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Key terms defined throughout,
increasing students’ confidence and
improving their essay-writing skills
Unit 2 Managers, leadership and decision making
6
Understanding the
role and importance
of stakeholders
This chapter considers the role and importance of stakeholders.
It highlights why an organisation should take into account
stakeholders’ needs when making decisions. The needs
of different groups of stakeholders are identified and the
implications of possible overlap and conflict of these needs
are analysed. Stakeholder mapping as a means of identifying
and analysing the power and interest of different stakeholder
groups is explained. The way in which information derived
from stakeholder mapping can be used to determine how to
manage relationships between different groups of stakeholders
is discussed. Potential influences on the relationship with
stakeholders are summarised. The chapter concludes with a
discussion about the importance of managing the relationship
with different stakeholders and how this might include using
communication and consultation.
Stakeholders, as their name implies, have a stake in an organisation –
something to risk and therefore something to gain or lose as a result of an
organisation’s activity. A stakeholder can have a negative or positive impact
on an organisation and its activities.
Regular topical
examples from the
world of business,
helping students
develop their
understanding and
apply the theories
they have studied
to real-world
situations
Advice drawing on both
authors’ experience
of over thirty years of
teaching, to help students
understand challenging
topics and avoid
potential pitfalls
Key term
Stakeholder An individual or group or other institution with a direct
interest in the activities and performance of an organisation or in a
project to be undertaken by that organisation.
In this context, a project might mean: the transfer of a business’s
operations to another location; the introduction of a new ICT system across
an organisation; the move from a centralised, national organisational
structure to a decentralised, regional structure; the closure of a factory; or
any other business strategy that involves change and affects stakeholders.
Manager and the
management team
Suppliers
Customers/supporters
Creditors
Employees of
Manchester United
Local
community
Government
Author advice
Make sure that you understand
the difference between
stakeholders and shareholders.
Stakeholders are the individuals
and groups with a direct interest
in the activities and performance
of a business. Shareholders
are people who provide a share
of the capital needed to run a
business in exchange for partownership; thus shareholders
are stakeholders in a business.
Key term
Pressure groups Organisations
formed by people with a
common interest or shared goal,
who join together to further
their interests or achieve their
goals by putting pressure on the
general public, governments
or businesses. Examples
include Friends of the Earth and
Greenpeace.
Shareholders
Media
Figure 6.1 Manchester United’s stakeholder groups
Stakeholders can be divided into:
●● internal stakeholders, such as owners, shareholders, employees,
managers, trades union representatives and members of works councils.
This group are closely connected to the organisation and their needs are
likely to have a strong influence on an organisation
●● external stakeholders, such as customers, competitors, suppliers, central
and local government agencies and regulators, pressure groups,
investors, bankers, creditors, professional and trade associations, the
local community and the media. External stakeholders have diverse
needs and varying levels of influence on an organisation’s ability to meet
its objectives. This group includes stakeholders who, although external
to the organisation, have a contractual relationship with it, such as
customers, suppliers and investors. These latter groups are sometimes
known as ‘connected stakeholders’.
An alternative classification divides stakeholders into:
●● primary stakeholders: those who are directly involved and affected,
either positively or negatively, by an organisation’s actions. These
people will have the power to influence and shape decisions.
(Primary stakeholders could be internal or external stakeholders)
●● secondary stakeholders: the ‘intermediaries’, that is, persons or
organisations who are indirectly affected by an organisation’s actions.
(Secondary stakeholders could be internal or external stakeholders)
●● key stakeholders: can be either primary or secondary stakeholders
but will have significant influence upon, or importance within, an
organisation.
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33
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Understanding the role and importance of stakeholders
Author advice
6
For a business, its main stakeholders are likely to be its shareholders,
employees, customers, suppliers, financiers, the local community and the
government. Figure 6.1 illustrates the stakeholder groups that might have
an interest in a football club such as Manchester United. If a business is
planning a particular project, for example, the transfer of operations to a
new location or the closure of one of its factories, stakeholders are likely to
also include trades unions, different groups of employees and managers, the
local council and the media.
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