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Stakeholders - Introduction

Author: Jim Riley  Last updated: Sunday 23 September, 2012

Let’s start with a definition of stakeholders, which are:

Groups / individuals that are affected by and/or have an interest in the operations and objectives of the business

Most businesses have a variety of stakeholder groups which can be broadly categorised as follows:

stakeholder groups

Stakeholder groups vary both in terms of their interest in the business activities and also their power to influence business decisions.  Here is a useful summary:


Main Interests

Power and influence


Profit growth, Share price growth, dividends

Election of directors

Banks & other Lenders

Interest and principal to be repaid, maintain credit rating

Can enforce loan covenants
Can withdraw banking facilities

Directors and managers

Salary ,share options, job satisfaction, status

Make decisions, have detailed information


Salaries & wages, job security, job satisfaction & motivation

Staff turnover, industrial action, service quality


Long term contracts, prompt payment, growth of purchasing

Pricing, quality, product availability


Reliable quality, value for money, product availability, customer service

Revenue / repeat business
Word of mouth recommendation


Environment, local jobs, local impact

Indirect via local planning and opinion leaders


Operate legally, tax receipts, jobs

Regulation, subsidies, taxation, planning

Stakeholder power is an important factor to consider whenever you are asked to write about the relationship between a business and its stakeholders. In the context of strategy, what is important is the power and influence that a stakeholder has over the business objectives.

For stakeholders to have power and influence, their desire to exert influence must be combined with their ability to exert influence on the business. The power a stakeholder can exert will reflect the extent to which:

  • The stakeholder can disrupt the business’ plans
  • The stakeholder causes uncertainty in the plans
  • The business needs and relies on the stakeholder

The reality is that stakeholders do not have equality in terms of their power and influence. For example:

  • Senior managers have more influence than environmental activists
  • A venture capitalist with 40% of the company’s share capital will have a greater influence that a small shareholder
  • Banks have a considerable impact on firms facing cash flow problems but can be ignored by a cash rich firm
  • A customer that provides 50% of a business’ revenues exerts significantly more influence than several smaller customer accounts
  • Businesses that operate from many locations across the country will be less relevant to the local community than a business which is the dominant employer in a town or village
  • Governments exercise relatively little influence on many well-established and competitive business-to-business markets.  However their power is much stronger over businesses in markets which are regulated (e.g. water, gas & electricity) or where the public sector has a direct stake (e.g. retail banking)
  • Employees have traditionally sought to increase their power as stakeholders by grouping together in trade unions and exercising that power through industrial action.  However, in the last two decades the level of union membership has declined significantly as has the total time lost to industrial action

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