Understanding external influences on business Revision Notes

Understanding Stakeholder Objectives

Different stakeholders have distinct goals regarding a business. Owners/shareholders typically aim for profit maximisation and increased share value. Employees desire fair wages, good working conditions, and job security. Customers seek high-quality products/services at reasonable prices. Suppliers want regular orders and prompt payment. The local community values job creation, environmental responsibility, and minimal disruption. The government is interested in tax revenue, legal compliance, and economic stability.

Stakeholder Influence and Conflict

Businesses affect stakeholders through their operations (e.g., job creation, pollution). Stakeholders, in turn, influence businesses (e.g., consumer purchasing decisions, employee productivity, government regulations). Conflicts arise because stakeholder objectives often clash. For example, prioritising shareholder profits might mean lower employee wages or less investment in environmentally friendly practices, which could upset employees or the local community. Managing these conflicting demands is a key challenge for businesses.

Examples of Stakeholder Conflict Scenarios

A common conflict arises when a business decides to cut costs. This may benefit shareholders by increasing profits, but it could lead to job losses (affecting employees and the local community), lower product quality (affecting customers), or delayed payments to suppliers. Another scenario is business expansion: shareholders and employees might welcome growth, but the local community could oppose increased traffic or noise pollution. Balancing these diverse interests requires careful management.