1.51 Stakeholders

A stakeholder is defined as anyone who has an interest in a business. This is not about ownership, it is about being interested in how the business is run.

Internal stakeholders are inside the business e.g. owners, employees.

External stakeholders are outside the business e.g. suppliers, local community, Government, customers, shareholders, pressure groups.

Business can affect stakeholders e.g. by opening a new factory and therefore creating more jobs, or deciding to withdraw a product and therefore impacting on customer choice.

Stakeholders can affect business e.g. employees can take industrial action, customers can protest and not buy a product (or buy elsewhere),  Government can raise / lower tax

Each stakeholder has its own priorities, which often conflict with each other.

  • Employees want higher wages and managers want bonuses but owners and shareholders don’t want to pay higher wages, as this will raise costs, raise their break even point and therefore impact profit
  • Customers want low prices and high quality, but owners and shareholders want high profit and so want to charge high prices.
  • Local communities want lower pollution levels, but owners and shareholders want high profits and reducing pollution will raises costs and so may lower profit
  • Suppliers want to get good prices for their goods and services, owners and shareholders want high profits and want to keep their costs low

So as you can see, a lot of the conflict comes down to the fact that a business wants to keep costs as low as possible, whereas the interests of many other stakeholders involve increased costs for the business.

A typical exam question for this subject might be “explain one possible conflict that can exist between stakeholders of a business” (3 marks).

Check your answer with the mark scheme by clicking here.