The Role of Stakeholder Groups (Cambridge (CIE) IGCSE Business): Revision Note

Internal stakeholders

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

  • External stakeholders are people and organisations that are outside of the business and include suppliers, governments, customers, lenders, such as banks, and the local community

  • Internal stakeholders include anyone within the organisation, such as employees, owners, shareholders, and managers

Typical internal stakeholder objectives

Owners (sole trader, partners and shareholders)

• Owners of small sole trader businesses often want to be able to earn a living, achieve a certain lifestyle or gain recognition for their work

• Partners often look to offer a range of services and may be focused on achieving organic growth

• Shareholders are individuals or entities who own a portion of a company's stock

  • They invest in the company to make a profit

  • Their primary objective is to maximise their returns on their investment

    • E.g. 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, be paid fairly for their work and have a safe working environment 

  • E.g. Google employees in California have some of the best working conditions in the world, with sleeping pods, games rooms and free speciality coffee all-day

Managers

• Managers 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

  • E.g. A manager of McDonald's may want the restaurant to increase sales and reduce costs by improving efficiency

Objectives of external stakeholders

Suppliers

• Suppliers are individuals or businesses that provide goods or services to a business

• Their primary objective is to sell 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 supplies Coca-Cola with 84% of the sugar used in the manufacture of its soft drinks. It wants the company to continue buying their sugar and to pay 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 at a fair price

• Customers also want good customer service, clear communication and a positive buying experience

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 donates all of their profits to local charities and good causes

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

Lenders

• Lenders are individuals or financial institutions (like banks) that provide loans or credit to a business

• Their primary objective is to be repaid on time with interest, so they can make a return on the money they lend

• Lenders also want the business to be financially stable and low-risk, so they feel confident their money is safe

  • For example, International bank HSBC expects regular repayments on loans and may want to see business accounts or cash flow forecasts to check a business can afford repayments before it grants a loan

Stakeholder conflict

• 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

  • For example, 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

  • For example, 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