This document discusses stakeholders in business. It defines stakeholders as individuals and groups with interests in what a business provides to society. It identifies different types of stakeholders including primary stakeholders essential to a business's survival and secondary stakeholders with a broader public interest. The document also outlines frameworks for analyzing stakeholders, including their power, interests, and mapping stakeholders. It discusses the importance of stakeholder management for businesses.

1. BUSINESS
AND ITS STAKE
HOLDERS

2. Stakeholders in Business
• Stakeholders: Individuals and groups with
interests, expectations, and demands about
what business should provide to society.
• Business should consider stakeholders’
expectations under:
– Legitimacy: the validity of the stakeholder’s claim,
– Power: the ability of the stakeholders to affect the
firm’s operations,
– Urgency: the degree of immediate attention of the
stakeholder’s claim.
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3. Stakeholders and Business
Business
1. Government 2. Employees
3. Owners
4. Consumers5. Society
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6. Environment

4. Types of Stakeholders
• Primary stakeholders: with direct stake in the
organisation and its success – owners, managers, share
holders, and workers.
Includes:
– Core stakeholders: essential to the survival of the firm,
– Strategic stakeholders: vital to the organisation and to
face its threats and opportunities – owners and managers
• Secondary stakeholders: public or special interest
stake in the organisation – consumers, government,
civil society, neighbourhood, environment. Also called:
– Outside stakeholders
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5. Stakeholder Management Strategy
Stakeholder’s Potential for Threat to Organisation
Stakeholder’s
Potential for
Cooperation
with
Organisation
Stakeholder Type 1
Supportive
Strategy:
Involve
Stakeholder Type 2
Marginal
Strategy:
Monitor
Stakeholder Type 3
Non-supportive
Strategy:
Defend
Stakeholder Type 4
Mixed Blessing
Strategy:
Collaborate
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6. The Clarkson Principles of Stakeholder
Management
1. Acknowledge: and monitor concerns of legitimate
stakeholders.
2. Listen and communicate with stakeholders,
3. Adopt mechanisms sensitive to stakeholders’ claims and
requirements,
4. Interdependence and distribution: recognise the
interdependence of interests, and distribute benefits
accordingly.
5. Cooperate with other public and private entities – to reduce
any negative impacts of the business, and to pay
compensation,
6. Avoid activities that infringe rights of stakeholders, e.g. right
to life, property, and clean environment.
7. Transparency of activities, reporting of actions taken to
address stakeholders’ requirements.
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7. • In perfect competition, firms work in a no risk
environment, with equal shares in the market,
and equal profits
• But in the real world, there is no perfect
competition, only oligopoly or monopolistic
competition,
• Businesses have to face different types of
competition risks, affects their market size and
profits
• SWOT analysis – Strengths, Weaknesses,
Opportunities and Threats
Competitive forces
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8. Porter’s - Five Forces
• Porter: to diagnose the principal competitive
pressures in a market and assess its strength
and importance to the firm.
• He identifies five forces that affect the
competitive structure of firms.
• The five forces are external forces that impact
on a company’s ability to compete in a given
market.
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9. Porter’s - Five Forces
Threat of new
entrants
Bargaining
power of
suppliers
Bargaining
power of buyers
Threat of
substitutes
Rivalry among
competing firms
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10. 1. Rivalry among firms: cut throat competition,
oligopoly, high fixed costs, no product
differentiation.
2. Threat of new entrants: low barriers to entry,
government licensing policy, economies of scale,
expected retaliation.
3. Bargaining power of buyers: monopsony,
consumers’ knowledge, undifferentiated
products (no brand loyalty)
4. Bargaining power of suppliers: supplies from
few firms, vertical integration, few or no
substitutes. Influences input prices (oil)
5. Threat of substitute products: rivals develop
substitutes, technology, adv campaigns
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11. Stakeholder Analysis
• The process used by managers to identify
relevant stakeholders and to understand their
interests and power they may assert.
• Who are relevant stakeholders?

