Stakeholders

A stakeholder is anyone with an interest in a business. Stakeholders are individuals,

groups or organisations that are affected by the activity of the business.

Private sector stakeholders: shareholders, employees, customers, suppliers,

government, local community, directors/managers, lenders, trade unions and
pressure groups.

Public sector stakeholders: central government, local government, councils, voters,

trade unions and pressure groups.

Third sector stakeholders: Board of trustees, volunteers, donors, club members,

Office of the Scottish Charity Regulator, pressure groups.

Private sector stakeholders:

Shareholders

Shareholders have a clear financial interest in the performance of a business. They

have invested money in the company by purchasing shares on the stock market, and
they therefore expect the company to grow and prosper and to get a healthy return
on their investment. This return comes in two forms. Firstly, a rise in the price of
shares will enable them to sell theirs at a premium. Secondly, they will expect a share
of the annual profits in the form of a dividend payment, which is based on profit.

Ordinary stakeholders are able to exert power at an Annual General Meeting (AGM).
They are responsible for electing a board of directors to run the company on their
behalf.

Employees

Employees also have a financial interest in the business, since their salaries and job
security will depend on the performance and profitability of the company. In
addition, employees are looking for job satisfaction, opportunity for promotion and
good working conditions. It is the employees who are responsible for the business’s
output (or services) and so they have a significant input to the workings of the
business. However, if workers feel undervalued, stressed, or underpaid, it can result in
poor quality output and/or high rate of staff turnover.
Many workers are members of a trade union and can put pressure on an
organisation by taking industrial action that ranges from work-to-rule, go-slow, or
even strike action, where they completely withdraw their labour to support their
cause.

Customers

Customers are vital to the survival of any business, since they purchase the goods
and service which provide the business with the majority of its revenue. Customers
essentially want high-quality products at the lowest possible price. In addition,
customers now expect to receive good customer care service and a high standard of
after-sale service. It is therefore vital for a business to find out exactly what the needs
of the customers are, and produce outputs of goods or services to directly satisfy
these needs. This is often done through market research.

All businesses must try to keep customers loyal to ensure they return in the future
and become a repeat purchaser.

Customers can therefore influence what products and services a business provides.
They can also provide positive and negative feedback to family and friends on the
quality of the goods purchased and the customer service and after-sale services
received. As such, the reputation of a business is very much in the hands of the
customers.

Suppliers

Without flexible and reliable suppliers, the business would be unable to guarantee
the necessary high-quality raw materials required to produce its output. It is
important for a business to maintain good relationships with its suppliers so that raw
materials can be ordered and delivered at short notice. Establishing good
relationships with suppliers will also allow the business to negotiate good credit
terms and discounts. Suppliers will want a business to be successful to ensure
prompt payment and repeat business for them.

Suppliers can influence how profitable a business is by changing the amount that
they charge for raw materials provided. They can also change credit terms and
withdraw trade and cash discounts.
The government

The government has an interest in businesses in order to ensure they are paying the
correct amount of taxes and are practicing business legally.

The government affects the workings of a business in many ways:

 Businesses have to pay taxes to both central and local government. These
taxes include corporation tax on profits, value added tax on sales, and
business rates to their local council. A change in any of these taxes can have
an impact on profits, sales and business expenses.
 Governments can introduce legislation such as the minimum wage, Health and
Safety Work Act, advertising and smoking bans. All business must adhere to
legislation or face prosecution.
 Businesses are also affected by government economic policies. For example, if
the government increases interest rates, this could deter a business from
borrowing to finance expansion or replace assets. However, a business can
also benefit from government incentives such as job creation programmes
and government grants or low-interest loans.

Banks and lenders

Banks and other lenders are able to support a business by offering or withholding
loans to finance expansion, address temporary cash flow problems or to purchase
new assets. They also negotiate interest rates and repayment periods. However,
before any loan is given, lenders will ensure that the organisation has sufficient funds
to make payments.

Directors/management

Directors and managers are responsible for the successful leadership of an

organisation. It is management who make decisions on matters such as hiring staff,
product portfolio, and target markets. They want the organisation to be successful
because this enhances their professional status and promotion prospects, and
enables them to negotiate higher salaries and bonuses.

Local community

A business organisation can create employment for the local community as well as
providing goods and services to consumers in their local area. Businesses often
sponsor local events and good causes (such as local charities) and this can help to
 establish the business’ reputation as a caring and socially responsible organisation.
Some businesses will also develop links with local schools and colleges by working
on school-based projects or providing resources such as computers for classrooms.

