1-5-1-Business-Stakeholders

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Exam code:1BS0

An introduction to business stakeholders

Business stakeholders are individuals or groups that affect or are affected by the actions of a business

Key business stakeholders

Diagram of business stakeholders, including owners, employees, customers, suppliers, the government, managers, local community, and pressure groups. — **Stakeholders are individuals or groups with an interest in the activities of a business**

Stakeholders can have different objectives based on their different roles and perspectives
A business needs to take into account the needs and interests of its stakeholders to operate successfully and ensure long term success

Objectives of stakeholders

Stakeholder	Objectives	Example
Owners (shareholders)	Shareholders are individuals or entities who own a portion of a company’s stock They invest in the company to make a profit Shareholders’ primary objective is to maximise their returns on investment They want the company to be profitable and generate a high return on their investment	For example, a shareholder of Apple may want the company to release new products and increase sales to increase the value of their shares
Employees	Employees are individuals who work for a company Their primary objective is to earn a living, have job security and be compensated fairly for their work and have a safe working environment	For example, Google employees in California have some of the best working conditions in the world, with the Company offering sleeping pods, games rooms and free speciality coffee all-day
Management	Managers are individuals who are responsible for the day-to-day operations of a company Their primary objective is to meet the company’s goals and objectives They want to maximise profits and minimise costs while ensuring that the company operates efficiently	For example, a manager of McDonald’s may want the restaurant to increase sales and reduce costs by improving efficiency
Suppliers	Suppliers are individuals or businesses who provide goods or services to a business Their primary objective is to sell their products or services and make a profit Suppliers want to be paid on time and have a long-term relationship with the company	For example, Busco Sugar Milling Co., Inc supplies Coca-Cola with 84% of its sugar requirements. They want the company to continue buying their sugar and to pay their bills on time
Customers	Customers are individuals or businesses who purchase goods/services from a business Their primary objective is to receive high-quality products or services at a fair price Customers also want good customer service and a positive experience with the company	For example, a customer of Nike may want the company to provide high-quality shoes at a reasonable price – and to deal promptly with any customer concerns issues
Pressure groups	Pressure groups are organisations that seek to influence the policies and actions of businesses or governments Their primary objective is to promote a specific cause or agenda Pressure groups want the company to support their cause or take action on an issue	For example, an animal rights group may want a clothing company to stop using animal products in their clothing
The local community	The local community includes individuals and organisations that live or operate in the area where a business operates Their primary objective is for the business to have a positive impact on the community This may include the business being environmentally responsible, providing jobs, and contributing to local causes	For example, Burnley Savings & Loans Ltd (Bank of Dave) donates all of their profits to local charities and good causes
The government	The government is responsible for creating and enforcing laws and regulations that affect businesses Their primary objective is to promote the public good and protect the interests of citizens The government wants companies to operate within the law and contribute to the economy	For example, the government may want a company to pay taxes, comply with environmental regulations, and create jobs

Stakeholders interactions with businesses

How stakeholders are affected by business activity

Business activity can have various impacts on stakeholders
- If a business experiences financial difficulties, shareholders may lose value in their investments and employees may face job losses or pay cuts
- If a business is profitable, shareholders may benefit from increased dividends and employees may receive bonuses or promotions
- Customers can be affected by business activity in terms of product availability, quality, and pricing
- The local community can be impacted by the environmental and social impact of business operations, such as pollution or job creation
- The government can be affected by business activity in terms of tax revenue and regulatory compliance (following the laws)

How stakeholders impact business activity

Stakeholders can impact business activity in various ways
- Customers can influence product development and pricing through their purchasing decisions and feedback
- Employees can impact business activity through their productivity, skills, and job satisfaction
- Shareholders can impact business activity through their investment decisions and demands for returns
- The local community can impact business activity through regulations and permits (from the local council), and social pressure
- Pressure groups can impact business activity by lobbying for changes in policy or boycotting products
- The government can impact business activity through taxes, regulations (laws), and subsidies

Possible conflicts between stakeholder groups

Stakeholder groups can have conflicting interests and objectives, which can lead to tensions and conflicts
- Shareholders may prioritise profit maximisation, while employees may prioritise fair treatment and high wages
- Customers may prioritise low prices, while the local community may prioritise environmental sustainability which raises costs and prices
These conflicts can create challenges for businesses to balance the competing demands of different stakeholder groups
- E.g. A company may need to invest in costly environmental technology to meet the demands of the local community, but this may reduce profitability and upset shareholders
Conflicts can also arise when stakeholders have different levels of power and influence
- E.g. Pressure groups with strong public support may be able to influence business activity more than individual shareholders
Managing stakeholder conflicts requires careful communication, transparency, and compromise

Examples of stakeholder conflicts

Stakeholders	Conflict
Employees vs. Employers	In 2020, British Airways faced criticism from its employees and unions after announcing plans to cut 12,000 jobs and reduce pay and benefits for remaining staff due to the impact of the COVID-19 pandemic on the airline industry The cuts were met with protests and legal challenges from unions and employees, who argued that the airline was unfairly targeting its workers
Pressure Groups vs. Government	In 2019, Extinction Rebellion, a climate change activist group, organised protests across the UK to demand government action on climate change While the group had the support of many members of the public, some politicians criticised the protests for disrupting public order and causing economic damage
Local Communities vs. Developers	In 2019, plans to build a new high-speed rail line, HS2, faced opposition from residents of areas affected by the proposed route, who argued that the project would damage the environment, disrupt communities, and be too expensive The project also faced opposition from environmental groups who argued that the resources could be better spent on other infrastructure projects

Examiner Tips and Tricks

The interests of stakeholders should be considered whenever a question asks you to weigh up business choices, typically in the longer-answer questions. You might consider the following:

Which stakeholders might be supportive of each option?
And which stakeholders might oppose each option?
Is there a conflict between different stakeholders?
How might conflict be overcome?

Business GCES EDEXCEL