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    Stakeholders: IB Business Management

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    Juan Antonio Limo Dulanto
    a) External stakeholders include shareholders, competitors in the pottery manufacturing industry who moved production overseas, the local community near the original factory, and the local newsagent/shop owner who lost business. b) Internal stakeholders include the managing director and remaining staff who will manage the company from a new office. c) Managers' responsibilities to stakeholders were in conflict because shareholders pressured for cost cuts and improved profits by moving production overseas, while the managing director and local community wanted to remain in the original location to retain jobs and support the local economy. Most staff also lost their jobs due to the relocation.

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    Stakeholders: IB Business Management

    Uploaded by

    Juan Antonio Limo Dulanto
    294 views24 pages
    a) External stakeholders include shareholders, competitors in the pottery manufacturing industry who moved production overseas, the local community near the original factory, and the local newsagent/shop owner who lost business. b) Internal stakeholders include the managing director and remaining staff who will manage the company from a new office. c) Managers' responsibilities to stakeholders were in conflict because shareholders pressured for cost cuts and improved profits by moving production overseas, while the managing director and local community wanted to remain in the original location to retain jobs and support the local economy. Most staff also lost their jobs due to the relocation.

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    a) External stakeholders include shareholders, competitors in the pottery manufacturing industry who moved production overseas, the local community near the original factory, and the local newsagent/shop owner who lost business. b) Internal stakeholders include the managing director and remaining staff who will manage the company from a new office. c) Managers' responsibilities to stakeholders were in conflict because shareholders pressured for cost cuts and improved profits by moving production overseas, while the managing director and local community wanted to remain in the original location to retain jobs and support the local economy. Most staff also lost their jobs due to the relocation.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    294 views24 pages

    Stakeholders: IB Business Management

    Uploaded by

    Juan Antonio Limo Dulanto
    a) External stakeholders include shareholders, competitors in the pottery manufacturing industry who moved production overseas, the local community near the original factory, and the local newsagent/shop owner who lost business. b) Internal stakeholders include the managing director and remaining staff who will manage the company from a new office. c) Managers' responsibilities to stakeholders were in conflict because shareholders pressured for cost cuts and improved profits by moving production overseas, while the managing director and local community wanted to remain in the original location to retain jobs and support the local economy. Most staff also lost their jobs due to the relocation.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    of 24
    At a glance
    Powered by AI
    The key takeaways are that stakeholders are individuals or groups that are affected by or can affect an organization's actions. Stakeholders can be internal like employees or shareholders, or external like customers, suppliers, or the community. Understanding stakeholders' interests is important for business management and decision making.

    Stakeholders are people or groups that are impacted by or can influence a company's actions. The chapter outlines that stakeholders can have financial interests like returns for shareholders or non-financial interests like better working conditions for employees. It also discusses the main interests that different stakeholders like shareholders, managers, and customers may have.

    Internal stakeholders work inside the organization like employees and shareholders, while external stakeholders are outside like customers, suppliers, and the community. The chapter explains how individuals can have both internal and external stakeholder roles depending on their relationship to the organization.

    Chapter 1.

    4
    Stakeholders

    IB Business Management
    1.4 Stakeholders
    By the end of this chapter, you should be able to:
    • Define the term stakeholders and identify internal and
    external stakeholders for a given organization.
    • Outline the main interests of internal and external
    stakeholders.
    • Explain possible areas of benefit and conflict between
    stakeholders.
    • Apply the power-interest model for stakeholder analysis.
    ¿What are Stakeholders?
    • People, groups of people, and organizations who
    affect or can be affected, directly or indirectly, by an
    action done by an organization.
    – They have an interest or concern (a stake) in a company’s
    performance.
    – The stake can be financial (profit) or non-financial (safety).
    Internal stakeholders
    Individuals or groups that work within the business
    – Shareholders
    – Employees
    – Unions
    Remember…
    • Do not confuse the terms ‘stakeholder’ and ‘shareholder’.

