IB Business and management

By the end of this chapter, you should be able to:

Outline the interests of internal stakeholders.
Outline the interests of external stakeholders.
Discuss possible areas of mutual benefit and conflict
between stakeholders interests.

A party that has an interest or concern (a stake) in

a companys performance.
People, groups of people, and organizations who
affect or can be affected, directly or indirectly, by
an organizations actions.
The stake can be financial (profit) or non-financial
(safety).

Individuals or groups that work within the

business
Shareholders
Employees
Unions

Individuals, groups, and organizations that

are outside the business.
Government
Financiers
Suppliers
Customers
Community
Pressure groups
The media

Shareholders: focus on returns on their investments.

CEO: focuses on coordinating the business strategy and
delivering profits and returns that satisfy the
shareholders.
Senior managers: focus on the strategic objectives for
their functional areas.
Middle managers: focus on the tactical objectives for
their functional areas.
Supervisors: focus on organizing tactical objectives and
formulating operational objectives.
Employees and unions: focus on protecting their rights
and working conditions.

Government: focuses on how the business operates in

the business environment.
Suppliers: focus on maintaining a stable relationship.
Customers and consumers: focus on the best product
that meets their needs.
Community: focuses on the impact of the business in
the local area.
Financiers: focus on returns on their investments.
Pressure groups: focus on how the business impacts on
their area of concern.
The media: focuses on the impact of the business in
terms of news stories.

In practice, grey areas exist between internal and external

stakeholders.
Employees of a business live in the community where the
business is located. As employees, they are internal
stakeholders; as residents of the community, they are
external stakeholders.
Small shareholders in large publicly traded companies, like all
shareholders, are considered internal stakeholders. However,
usually is considered external to the business as it has
virtually no ability to influence on the organization.
Therefore, individuals might have multiple stakeholder
interests.

Groups of people with a common interest, such as a business,

may also have differences of opinion.
Although all stakeholders have a stake in the business, their
focuses are different.
Consider the example of a pay rise for employees.
Shareholders may object to the idea, as it could decrease
profits and, therefore, their return on investment. At the
other end of the spectrum, employees would favour pay rises,
which would give them a higher standard of living.
Thus, any decision of importance will elicit different reactions
from different stakeholders.
In successful businesses, the interests of stakeholders are
sufficiently satisfied most the time.

Large businesses with complicated stakeholder interests

often perform a stakeholder analysis.
The first step is to prioritize or rank the interests of various
stakeholders.
One conceptual approach to this step is to determine how
close each stakeholder is to decision making in the
business.
Under this approach, owners and managers are central to
decision making, while suppliers, employees, financiers, and
consumers are further removed.
Most distant are government, pressure groups, the media and
the local community.
Decision makers try to satisfy those stakeholders closest to
the centre.

government

employees

suppliers

owners

pressure
groups

media
managers
financiers
consumers

local community

Another conceptual approach for mapping stakeholders.

Stakeholders are placed in groups in a matrix based on the level
of interest and the degree of power towards the organization.
Based on this matrix, the company can decide on likely strategies
to manage potential conflicts.
Group A: Stakeholders with minimal interest in the business and
have limited power over it. They are rarely a problem for the
business. Owners and managers fairly ignore them, or at least
devote limited energy and attention to satisfy their interests.
(Minimal effort)
Group B: Stakeholders with a high interest in the business and a
low degree of power over it. For owners and managers, making
this group feel included is important. Newsletters, events, and
other ways of conveying a sense of belonging are important.
(Keep informed)

Group C: Stakeholders with low interest in the business and a

high degree of power over it. They have the power to
influence other groups. The business must find ways to
flatter the self-esteem of members of this group to make
them feel important. (Keep satisfied)
Group D: Stakeholders with a high interest in the business
and high degree of power over it. This group is the most
important. The business must not merely communicate with
them but also consult with them before any major decisions
are made. The business should focus on their needs in
preference to the others. Failure to involve and satisfy these
stakeholders can have very negative consequences for the
business. (Key players)

Level of interest
Low

High

Low

Group A: minimal effort

Group B: keep informed

High

Group C: keep satisfied

Group D: key players

Degree of
power

Be a thinker
Outline four internal and four external stakeholders
for your school and identify two areas of mutual
benefits and two areas of mutual conflicts.
Carry out a stakeholder analysis to determine the
importance of these stakeholders.
Use the power-interest model to place these
stakeholders.

Lomin, L., Muchena, M., and Pierce, R. (2014)

Business Management. Oxford
Clark, P. and Golden, P. (2009) Business and

management Course Companion

Gutteridge, L. (2009) Business and management for
the IB Diploma
Thompson, R. and Machin, D. (2003) AS Business
Studies