Stakeholders in a business
This detailed article aims to identify the key stakeholders in a business. When running a business, it is important to know who the stakeholders are. Being aware of them and their needs is very useful to manage the business more effectively and increase its chances of success.
Definition of stakeholder
Stakeholders are people or organisations who have an interest or influence on the success of a business (BBC, 2022). They stand to gain or lose from the actions or the policies of the business. According to Nevins (2021) the term stakeholder refers to a party that has an interest or concern in a business.
Types of stakeholders in a business
There are usually two types of stakeholders: internal stakeholders, and external stakeholders. Internal stakeholders are those institutions and individuals who are actively involved in the activities of a business or own its shares. These include owners, leadership team members, employees, shareholders, and investors.
On the other hand, external stakeholders are those outside parties that are connected to a business due to their vested interests. These include customers, suppliers, competitors, pressure groups, local community, government, regulatory bodies etc.
Stakeholders can also be divided as primary and secondary stakeholders. Primary stakeholders engage in economic transactions with a business. Examples include customers, suppliers, creditors, leadership team, and employees.
On the other hand, secondary stakeholders do not engage in direct economic exchange with the business, though they are affected by it or can affect its actions. Examples include government, communities, competitors, pressure groups, business support groups, and the media.
Detailed analysis of the stakeholders in a business
As seen above, stakeholders can be divided into different categories. However, the discussion that follows will highlight the internal and external stakeholders in a business.
Internal stakeholders in a business
Leadership team, employees, and shareholders are the key internal stakeholders in a business. The following discussion sheds lights on them in detail.
Leadership and management team sets the vision and charts the future direction of a business. They are responsible for making strategic decisions and overseeing their implementation by the operational managers. Indeed, organisations need great leaders who can deal with current challenges efficiently and visualise the future. Under a great leader, a team becomes productive, inspired, and happy (University of Wolverhampton, 2021).
How satisfied and engaged the employees are, have a significant impact on the success of a business. Engaged employees are more productive, less likely to leave the organisation, and more able to come up with creative ideas. To maintain high employee engagement, managers must understand what their values, desires, and expectations are and be willing to meet those requirements.
Shareholders are those individuals and institutions who own the stocks/shares of a company. Typically, institutional shareholders are very powerful and can impact on the strategic decisions of the company significantly. Individual shareholders can also be powerful provided they own a significant number of shares of the business.
External stakeholders in a business
Customers, suppliers, competitors, government, and regulatory bodies are the key external stakeholders in a business. The following discussion sheds lights on them in detail.
Customers are the most important external stakeholders in a business. They are the lifeblood of the business. They are usually either satisfied or dissatisfied with the products and services. Therefore, it is critical to understand their needs and desires. Effective marketing and sales strategies can help a business reach the right customers and keep them satisfied.
Suppliers are the organisations and individuals that provide a business with raw materials, goods, and services. Therefore, it is important to maintain good relationships with them. It is also important to choose suppliers that are reliable and trustworthy.
Competitors can impact on the operations of a business significantly. Imagine, how Apple is affected by the offers and discounts given by Samsung! Also, imagine how Tesco is impacted by the strategies of Asda, Aldi, Lidl etc. In fact, Tesco offers ‘Aldi price Match’ to fend off challenges from Aldi.
A business is likely be located in a particular community. Therefore, it is important to understand the needs and desires of this group. Contributions to the community, such as charitable donations and employment opportunities for locals, are great ways to build goodwill and positive relationships with the local communities.
Other external stakeholders
The government, media, pressure groups, and special interest groups are other examples of external stakeholders. If a company manufactures a product, the government will have an interest in the work since any manufacturing process may create some pollution. If the company sells anything, the government will want to make sure that it is operating within the law and paying due taxes by the end of the year.
By providing the public with relevant information, the media can influence a business. Likewise, pressure groups often have an interest in the actions of the business. Therefore, it is important to keep them in mind.
Examples of stakeholders in a business
Companies tend to have a wide range of stakeholders. For example, on average, McDonald’s serves around 3.8 million customers a day in the U.K. It employs around 200 thousand employees (Lock, 2022). It must abide by the rules and regulations set by the government and regulatory bodies. It must also ensure that its activities are not antagonising any pressure groups and the local communities.
Conflict between stakeholders in a business
It is not uncommon for the stakeholders in a business to disagree and even have serious conflict with each other. This can happen for a number of reasons. For instance, customers may want cheaper prices whereas shareholders want higher return on investment. Likewise, employees want higher wages whereas management may think otherwise.
Organisations should create an environment where stakeholders feel comfortable speaking up and sharing their needs and desires. This will help prevent future conflict and improve their operations. Likewise, they can also use a conflict-resolution technique known as ‘win-win’. This means trying to find a solution that benefits all parties involved.
Importance of stakeholders in a business
It is important for a business to understand the different needs and desires of its stakeholders to create an effective business strategy. By listening to and meeting their need, the business can increase customer satisfaction and sales, as well as employee morale and productivity. This will, in turn, help it grow and thrive.
Stakeholder engagement (How to communicate with the stakeholders?)
As discussed above, an organisation has several stakeholders, including employees, customers, suppliers, local community, and investors. In order to create an effective business strategy, the organisation must understand the role of each stakeholder and how they affect its success and failure.
Onganisations need to be in communication with their stakeholders regularly. Email, intranet, meeting, annual report, and press release are some of the popular methods to communicate with them. However, it is worth mentioning that all these methods have their pros and cons. Therefore, organisations need to select the right method/s while communicating with a particular stakeholder.
Summary of the stakeholders in a business
The above analysis demonstrates that there are several internal and external stakeholders that a business must consider. Understanding them is important to create an effective business strategy. This can help the business create better products/services. It can also help it build positive relationships with the stakeholders, which can lead to increased profits and customer satisfaction.
Hope you like this article: ‘Stakeholders in a business’. Please share the article link on social networking sites to support us. You may also like the following:
Stakeholders of McDonald’s (Analysis of McDonald’s stakeholders)
Stakeholders in the grocery and supermarket (retail) industry
Last update: 03 September 2022
BBC (2022) Stakeholders, available at: https://www.bbc.co.uk/bitesize/guides/zghkfcw/revision/1 (accessed 02 September 2022)
Lock. S. (2022) Number of McDonald’s employees worldwide, available at: https://www.statista.com/statistics/819966/mcdonald-s-number-of-employees/ (accessed 01 September 2022)
Nevins, M. (2021) The single best way to engage and manage your stakeholders, available at: https://www.forbes.com/sites/hillennevins/2021/08/12/the-single-best-way-to-manage-your-stakeholders/?sh=18e13ddc20aa (accessed 02 September 2022)
University of Wolverhampton (2021) Importance of leadership and people management skills, available at: https://online.wlv.ac.uk/the-importance-of-leadership-and-people-management-skills/ (accessed 01 September 2022)
Author: M Rahman
M Rahman writes extensively online and offline with an emphasis on business management, marketing, and tourism. He is a lecturer in Management and Marketing. He holds an MSc in Tourism & Hospitality from the University of Sunderland. Also, graduated from Leeds Metropolitan University with a BA in Business & Management Studies and completed a DTLLS (Diploma in Teaching in the Life-Long Learning Sector) from London South Bank University.