Stakeholders

by Business Case Studies on Monday 16th May, 2011

Stakeholders are groups or individuals that affect, or are affected by, a business. Each stakeholder group will have certain expectations of the business. For instance, employees are likely to expect fair pay and safe working conditions. For customers, value for money is one of the highest priorities. In addition to this, those customers passing on personal details to businesses must surely expect those details to be kept safe. Unfortunately, for 100 million Sony customers, this was not the case. A security breach led to their personal data being stolen. Sony has now implemented additional security measures to provide its users with greater protection. On Sunday Sony started to restore its online Playstation network in Europe, the US, Australia, New Zealand and the Middle East. Restoration of services to Japan and Asia are to begin soon. Sony's executive deputy president, Kazuo Hirai, said that 'aggressive action' was being taken to resolve security issues, and asserted that the whole company is committed to consumer protection. It remains to be seen how these events will impact on the organisation. (BBC News 15th May 2011)

Multinational energy company Shell knows that it must balance the different needs of its stakeholders by looking at the social, economic and environmental impacts of its work. As stakeholders influence the achievement of the organisation's aims, consideration of stakeholders needs is very important. Shell's internal stakeholders include its shareholders, employees and suppliers. In addition to local communities and other interest groups, customers make up its external stakeholders. Without customers, businesses would not exist. With this in mind, one of Shell's major objectives is 'To win and maintain customers by developing and providing products and services which offer value in terms of price, quality, safety and environmental impact, which are supported by technological, environmental and commercial expertise.'

Questions

1. Using examples, define stakeholders.
2. Using the Shell case study, describe the 'other interest groups' mentioned in the article.
3. Explain why the objectives of stakeholders may conflict.
4. Do you agree that customers are the most important stakeholders of a business? Justify your answer.

Answers to questions

1. Using examples, define stakeholders:Stakeholders are groups or individuals that affect, or are affected by, a business. Examples of stakeholders include owners/shareholders, workers customers, local community, suppliers, financiers and the government.
2. Using the Shell case study, describe the 'other interest groups' mentioned in the article:Interest groups are decision makers and opinion formers. They include academics, government, media, non-governmental organisations (NGOs), business leaders and the financial community.
3. Explain why the objectives of stakeholders may conflict:Each stakeholder group will have different expectations. These objectives may work against each other. For instance, shareholders may want more profit but the increased activity required to achieve this profit may result in greater congestion or pollution for the local residents.
4. Do you agree that customers are the most important stakeholders of a business? Justify your answer:

On the one hand…

  • It is customers' money that keeps the business going. Without customers, firms would not exist.

However…

  • For a firm to provide goods and services for customers, it relies on owners/shareholders to take risks and invest in the business. Shareholders could therefore be considered the most important stakeholders
  • Other stakeholders influence how an organisation operates, for example, the employees make the goods and provide the services for the business. Many firms have commented that their workers are their biggest asset.

It depends on…

  • How much competition there is in the market
  • Whether the goods/services are essential or luxuries.

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