Stakeholders of Business Organisation

Stakeholder simply means people who have interest in an organization and people whom without their support the organization cease to exist as it is very important to note that organization by definition means a social arrangement of a group of people coming together to pursue collective goal and control their own performance with boundary separating them from external environment. However in this blog, we would not dwell on the idea of organization too much but rather just use whatever we learn to explain what stakeholder is about.

Before we dwell into the details, let us now see the different catgory of stakeholder in a business organization.
1.External stakeholder
2.Connected stakeholder
3.Internal stakeholder

Now to explain it in my own understanding, external stakeholder means people who have the least but NOT no interest in the organization. Eg. tax authority, public, pressure group. While these people may affect the decision making of the company, their influence over the decision making process is very much limited and are likely to have diverse objectives. These are people that the organization must be aware about but just take them lightly provided they(pressure groups,NGO) joint forces and come together to make a statement should then the organization take heed of them. Connected stakeholders such as customer, suppliers, bankers and shareholders whom are people with fair amount of interest in the organization and that the organization should be fully aware of their desire and opinion about the organization as they pose direct influence in the decision making process of the organization but only short of being in control in the running and actual decision making process of the organization. Lastly internal organization who have direct interest and whose action can directly affect the organization in strategic planning as well as operational part of the organization. Another way of looking at categorizing stakeholder is to split them into primary and secondary stakeholder where primary stakeholder are internal and connected stakeholders while secondary stakeholders are external stakeholder. I will not be dealing further into the examples of various group of stakeholders according to their category as it is found in the textbook but just to summarise this part is that stakeholders are categorized in accordance with their degree of interest which leads to the degree of influence over a business organization.

Now that i'm done with the part above, lets deal with stakeholder conflict. Well the world isnt perfect and not everyone is satisfied. But priority setting comes into the picture based on Mendelow who suggest that stakeholders may be positioned on a matrix as shown in BPP textbook page 80. To make thing easier to understand rather than figuring out the matrix,just remember that by deriving Mendelow's statement, they are four groups of stakeholder (not to be mistaken with the above part as we are deriving Mendelow statement) which are mainly:
1.Key player group
2.Kept satisfied group
3.Kept informed group
4. Unimportant group.
Pls take note that these arent official term but can be found in BPP textbook


Key player group like large customer are likely to affect the decision making process which ultimately affect the direction of the organization. kept satisfied group are people who are to be treated with care and their degree of interest and influence are just one step below the key player group. Kept informed group are people who are unlikely to affect the strategy of organization but whose view are still quite important as it will affect the other stakeholders while lastly the unimportant group are stakeholders who can be ignored or minimal effort required to satisfy them . It is important to note that as time goes by and strategy changes, the stakeholder categorized by the 4 main parts can change as it is fluid. However each group has three choices which are loyalty to the organization, exiting from the organization or voicing out opinion. Ultimately the stakeholders can affect the location, channel of info, limitation of choices, embodiment of culture, determination of successful implementation of the strategy of the organization and affect the degree of reliance of the organization on various group of stakeholders.

The interaction between different stakeholders and how conflict arises may be visualized through 4 main groups
1. Employer and employee
2.Customer and shareholder
3.Manager and shareholder
4.General Public and shareholder.

Employer may have conflicting interest with employee because the employer demand much from the employee without having to give too much incentives while the employee would expect otherwise
Customer would have conflicting interest with the shareholder because they want product with the best economic value while shareholder wants to maximise profit and revenue from product sold
Manager may have conflicting interest with the shareholder because they may want to do things their way and to enjoy certain degree of autonomy away from the influence of the shareholder while the shareholder only wants result (return over capital investment) and may intervene in managerial activity to increase control causing displeasure to the management team
General public have certain expectation of organization fulfilling their corporate responsibility while shareholders put great emphasis on generation of revenue and little emphasis on corporate responsibility which may cause the reduction in profit of organization and ultimately less return on their capital investment.

In conclusion, there should be a right balance between different group of stakeholders .
(article done by Harry Chew)