Business Stakeholders

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The Main Stakeholders in a Business

A stakeholder is any individual, group or organisations that is affected by a business and its operations. This includes everything from the owners to the local community. There are five main stakeholders in a business.

Owners

Whether it is the shareholders of a limited company or a sole trader, the owners are always the main stakeholders.
They have money invested, own a share of the profit and make key decisions about what should happen to the business.
Their main objective is usually to maximise profit and the value of the firm.

Suppliers

Businesses that supply a company with raw materials or certain goods/services have a significant stake because the business is a customer.
If the company fails, then the suppliers will lose a customer and this might be significant, especially if they have an exclusive contract. -E.g. the fashion manufacturer John Smedley used to supply Marks and Spencers with its exclusive knitwear clothing.

Customers

Businesses serve customers needs and wants.
Think about your stake in Instagram, if they became bankrupt, and closed tomorrow, your life would be affected. This is the essence of a customers’ stake in a business.
The main objectives are therefore for the firm to deliver quality products at an appropriate price and for the firm to survive.

Local community

Business operations affect those that live nearby. Businesses can provide employment and economic activity, but also create noise and environmental pollution.
A local community may be negatively affected by noise and pollution caused by factories.
- For example, the village of Alton near the Alton Towers theme park is affected by both noise and pollution caused by the traffic and customers of Alton Towers.

Employees

If a business is doing well or doing badly it can have an impact on the wages of the employees and even whether or not they keep their jobs (job security).
If a business is growing rapidly then employees have more chance of being promoted to higher paid roles and if a business goes bust then the employees will lose their jobs.
For employees, the main objectives for the company would be survival and growth.

The Impact and Influence of Stakeholders on Businesses

The owners of the firm have the biggest impact because they make decisions about the aim(s) and objectives of the business. Different stakeholders can have different influences on a business:

Customers

Customers are very important stakeholders of the firm and can have a large influence on a business.
If customers’ needs and wants are changing over time then a business needs to be able to adapt in order to meet these.

Local community

A local community may have less of an impact on how a firm operates.
- A multinational corporation, like Burberry in China, may not mind if a small local community in China does not like how they operate, because most of their sales happen elsewhere in the world.
- Similarly, mining companies or manufacturing companies may not worry about pollution created by their operations in developing countries where few people can afford to buy their produce.

Employees

Keeping employees happy is also important as they determine a lot of the day-to-day running of the organisation. If they can keep employees happy then they will work more effectively.

Conflicts between stakeholders

There may be conflict between maximising profits and being an environmentally friendly firm. Renewable energy sources can be better for a community but they may be more expensive than traditional energy sources such as oil, coal and gas.
- This might have been the case for Coca Cola in India, where some of their operations depleted the clean water supplies that were available to some small village communities.