    • Stakeholder is a much broader term that covers many groups,


    including shareholders.
    External stakeholders
    Individuals, groups, and organizations that are outside
    the business.
    – Government
    – Financiers
    – Suppliers
    – Customers
    – Community
    – Pressure groups
    – The media
    Interests of internal stakeholders
    ¿What do they (stakeholders) expect from the business?
    Shareholders
    • Returns over their investments
    • Make strategic decisions
    • Information about decisions made

    CEO
    • Achieve strategic objectives efficiently

    Senior managers
    • Achieve tactical objectives efficiently

    Middle managers
    • Achieve day-to-day objectives efficiently
    Employees and unions
    • Better working environment
    • Better salary
    • Promotions
    • Training
    Interests of external stakeholders
    ¿What do they (stakeholders) expect from the business?
    Government
    • Pay taxes
    • Licences and certifications

    Suppliers
    • Stable commercial relationship
    • Buy more supplies
    • Better selling conditions

    Customers and consumers


    • Quality products
    • Cheaper products
    • Promotions
    • Better purchasing conditions
    ¿What do they (stakeholders) expect from the business?

    Community
    • Business does not impact negatively
    local area
    • Create jobs
    • Social responsibility

    Financiers / Investors
    • Returns over their investments
    • Pay loan on time

    Pressure groups
    • Influence business in a specific issue

    The media
    • Information about the business
    Internal and external stakeholders
    Individuals might have multiple stakeholder interests.
    Examples:

    • Employees of a business might live in the community where the business


    is located.
    – As employees they are internal stakeholders,
    – As residents of the community, they are external stakeholders.

    • Small shareholders in large publicly traded companies.


    – Like all shareholders, are internal stakeholders.
    – However, they are usually considered external to the business as they have virtually no
    ability to influence on the organization.
    Possible areas of benefit and conflict
    All stakeholders have a ‘stake’ in a business, but not always they have the
    same objectives. Their focuses are different.

    Example: A pay rise for employees


    – Shareholders may object to the idea, as it could decrease profits and,
    therefore, their return on investment.
    – Employees, on the other hand, would favour pay rises, which would give
    them a higher standard of living.
    • Any decision of importance will have different reactions from different
    stakeholders.
    • In successful businesses, the interests of stakeholders are sufficiently
    satisfied most the time.
    Remember
    • Many examination questions involve the conflict of stakeholders’
    objectives.
    • Remember that it is difficult for a business to meet all its
    responsibilities to all stakeholders at the same time.
    • Compromise might be necessary – meeting as many stakeholders’
    objectives as possible or meeting the needs of the most important
    groups in each situation.
    Stakeholder analysis
    • Large businesses with many stakeholders often perform a
    stakeholder analysis.
    • Purpose: prioritize or rank the interests of the stakeholders
    • Determine how “close” each stakeholder is to decision-making in
    the business.
    – Under this approach, owners and managers are central to decision-making
    – Suppliers, employees, financiers, and consumers are further removed.
    – Most distant are government, pressure groups, the media and the local
    community.
    • Decision makers try to satisfy those stakeholders closest to the
    centre.
    Stakeholder analysis
    Government

    Employees

    Owners
    Suppliers Financiers
    Pressure Media
    groups Managers

    Consumers

    Local community
    Power-interest model
    • Another conceptual approach for mapping stakeholders
    • Stakeholders are placed in groups in a matrix based on the level of
    interest and the degree of power towards the organization
    • The company can decide on likely strategies to manage potential
    conflicts.
    Level of interest
    Low High

    Group A Group B
    Low
    Minimal effort Keep informed
    Degree
    of
    power
    Group C Group D
    High
    Keep satisfied Key players
    Group A: Minimal effort
    • Stakeholders with minimal interest and limited power over the
    business.
    • Rarely a problem for the business.
    • Owners and managers fairly ignore them, or at least devote limited
    energy and attention to satisfy their interests.
    Level of interest
    Low High

    Group A Group B
    Low
    Minimal effort Keep informed
    Degree
    of
    power
    Group C Group D
    High
    Keep satisfied Key players
    Group B: Keep informed
    • Stakeholders with a high interest and low degree of power over the
    business.
    • Making this group feel included is important.
    • Newsletters, events, and other ways of conveying a sense of belonging
    are important.

