Ramesh Naoickyer
BUSINESS MANAGEMENT (IBDP)
Unit 1: BUSINESS ORGANISATION AND ENVIRONMENT
Chapter 1.4 Stakeholders
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Meaning of Stakeholders:
People who can be affected by and therefore have interest or stake in actions of
the business.
Examples:
Internal stakeholders: Shareholder, Employees, Managers & Directors
External stakeholders: suppliers, customers, competition,
government/state, pressure groups, etc.
Stakeholder Concept – priority to stakeholders rather than shareholders
A02 Interests of internal stakeholder
Interests of internal stakeholders vs. interests of external stakeholders
Internal stakeholder:
Employees - Employment/Job security, wage levels, Work
environment.
Managers & Directors - Employment/Job security, salary and
benefits, remuneration, profitability.
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Shareholders - Owners of shares in the company, have decision-
making power, receive dividends (share of profit). Annual dividends, share price,
security of investment
A02 Interests of external stakeholders
External stakeholder:
Suppliers – regular contracts, competitive prices.
Customers - Value for money, product quality, quality of service
Government- Job creation, tax payments, impact on wider
society/economy, value for output produced
Special Interest groups (SIGs) or Pressure group – enforce demands on
organisations to act in a particular way. Don’t harm environment, ethical with
employees.
Competitors - Fairness of competitive prices, strategic plans of the
business, remain competitive, benchmark performance.
A03 Possible areas of mutual benefit and conflict between stakeholders' interests
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Stakeholder conflict
It is not possible to satisfy all stakeholders all the time.
Conflict will always arise between different stakeholders interests.
Example: Shareholders want more profit by cutting employee benefits. Suppliers
expect full payment, but business wants discount in exchange. Shareholders and
employees argue that top managers are overpaid. But, managers believe their job
involves risky decision making and the salaries are justified.
Stakeholder conflict resolution
Arbitration
To resolve industrial disputes between workers and managers
Advantage
Both sides agree to an independent arbitrator who will
decide to an independent party,
Disadvantage
Neither stakeholder group will likely receive what they
want
Decision is binding
Workforce Participation
To improve communication, decision-making and reduce potential
conflicts between employees and managers/ Directors
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Advantage
Gain cooperation of workers – better motivated and
involved
Disadvantage
Waste of time and resources to be able to get all
information
Profit-sharing scheme
Reduce conflict between workers and shareholders over allocation
of profits and benefits
Advantage
Sharing profits can encourage workers to work in ways that
will increase long-term profit
Disadvantage
Reduces retained profits and/or profits paid out to
shareholders unless the scheme pays off
Share-ownership scheme
Reward employee with company shares.
To reduce conflict between workers , manager and shareholders
Advantage
Provides share options; employees and shareholders benefit
and aligns their interests with one another
Disadvantage
Administration costs, decreased ownership, qualification
constraints may limit motivation
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Stakeholder Map
A tool to analyze which stakeholders to prioritize for a given issue,
mapped in a grid classifying stakeholders in terms of interest and power
