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Stakeholders in a business Business stakeholders

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Related Essays

Stakeholders in a Business

 A Level/AS Level/O Level

Your Burning Questions Answered!

Analyze the different types of stakeholders in a business and their varying interests.

Explain the importance of managing stakeholder relationships and discuss the challenges involved in doing so.

Discuss the ethical responsibilities that businesses have towards their stakeholders.

Evaluate the impact of stakeholder engagement on business performance and decision-making.

Compare and contrast stakeholder theory with shareholder theory, examining the implications for business strategy.

Stakeholders in a Business: Who Matters?

Imagine a company like Nike. They make shoes, clothes, and other sports gear. Now, who do you think cares about how well Nike does? The answer: lots of people! These people, or groups of people, are called stakeholders. They all have a stake in the success (or failure) of the business.

Here's a closer look at who these stakeholders are and why they matter:

1. Internal Stakeholders

These are the people who work directly for the business. Think of them as the "inside team".

  • Employees: They are the backbone of the company, making the products, providing services, and keeping operations running smoothly. They care about fair wages, good working conditions, and opportunities for growth.
    • Example: Nike employees might be concerned about safe working conditions in their factories and fair wages for their labor.
  • Managers: They oversee teams and departments, making decisions to keep the business running efficiently. They want to see the company succeed and are often motivated by bonuses or promotions.
    • Example: Nike managers might focus on improving production efficiency to increase profits and secure their own job security.
  • Owners: These are the people who own the business and have the final say in its direction. They want to maximize profits and see the value of their investment grow.
    • Example: The CEO of Nike, John Donahoe, is an example of an owner who wants to see the company's stock price rise and its overall value increase.

2. External Stakeholders

These are the people and groups who are outside the business, but still have an interest in its success. Think of them as the "outside circle" that interacts with the business.

  • Customers: These are the people who buy the company's products or services. They are essential for the business's survival. Customers want high-quality products at a fair price, excellent customer service, and perhaps even ethical sourcing practices.
    • Example: A customer buying Nike shoes might be concerned about the shoe's durability and performance, as well as the company's ethical practices regarding labor and environmental impact.
  • Suppliers: These are the businesses that provide raw materials, components, or services to the company. They want to be paid fairly and on time, and they also want to maintain a good relationship with the company.
    • Example: A supplier of leather for Nike might want to ensure that they are paid promptly and that they have a long-term relationship with Nike.
  • Competitors: These are other businesses that offer similar products or services. They are rivals for customers and market share. Competitors want to outperform the company by offering better products or services, lower prices, or more effective marketing.
    • Example: Adidas is a major competitor to Nike, and both companies constantly try to outdo each other by introducing new products, improving technology, and attracting customers.
  • Government: Governments create laws and regulations that businesses must follow. Governments also play a role in the economy and can influence the business environment.
    • Example: Governments might create regulations regarding labor safety or environmental protection that affect Nike's operations.
  • Community: This includes the local residents, NGOs, and community groups who live and work near the business. They are concerned about the impact of the business on the environment, employment opportunities, and the overall well-being of the community.
    • Example: A community living near a Nike factory might want to ensure that the factory doesn't pollute the air or water, and that it provides local jobs.
  • Investors: These are individuals or organizations who invest money in the business, hoping to earn a return on their investment. They are interested in the company's financial performance and its ability to generate profits.
    • Example: A person who bought shares of Nike stock would be considered an investor and wants to see the stock price increase and the company's financial performance improve.
  • Media: The media, including newspapers, websites, and social media, play a role in reporting on the company's activities, both positive and negative. Media coverage can influence public opinion and affect the company's reputation.
    • Example: A negative news report about Nike's labor practices in its factories could damage the company's reputation and affect consumer purchases.

3. Balancing Stakeholder Interests

It's important for businesses to recognize the importance of all stakeholders and try to balance their interests. This isn't always easy, as different stakeholders may have conflicting desires.

For example, customers might want the lowest possible prices, while employees want higher wages. The business needs to find a way to meet the needs of both groups, without sacrificing its own profitability.

4. Understanding Stakeholders' Impact

By understanding the needs and expectations of its stakeholders, a business can make better decisions, build stronger relationships, and achieve long-term success. It's not just about making money—it's about creating a positive impact on those who are affected by the business.

5. Real-World Examples:

  • Tesla: The electric car company has faced criticism from some employees for its working conditions, but it has also been praised by investors for its innovative products and strong financial performance.
  • Starbucks: The coffee giant has been criticized for its labor practices and environmental impact, but it has also been praised for its commitment to social responsibility initiatives.

By understanding the different types of stakeholders and their interests, you'll gain a deeper understanding of how businesses operate and make decisions.

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