Business Studies – Objectives And Strategies – Stakeholders

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Business Studies Steve Emma Rudd BMA
Business Studies ­ Objectives and Strategies ­ Stakeholders
Who are the Stakeholders?
All business activity affects many groups in society. For example a decision to expand
a company may affect:
The employees, in terms of changes to their job.
The local community, in terms of increased traffic and noise levels and jobs
The local shops (new jobs may be created and more people may have greater
spending power)
Suppliers may receive more orders
Retailers may have more products to sell
All of these different groups are called stakeholders. A stakeholder is an individual or
group, which is affected by the actions of a business. A key issue for managers is
the extent to which they should take the views of the stakeholders into account.
Obviously, firms have to behave within the law and this means they automatically
have some legal obligations to these groups.
Stakeholders and Business Success
Some managers believe that stakeholders are very important to the success of
their business. They think that if a firm pays attention to the needs of different
stakeholder groups, this will help the firm to succeed. For example:
If employees are treated well, they are likely to be more motivated and work
more efficiently for the business.
If suppliers are paid on time and kept well informed, they will provide good
quality products for the firm and make sure they supply their products on
If the firm tries to help the community (for example by providing jobs or by
investing in local schemes) this provides a better environment for employees
to work in and helps to recruit and retain employees.
If the firm tries to reduce any negative impact it has on the environment,
this leads to a better quality of life for everyone.
The firm may also benefit from taking account of its stakeholders:
It may attract more investors. Investors are increasingly looking at how a
firm behaves, as well as what it produces. Firms who exploit child labour,
produce guns or harm the environment for example, may find it more difficult
to raise finance.
It may find it easier to recruit staff. Employees are often interested in the
company's treatment of stakeholders and take this into account when
deciding whether to accept the job.
It may find that the government (at both local and national level) is more
cooperative because of a good track record. This may make it easier to get
permission for certain activities or in preventing unfavourable legislation from
being introduced.
The stakeholder approach takes the view that it is much better to work with these
groups, rather than to take a more selfish approach, focusing purely on the firms

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Business Studies Steve Emma Rudd BMA
own needs. Firms take many decisions, which affect their stakeholders, e.g.
Stakeholders VS Shareholders
Some managers believe that the needs of stakeholders should not be considered.
These managers believe they should only pay attention to their owners ­ the
shareholders ­ and that the needs of stakeholders are irrelevant and often
expensive to address.…read more


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