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Unit 1 · Introduction to business management

1.4 Stakeholders

Who has an interest in a business, and why they do not always agree.

A stakeholder is any individual or group with an interest in, or affected by, the activities of a business. (A shareholder is just one type of stakeholder, someone who owns part of a company.)

Internal stakeholders

  • Employees: pay, job security, working conditions
  • Managers and directors: salary, bonuses, power, status
  • Shareholders: dividends, rising share price

External stakeholders

  • Customers: quality, price, service
  • Suppliers: regular orders, prompt payment
  • Government: taxes, jobs, following the law
  • Local community: jobs, low pollution, safety
  • Pressure groups: ethical and environmental behaviour
  • Financiers (banks): repayment of loans with interest
  • Competitors: fair competition

Conflict between stakeholders

Because stakeholders want different things, a single decision can please some and upset others. Try the examples below.

Stakeholder conflict explorerPick a decision
ShareholdersLikely to supportLower costs should raise profits and dividends.
EmployeesLikely to opposeJobs at home are lost.
Local communityLikely to opposeUnemployment and less spending in the area.
CustomersMixedPossibly lower prices, but quality or delivery times may suffer.
GovernmentLikely to opposeLess tax revenue and more unemployment benefits.
SuppliersMixedLocal suppliers lose orders; overseas ones gain.

Businesses manage conflict between stakeholders by:

  1. Consulting stakeholders
  2. Communicating openly
  3. Compromising, for example by phasing in a change
  4. Putting first the stakeholders with the most power or interest in the decision

Not all conflict can be resolved. Managers often have to accept that some groups will be unhappy.

Exam tip
When asked about conflict, name two specific stakeholder groups from the case and explain why their interests clash over one specific decision. Generic answers ("shareholders want profit, workers want pay") earn limited credit.
Common mistakes
  • Using "stakeholder" and "shareholder" as synonyms. Shareholders are only one stakeholder group among many.
  • Forgetting that shareholders can be either. Staff who own shares are internal, outside investors are external. Say which you mean.
  • Describing what each stakeholder wants without explaining why their interests clash in this case and who is likely to win.

Practice questions

New IB style questions every time. You won't get the same one twice until you've done them all at this level.

305 new of 305 medium-level questions leftExplain, distinguish, multi step calculations
Pick a difficulty and press "Generate question" to get your first question.

All companies, people, products, places and figures in these questions are fictional. Any resemblance to real businesses or people is a coincidence and is not intended.

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