Today we are going to learn more about :- Stakeholders in The Stakeholder Model

Learning Objectives By the end of today’s lesson you: MUST be able to explain the definition of stakeholders in a business. SHOULD be able to categorise different types of stakeholders and key differences COULD be able to apply this to a selected organisation and evaluate the outcome

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

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

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

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

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

Benefits Firms Can Expect Better public relations More favourable reporting of firm’s activities in media Quality relationships with suppliers Lower staff turnover http://www.walesonline.co.uk/

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.

Meeting the Needs of Stakeholders BTEC Business

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!

Definition of "stakeholder" Business party with vested interest in firm's success a person or organisation with a legitimate interest in the successful operation of a company or organization. A stakeholder may be an employee, customer, supplier, partner, or even the local community within which an organisation operates.

Types of Stakeholder I = Internal E = External Owners (I) Shareholders (I) Managers (I) Staff or employees (I) Customers (E) Suppliers (E) Community (E) Government (E) I = Internal E = External

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

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?

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

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

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

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

Characteristics of Stakeholders 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 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 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

Is this a Stakeholder or Not?!

Factors influencing scale Existing size of business Type of product of service Owner’s ambitions Size of market Factors influencing scale Competition Existing skills and knowledge Tutors may wish to discuss each of the above factors and how it affects the potential scale. For example: A very small business would struggle to operate on a large scale because of numbers of staff/expertise. Some products/services are only attractive to a local market (e.g. food specialities – jellied eels/black pudding); others have global appeal, e.g. mobile phones, blockbuster films. Some knowledge of specific cultures/language is essential for international or global operation. Expansion may require branch offices/production facilities overseas/advertising in different languages/appointment of foreign agents to promote goods etc – all these cost money. If competition is intense then international expansion may be risky, e.g. clothes, footwear. If specialist service is offered then international expansion may be much simpler, e.g. Red Adair (firefighting oil fires). Some entrepreneurs are quite happy to operate on a local basis (accountants/estate agents etc in local town) a regional basis (shop owners with regional branches) or a national basis (eg Richer Sounds). Others aim for global dominance where possible (McDonald’s, Microsoft). Cost of operating over a wider area Cost of expansion