This is a two-way process, as suppliers depend on the firms they
supply

Characteristics of Stakeholders
6. Community:

Firms and the communities they exist in

are also in a two-way relationship
The local community may often provide many of the firms staff
and customers
The business often supplies goods
and services vital to the local area
But at times the community can feel aggrieved by some aspects
of what a firm does

Characteristics of Stakeholders
7. Government:

Economic policies affect firms costs (through taxation and

interest rates)
Legislation regulates what business can do
in areas such as the environment
and occupational safety and health
Successful firms are good for governments
as they create wealth and employment

Characteristics of Stakeholders
7. Government:

Economic policies affect firms costs (through taxation and

interest rates)
Legislation regulates what business can do
in areas such as the environment
and occupational safety and health
Successful firms are good for governments
as they create wealth and employment