Stakeholder Model

The Stakeholder Model

BTEC Business

Pressures on BusinessCompetitive pressures – Modern business faces greater competitive pressure:

• More open markets • Globalisation • Shareholders seeking ever higher

profits

Pressures on BusinessPressure of responsibility - Growing importance to consumers of ethical business:

• Total UK sales of Fair Trade products grew in 2004 by more than 50% to £140 million

• Environmental legislation

How Should Firms Respond?‘Inclusivity’:

• Take a wide view of why the firm exists

• Recognise range of interest groups • Form partnerships with wide range

of groups

What’s Different About This?• Firms used to aim for maximum

profits to keep shareholders happy• This was often against interests

of groups outside organisation• Now, interdependence seen

as vital• Partnerships with all interest

groups

What Does This Mean?• Difficult to balance the different

short term demands of shareholders and stakeholders

• Firms can benefit considerably from cooperating with stakeholder groups

• Their needs can be built into the firm’s decision making processes

Benefits Firms Can Expect• Better public relations• More favourable reporting

of firm’s activities in media• Quality relationships with suppliers• Lower staff turnover

Benefits Firms Can Expect• Higher employee motivation• Reduced impact of pressure

groups on firm’s activities

But only if firm genuinely commits to stakeholder model.

Meeting the Needs of StakeholdersBTEC Business

What are Stakeholders?• Stakeholders are groups of people

who have an interest in a business organisation

• They can be seen as being either external to the organisation, or internal

• But some may be both!

Types of Stakeholder• Owners (I)• Shareholders (I)• Managers (I)• Staff or employees

(I)• Customers (E)• Suppliers (E)• Community (E)• Government (E)

• I = Internal

• E = External

Internal and External Stakeholders

Internal stakeholders are those who are ‘members’ of the business organisation

• Owners and shareholders• Managers• Staff and employees• External stakeholders are not part of

the firm

But…..!• Some groups can be both internal

and external stakeholders• Such as staff or shareholders who

are also local residents• Can you think of any others?

Characteristics of Stakeholders

1. Owners and Shareholders• The number of owners and the roles they carry

out differ according to the size of the firm• In small businesses there may be only one

owner (sole trader) or perhaps a small number of partners (partnership)

• In large firms there are often thousands of shareholders, who each own a small part of the business

2. Managers:

• organise• make decisions• plan• control• are accountable to the owner(s)



3. Employees or Staff:

• A business needs staff or employees to carry out its activities

• Employees agree to work a certain number of hours in return for a wage or salary

• Pay levels vary with skills, qualifications, age, location, types of work and industry and other factors


4. Customers:

• Customers buy the goods or services produced by firms

• They may be individuals or other businesses• Firms must understand and meet the needs of

their customers, otherwise they will fail to make a profit or, indeed, survive

5. Suppliers:

• Firms get the resources they need to produce goods and services from suppliers

• Businesses should have effective relationships with their suppliers in order to get quality resources at reasonable prices

• This is a two-way process, as suppliers depend on the firms they supply


6. Community:

• Firms and the communities they exist in are also in a two-way relationship

• The local community may often provide many of the firm’s staff and customers

• The business often supplies goods and services vital to the local area

• But at times the community can feel aggrieved by some aspects of what a firm does


7. Government:

• Economic policies affect firms’ costs (through taxation and interest rates)

• Legislation regulates what business can do in areas such as the environment and occupational safety and health

• Successful firms are good for governments as they create wealth and employment