    Level of interest
    Low High

    Group A Group B
    Low
    Minimal effort Keep informed
    Degree
    of
    power
    Group C Group D
    High
    Keep satisfied Key players
    Group C: Keep satisfied
    • Stakeholders with low interest and high degree of power over the
    business.
    • They have the power to influence other groups.
    • The business must find ways to flatter the self-esteem of members of
    this group to make them feel important.

    Level of interest
    Low High

    Group A Group B
    Low
    Minimal effort Keep informed
    Degree
    of
    power
    Group C Group D
    High
    Keep satisfied Key players
    Group D: Key Players
    • Stakeholders with high interest and high degree of power over the business.
    • Most important group. The business must communicate and consult them
    before any major decisions are made.
    • The business should focus on their needs in preference to the others.
    • Failure to involve and satisfy these stakeholders can have very negative
    consequences for the business.
    Level of interest
    Low High

    Group A Group B
    Low
    Minimal effort Keep informed
    Degree
    of
    power
    Group C Group D
    High
    Keep satisfied Key players
    Assignment
    1. Case Study: Stake & Chips
    The day of the relocation was hectic. Staff were carrying boxes to the various
    vans hired to move the company to its new offices 50 miles away.
    The move had been agreed six months ago. Paragon, a pottery manufacturer,
    under pressure from shareholders to cut costs and improve profit margins, had been
    faced with some tough decisions. Competition in the market was fierce; most businesses
    in the industry had already moved production facilities to South East Asia and now had
    significant cost advantages over Paragon. Paragon’s Managing Director had avoided the
    inevitable for as long as possible, ‘we have a duty to our staff, the local community and
    to the UK to remain here’, she argued 12 months ago. But, under increasing pressure
    from shareholders, the company moved production to Vietnam and the factory and
    offices were sold to a housing developer.
    The majority of staff were made redundant; a small number would manage the company
    from offices 50 miles from the original factory. The local newsagent and shop owner, who
    had supplied the staff with refreshments for over 20 years, although obviously upset by
    the move came out to wish everybody well.

    a) Identify as many external stakeholders from this case study as possible


    b) Identify two internal stakeholders
    c) Using the information in this case study, highlight why managers’ responsibilities to
    different stakeholders are often in conflict
    2. Be a thinker
    a) Identify four internal and four external stakeholders for your
    school and outline two possible areas of mutual benefit and two
    possible areas of mutual conflict.
    b) Applying the power-interest model, carry out a stakeholder
    analysis to determine the importance of these stakeholders
    Key concept link
    • A positive culture in business today is unfortunately the exception rather
    than the norm, but a strong organizational culture can clearly differentiate
    a business from its competitors in the mind of its stakeholders.
    • Business ethics are the guidelines a company uses when interacting with
    entities inside and outside the company. It is a conscious effort to treat
    people and companies with respect and establish a positive working
    environment.
    • The effects of ethical practices in business can benefit a company financially
    and they can also help a company gain the elements it needs to grow.
    • However, some organizations apply unethical practices towards their
    suppliers or employees to satisfy the needs of their key stakeholders.
    Sources
    • Stimpson, P., Smith, A. (2015). Business Management for the IB Diploma.
    Cambridge, United Kingdom: Cambridge University Press
    • Lominé, L., Muchena, M., and Pierce, R. (2014). Business Management.
    Oxford, United Kingdom: Oxford University Press
    • Clark, P. and Golden, P. (2009). Business and management Course
    Companion. Oxford, United Kingdom: Oxford University Press
    • Gutteridge, L. (2009). Business and Management for the IB Diploma.
    Oxford, United Kingdom: Oxford University Press
    • Thompson, R. and Machin, D. (2003). AS Business Studies. London, United
    Kingdom: Harper Collins Publishers

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