Understanding external influences on business Study Guide

Stakeholders are individuals or groups who have an interest in, or are affected by, the activities of a business. These can include employees, customers, suppliers, local communities, owners/shareholders, and the government. Each stakeholder group typically has distinct objectives. For example, employees may want high wages and job security, while shareholders seek high profits and dividends. Business activity, such as expanding operations or changing production methods, can significantly impact these various stakeholders, sometimes positively and sometimes negatively. Stakeholders also influence a business through their actions; for instance, customers can choose to buy products or not, and employees can affect productivity. Due to these differing objectives and impacts, conflicts can frequently arise. For instance, a business's decision to cut costs by using cheaper suppliers might boost profits for shareholders but could negatively impact the quality for customers and potentially harm the local community if the cheaper suppliers are located far away, leading to job losses or reduced local economic activity.