Chapter 3: Business and Stakeholder

Concept
Stakeholder is any person or group within or outside the organization that has a stake in the
organization’s performance. They are groups of people that affect, or are affected by an organization’s
decision’s policies, and operations. They are the person who have the genuine interest on the
organization. They include diverse group of customers, employees, stockholders, the media,
government, etc.
Each stakeholder has a different criterion of responsiveness because he/she has a
different interest in the organization for e.g. Bhatbateni in Nepal uses aggressive bargaining tactics with
suppliers so, that it can provide low prices for customers. Some stakeholders see this tactics as
responsible corporate behavior because it benefits. However, other argue that the aggressive tactics are
unethical and socially irresponsible to lay off workers, close factories.

Stakeholders of the Company/ firm

1. Shareholder
2. Investors
3. Employees
4. Suppliers
5. Distributor
6. Customer
7. Government
8. Competitors
9. Civil society
10. Communities

Types of Stakeholder

1. Market Stakeholder vs. Non-Market Stakeholder:

i. Market Stakeholders: Market Stakeholder are those that are engage in economic transaction
with the company as it carries out its purpose of providing society with the goods and services.
Each relationship between a business and its market stakeholders is based on a unique
transaction or two-way exchange. {Supplier, Wholesaler, Distributors, Agents and Retailers}

ii. Nonmarket Stakeholders: Nonmarket Stakeholders, by contrast, are people and groups who
although they do not engage in direct economic exchange with the firm but affected or can
affect the organization by its action. Nonmarket Stakeholders are not necessarily less important
than others, simply because they do not engage in economic exchange with a business. {Govt.,
NGO, Media, Business Support Groups, Competitor, General Public}
2. Internal vs. External
i. Internal Stakeholders: Internal Stakeholders are those who work for the firm and contribute
their skill and effort at a company worksite. { such as employees, managers}
ii. External Stakeholder: External Stakeholder are those who have important relations with the firm
but are not directly employed by it. { such as customer}
3. Voluntary vs. Involuntary
Voluntary Stakeholders are those who can choose whether or not to be stakeholders to an organization.
{Such as Employee}
Involuntary stakeholder are those who cannot choose whether or not to be stakeholder. {Such as local
society or environment}

Company Stakeholders

Internal Connected External

Director Shareholders Government

Manager Customers Local Community
Employees Suppliers Pressure Groups
CEO Advisors Media
General Managers Consultants
Competitors

Stakeholder Analysis
In a modern business organization, there are large numbers of stakeholder, organization has to identify
relevant stakeholder to understand their interest and the power they may assert to the organization. As
an organization, wants to know which stakeholder has important role in the functioning of the
organization (who are the relevant stakeholders). This process is called stakeholder analysis.
Factor to be analyzed
1. Stakeholder Interest: Each stakeholder has a unique relationship to the organization and
manager must respond accordingly. Stakeholder interest is the nature of each group’s stake in
the organization. Manager need to understand complex and often intersecting stakeholder
interest. For e.g. stockholder have ownership interest in the firm as return want fair dividend,
capital appreciation etc. Similarly customer want quality product at reasonable price. Likewise,
supplier want fair compensation for their product and service, in the same way, employees want
a fair compensation and develop their job skill.
2. Stakeholder Power: Stakeholder power is the ability to use resources to make an event happen
or to secure a desired outcomes. Stakeholder have five different power:
i. Voting power: Shareholders have voting power
ii. Legal Power: Government have legal power
iii. Economic power: Customers, suppliers, and retailers have economic power.
iv. Political power: Government have political power
v. Informational power: retailer, wholesaler have informational power
 3. Stakeholder Coalitions (Union): When the stakeholder’s interests are similar, stakeholder may
form coalitions. But coalitions are not of permanent nature because coalitions change according
to situation and interest.
4. Stakeholder Orientation: The degree to which a firm understands and addresses the stakeholder
demands. This involves three different activities:
a. Generation of data about stakeholder groups
b. Distribution of the information throughout the firm
c. Organizational responsiveness to this intelligence.

Stakeholder Activism (How much active is the stakeholder in the organizational activities)
Stakeholder activism refers to the stakeholders’ active influence on firm policy and practices. Stakeholder
Activism use variety of tactics through which stakeholders communicate concerns to the management of
organization. Socially responsible stakeholders use various tactics primarily to raise sustainability,
economic justice and corporate governance issues. For e.g. shareholder activists are committed to using
their leverage as shareholders to seek change at corporation.
Managing Key Stakeholders Issues
1. CSR in the Workplace
The relationships between a company and its employees have big impact on other key relationship
between company and its customers. For e.g. employees have the right to professional training and
equipment, to prepare them for the safe, ethical performance of their duties and improve their careers.
i. Remuneration
ii. Employees development
iii. Policies and procedures
iv. Working balance
v. Health and safety
vi. Diversity
vii. Consistency across different working environment
viii. Ethical performance
ix. Improve career

2. CSR in the Market place

Market place issues are related to organization activities in the market in relation to supplier, retailers,
intermediaries, competitors, products, and marketing behavior. Companies need to positively contribute
in promotion of professional and ethical reputation of the organization.

3. CSR in the Community

Organization have a responsibility to support local community and to make a positive differences to
those who work for or in partnership.
i. Charitable contribution
ii. Employees volunteer program
iii. Corporate involvement in education, employment and other
iv. Product safety and quality
4. CSR in the Ecological Environment
Organization have a responsibility to minimize the environmental impact and make most use of the
resources available.
i. Greater material recyclability
ii. Better product durability and functionality.
iii. Greater use of renewable resources
 iv. Integration of environmental mgmt. tools into business plan, including life cycle
assessment and costing, environmental mgmt. standards and eco-labeling.
Making Trade –offs
Trade off means compromising one term or element for another or leaving some elements to
gain importance of other elements.
Each and every element or components should be looked in same pattern/ importance and
interconnect or integrate them which influence the business activities. We should not focus on
only one element as important element keeping other elements as isolated.
Creating a win-win situation between Business and Society
Creating the win-win situation is very important for long term sustainability of the business and society.
Win-win sustainable business situation create advantage situation for the manufacturers, retailers and
consumers while positively contributing to the environment and society. A few example of win-win
business models include, product refills models, second hand clothing collection.
We explain how product refill business models can create the win-win situation for business and society,
product refill business models include packaged consumer products that can be directly refilled and
reused after use and reduced material refill pouches. There may be financial incentives such as discounts
on the next purchase or free products after a certain number of refills to stimulate packaging reuse.
Win-win
1. Manufacturer win- recurring customers, engagement with sustainability
2. Retailer win- generates traffic to the store, one successful refill model can pave way for more
refillable products.
3. Consumer win- may save cost, reduces waste, in some cases allows to reuse the containers
they prefer
4. Sustainability win- materials reuse, waste reduction, consumer education