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Business · Understanding external influences on business

Business stakeholders

A stakeholder is anyone affected by a business - owners, employees, customers, managers, suppliers, the local community, pressure groups and the government. Each wants something different, and what they want does not always agree.

6 key terms
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Last Chapter

Answer from memory before the answers appear.

What is limited liability?
The owners can only lose the money they invested in the business.
Name the four location factors.
Proximity to the market, labour, materials and competitors.
Name the four Ps.
Product, price, promotion and place.
Give two reasons for writing a business plan.
To minimise risk and to obtain finance.

Learning Objectives

1Explain who a business's stakeholders are.
2Explain the different objectives of each stakeholder group.
3Explain how stakeholders are affected by, and can affect, business activity.
4Explain why stakeholders' objectives can conflict.

What Is a Stakeholder?

A stakeholder is any person or group with an interest in a business, because they affect it or are affected by it.

Not just the owners
Customers, staff, suppliers, neighbours and the government all have a "stake" in what the business does.
Internal stakeholders
People inside the business: the owners, managers and employees.
External stakeholders
People outside the business: customers, suppliers, the local community, pressure groups and the government.
Why they matter
A small business needs the support of its stakeholders - without customers, staff and suppliers it cannot operate at all.

A small business's stakeholders

Owners (shareholders)
- profit
- the business surviving and growing
- the value of their investment
Employees
- fair pay
- job security
- good working conditions
Managers
- a good salary
- responsibility
- the business succeeding
Customers
- good quality
- low prices
- good service and choice
Suppliers
- regular orders
- being paid on time
- a long relationship
Local community
- jobs
- little noise, litter or traffic
- support for local causes
Pressure groups
- the business changing how it behaves on the issue they campaign about
The government
- taxes paid
- laws followed
- jobs created

The People Inside the Business

In a small business the owner and employees work side by side every day. They both want the business to succeed - but the owner wants profit, and the employees want good pay, and every pound spent on one is a pound less for the other.

A small business owner standing with their team of employees in front of the shop.

Stakeholders and Their Objectives

Owners (shareholders)
Who they are: The people who own the business. What they want: Profit, survival and growth
Employees
Who they are: People who work for the business. What they want: Good pay, job security, safe conditions
Managers
Who they are: Employees who run parts of the business. What they want: Good salary, responsibility, success
Customers
Who they are: People who buy the products. What they want: Quality, low prices, good service
Suppliers
Who they are: Businesses that sell materials or stock to it. What they want: Regular orders and prompt payment
Local community
Who they are: People living near the business. What they want: Jobs, little disruption, local support
Pressure groups
Who they are: Groups campaigning on an issue. What they want: The business changing its behaviour
The government
Who they are: National and local government. What they want: Taxes, jobs, following the law

A Two-Way Relationship

How business activity affects stakeholders

A new café creates jobs for local people.
Raising prices costs customers more.
Paying suppliers late causes them cash-flow problems.
Late-night opening may disturb neighbours.
Profits pay the owner and taxes pay for public services.

How stakeholders affect the business

Customers decide whether to buy - they decide sales.
Employees' skill and effort decide the quality of service.
Suppliers can refuse trade credit or raise prices.
The local council can refuse planning permission.
Pressure groups can organise protests and bad publicity.

When the Community Pushes Back

Even a small business can find itself in conflict with its neighbours. Residents worried about noise, litter or traffic can object to planning applications, complain to the council or campaign on social media - and a business that ignores them risks losing both its permission and its reputation.

Local residents holding handmade placards on a quiet residential street.

Pressure Groups

A pressure group is an organised group that tries to change what businesses or the government do.

What they want
Change on one issue, such as animal welfare, pollution, plastic waste or protecting a local area.
How they act
Campaigns on social media, protests, petitions, boycotts and contacting the local council or newspapers.
Impact on a small business
Bad publicity can put customers off, so the business may change its plans.
Local groups
Many pressure groups are small and local, formed to fight one decision - such as a new takeaway on a quiet street.

Conflicts Between Stakeholders

Owners and employees
One wants...: Lower wage costs to raise profit. The other wants...: Higher pay
Owners and customers
One wants...: Higher prices to raise profit. The other wants...: Lower prices
Customers and local community
One wants...: Late opening for convenience. The other wants...: Quiet evenings and no litter
Owners and suppliers
One wants...: Lower prices and longer to pay. The other wants...: Higher prices and prompt payment
Owners and pressure groups
One wants...: The cheapest packaging. The other wants...: Plastic-free packaging, which costs more

Dealing With Conflict

A business cannot please everyone, so it has to make choices.

Prioritise
Most small businesses put customers and owners first, because without sales and profit the business cannot survive.
Compromise
A café might open late on weekends only, to keep customers happy without annoying neighbours every night.
Communicate
Explaining decisions to staff, customers and neighbours can reduce complaints.
Long term
Treating employees, suppliers and the community well often pays off in loyalty and reputation.

The New Takeaway

A new pizza takeaway plans to open until 2am on a street of houses near a town centre. Choose four stakeholders. For each one, say whether they will support or oppose the plan and why. Then identify the biggest conflict and suggest a compromise.

1. Choose four stakeholders.

2. Support or oppose? Explain why.

3. Name the biggest conflict.

4. Suggest a compromise.

A good answer shows: Four stakeholders with clear objectives linked to the plan, one conflict explained, and a realistic compromise such as earlier closing on weeknights.

Can I...?

1Explain what a stakeholder is.
2Name the eight stakeholder groups.
3Explain the objectives of each group.
4Explain how a business affects its stakeholders.
5Explain how stakeholders affect a business.
6Explain what a pressure group does.
7Explain a conflict between two stakeholders.
8Suggest how a business could deal with a conflict.

Summary & Exam Focus

Stakeholders are anyone affected by, or who affects, a business.
Owners, employees, managers, customers, suppliers, the local community, pressure groups and the government all have different objectives.
Business activity affects stakeholders, and stakeholders affect the business.
Stakeholders' objectives often conflict, so a business has to prioritise or compromise.

Exam focus

Explain one possible conflict between the owners and the employees of a small business. (3 marks) (3 marks)

Name both stakeholders and what each one wants, then explain why the business cannot fully give both what they want at the same time.

Key terms

The vocabulary this lesson expects you to use. Each one is linked from the first place it appears above.

Stakeholder: Any person or group with an interest in a business, who affects it or is affected by it.
Internal stakeholder: A stakeholder inside the business: owners, managers and employees.
External stakeholder: A stakeholder outside the business, such as customers, suppliers and the community.
Shareholder: An owner of part of a company.
Pressure group: An organised group that tries to change the behaviour of businesses or the government.
Local community: The people who live and work near a business.

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