Stakeholders

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Types of Stakeholders

Internal and external stakeholders are individuals or groups of individuals affected by a business and its decisions.

Employees are an internal stakeholder as they are affected by the decisions made by the business in terms of salaries and wages, recruitment policies and job security.

Suppliers are an external stakeholder as they are affected by the decisions made by the business in terms of order quantities and payment terms.
Communities are an external stakeholder as they are affected by the decisions made by the business in terms of local jobs and traffic congestion in residential areas because of deliveries.
Customers are an external stakeholder as they are affected by the decisions made by the business in terms of products and services sold and prices charged.

Businesses can manage their relationship with stakeholders using communication and consultation:
Communication can be used between a business and its stakeholders to share information, through methods such as email and newsletters, so that stakeholders can remain informed of developments within the business.
Consultation can be used to investigate the views and feeling of stakeholders so that they feel involved in any decisions made by the business, though the power of stakeholders to change decisions made is still limited as the business defines the stakeholder’s influence.

Stakeholders can have different levels of power and interest and a business must consider this power and interest when deciding how to manage their relationship.
The business may wish to ensure that certain stakeholder groups remain satisfied and this may require consultation instead of communication.

A stakeholder map can be used to display the relative power and interest of different stakeholder groups.

Stakeholders with high power and high interest will need to be managed closely and consultation may be appropriate for these individuals and groups.
Stakeholders with high power and low interest will need to be kept satisfied as they have the power to influence the business if they become dissatisfied.
Stakeholders with low power and low interest will need to be monitored though they lack influence and interest in many business decisions.
Stakeholders with low power and high interest need to be kept informed and consultation may be appropriate.

For example, Morrison’s shareholders have high power, as they can vote at AGMs, and they have high interest, as they receive dividend payments, so Morrisons must manage this relationship closely.
For example, Google employees have high interest, though relatively low power, as they cannot influence decisions, so Google may decide to keep them informed of major changes, but they may not consult with staff.

Power and influence can affect a business’ relationship with stakeholders, though there are several additional influences which can affect this relationship:
- The expertise and skill level of staff may affect the relationship between an employer and its employees as an employer may wish to consult with staff if they are able to contribute their expertise to a decision being made.
- The business’ performance may affect the relationship between stakeholders, as poor financial performance may require the business to build a stronger relationship with customers and suppliers so that more favourable payment terms can be negotiated.