12. The Stakeholder Analysis process:
1. Identify all stakeholders (Brainstorming)
2. Identify stakeholder needs & interests
3. Classify groups of interests (Stakeholder Mapping)
4. Identify areas of conflict: Organisation v
Stakeholder, Stakeholder v Stakeholder
5. Prioritise, reconcile and balance stakeholders
6. Align significant stakeholder needs with
organisation’s strategies and actions

13. Advantages of Stakeholder Analysis
• Get to know stakeholders better:
– Relative importance, power and interests
– Better managed relationships
– Risks identified
• Make better strategies and decisions
• Greater acceptance of organisation actions by
stakeholders

14. Disadvantages of Stakeholder Analysis
• Best done on continuous basis
• Assessment of analysis may be subjective
• Maybe not all stakeholder interests can be
met at the same time
– Focus on most important stakeholder
– Balance & reconcile all interests according to
importance or urgency

15. Stakeholder Interests
• Stakeholder have unique relationship to the
organization.
• Stockholders for their part, have an ownership
interest in the firm.
• Customers are interested in gaining fair value
and quality for product and service.
• Employees for their time and effort want to
receive compensation

16. Stakeholder Power
• It’s the ability to use resources to make an
event happen or to secure a desired outcome.
• Five different kinds of power:
– Voting Power
– Economic Power
– Political Power
– Legal Power
– Informational Power.

17. Stakeholder Coalitions
• When the interest are similar stakeholders may
form coalitions temporary alliances to pursue a
common interest.
• Stakeholder coalitions are not static.
• Groups that are highly involved with a company
today may be less involved tomorrow.
• Controversial issues today may not be
controversial tomorrow.
• Stakeholders involved in one part of the
organization may not be involved in the other
part of the organization.

18. Stakeholder Mapping
• Several techniques for categorising stakeholders
• Helps identify which stakeholders may support or
oppose change / organisation’s actions
• Which stakeholders are the most powerful, have
most influence
• Help decision makers formalise / prioritise strategies

19. The Power / Dynamism Matrix
Classifies stakeholders in
relation to the power they hold
and their aptitude for action
(dynamism)
Can be used to indicate where
political effort should be made
before instigating change

21. Power / Dynamism Matrix:
Stakeholders in groups A & B: are the easiest to deal with.
Stakeholders in group C: are important because thy are
powerful. But low dynamism means their reaction is
predictable and expectations can be managed.
Stakeholders in section D: Need most management attention
because they are powerful and reaction is difficult to predict.
May need to ‘trial’ new strategies with them.

22. The Power / Interest Matrix
Classifies stakeholders in relation to
their power and the extent to which
they are likely to show interest in the
actions of the organisation.
Can be used to indicate the nature of
the relationship which should be
adopted with each group

24. Business Ethics
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Business ethics : refers to the
behaviour that a business
adheres to in its daily
dealings with the world.
(1) avoid breaking
the criminal law in one’s
work-related activity;
(2) avoid action that may
result in civil law suits against
the company; and
(3) avoid actions that are
bad for the company image
Includes:
• Labour management, safety in
production, and of final
product,
• Environmental safety and
protection,
• Pricing of products,
• Proper and not misleading
advs.
• Avoid promises of products,
that cannot be kept,
• Ethical behaviour of workers,
staff and managers

25. • Many large companies flout ethics due to their
money power.
– Coca cola – exploitation of labour in South and
Central America, pesticide content – India,
– Union Carbide – Bhopal gas tragedy,
– Nestlé - selling genetically modified food in some
Asian countries without labelling them explicitly.
– Health drinks (Complan, Horlicks) – as substitutes
for a balanced diet, increase intelligence!

27. Shakeholder Activism
• Shareholder activism is a way in
which shareholders can influence a
corporation's behavior by
exercising their rights as owners.
Although shareholders don't run a
company, there are ways for them
to influence the board of directors
and management.

28. Elements of CSR
• CSR in the workplace: Employee training for
safe and ethical practices
• CSR in the marketplace: Contribution in
promotion of ethical reputation.
• CSR in the community: Support local
communities and to make positive difference
• CSR in the ecological environment: Minimize
environmental impact.