Stakeholder Model

Stakeholder Model

1. The Stakeholder Model
BTEC Business

2. Pressures on Business
Competitive pressures –
Modern business faces greater
competitive pressure:
•More open markets
•Globalisation
•Shareholders seeking ever higher
profits

3. Pressures on Business
Pressure 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

4. 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

5. 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

6. 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

7. Benefits Firms Can Expect
•Better public relations
•More favourable reporting
of firm’s activities in media
•Quality relationships with suppliers
•Lower staff turnover

8. 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.

9. Meeting the Needs of
Stakeholders
BTEC Business

10. 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!

11. 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

12. 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

13. 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?

14. 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

15. 2. Managers:
•organise
•make decisions
•plan
•control
•are accountable to the owner(s)
Characteristics of
Stakeholders

16. Characteristics of
Stakeholders
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

17. Characteristics of
Stakeholders
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

18. 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
Characteristics of
Stakeholders

19. 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
Characteristics of
Stakeholders

20. 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
Characteristics of
Stakeholders