However, businesses can also cause many problems in local communities, such as
congestion, pollution, noise and overcrowding. These negative factors can
sometimes outweigh the benefits that the business brings to the local area.

In summary:

Stakeholder Main interests Power and influence

Shareholders  Increase market share They elect directors at the annual

 Profits AGM.
 Dividends
 Rise in price of shares.

Employees  Fair pay They can affect businesses through

 Job security industrial action such as strikes, staff
 Good working conditions absenteeism, staff turnover and the
 Job satisfaction. production of poor quality products.

Customers  High quality products
 Good customer service
(including after-sales service)
 Product/service availability
 Good value for money.
They can buy products from rival
businesses and they could stop
recommending the business to
family and friends, which impacts
reputation.

Suppliers  Repeat orders They can change the price of

 Prompt payment for goods products provided and can change
supplied. terms of conditions of things e.g.
delivery times, carriage charges and
trade and cash discounts.

Government  Job creation They produce legislation, set tax

 Tax receipts rates and offer subsidies and grants.
 Ensure the business is
operating legally.

Management  Salary They make strategic and tactical

 Status decisions.
 Job satisfaction
  Bonuses
 Promotion
 Share options.
Local community  Local employment
 Protection of local environment
 Positive impact on local area.
Lenders  Ensuring all loans and credit
given can be repaid
Interdependence – why a stakeholder needs another stakeholder.
Conflict – the disagreements that can occur between different stakeholders.
In the table below, owners could be shareholders and/or managers depending on
the type of business being discussed.
Stakeholders Interdependence
Owners and  Owners need employees to
employees carry out different tasks and
employees need owners to pay
their wages.
 Owners need employees to be
as productive as they can and
employees need owners to
provide the necessary job
training.
Owners and  Owners need customers to buy
customers products from them to make
profit and customers need
owners to provide them with
the product they want.
They can make complaints to local
council and can participate in
protests, which can damage
business reputation.
They can grant or withhold loans,
set interest rates and repayment
periods.
Conflict
 Owners want to pay as low a
wage as possible so that their
profit is high whereas
employees want high wages for
their work.
 Owners want employees to work
as many hours as they can
whereas employees want to
work as few hours as possible.
 Owners want to make as much
profit as possible by charging
higher prices whereas customers
want as low a price as possible.
 Owners want to keep costs low
  Owners need customers to
become loyal to increase its
market share and customers
want to be rewarded for loyalty
(e.g. discounts).
Owners and  Owners need suppliers to
suppliers provide products on time and
suppliers need owners to
provide them with repeat
orders.
 Owners need suppliers to
provide a quality product at a
suitable price to make profit
and suppliers need owners to
pay their invoices within an
agreed time to prevent cash
flow problems.
Owners and  Owners need banks to provide
banks them with affordable loans and
banks need owners who can
make repayments on time.
Owners and  Owners need the government
government to have low tax rates and the
government needs owners to
provide jobs.
 Owners need the government
to provide grants and the
government needs owners to
regenerate local communities
and unused areas of land.
Owners and the  Owners need local communities 
local community to support their business and
the local community needs
owners to provide jobs to
decrease unemployment.
by providing the cheapest
possible service they can
whereas customers want the
best possible service (e.g. after-
sales).
 Owners want supplies for as low
a price as possible whereas
suppliers want to maximise their
profits.
 Owners want to wait for as long
as possible before paying their
debts whereas suppliers want
paid as quickly as possible.
 Owners want interest rates on
loans to be as low as possible
whereas banks want to make as
much profit as possible by
charging higher interest rates.
 Owners want low tax rates to
maximise profits whereas the
government wants taxes to
invest in the country, e.g. for the
NHS.
 Owners want to dominate the
market whereas the government
wants competition to encourage
lower prices for customers.
Owners want to keep costs low
to maximise profit whereas local
communities want business to
invest in community projects.
Employees and  Employees need customers to
customers buy from an organisation so
that they get paid and
customers need employees to
provide them with good
customer service.
 Employees want customers to
spend as much as possible to
increase their commission
whereas customers want as
much discount as possible.

Public sector stakeholders

Public sector organisations are also influenced by stakeholders. For example, voters,
pressure groups and the local community can all have an impact on the objectives of
services such as health, police, education and social housing.

Third sector stakeholders

Third sector organisations like charities are influenced by donors who support their
cause, and by members of the public who are willing to act as volunteers to help
them achieve their aims.

*edit with school notes and brush up with success guide