Thinking about stakeholder power
The study of stakeholders should not be limited to a description of the way in which the organisation impacts upon the stakeholders.
In the context of strategy, what is more important is the power and influence that a stakeholder has over the organisation and its objectives.
Stakeholders influence:
Current and future strategies of the organisation are affected by:
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External pressure from the market place, including competitors, customers, suppliers, shareholders, pressure groups threatening a boycott, the government (through taxation and spending).
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Internal pressures from existing commitments, managers, employees and their trade unions.
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The personal ethical and moral perspectives of senior managers
Primary and secondary stakeholders
A distinction can be drawn between the two groups of stakeholders.
Primary stakeholders;
- Those most vital to the organisation.
- A group without whose continuing participation the company cannot survive as a going concern.
- e.g. customers, suppliers.
Secondary stakeholders:
Those without whose continuing participation the company can still exist. e.g. the community.
Active and passive stakeholders
this is an alternative categorisation of stakeholders.
Active stakeholders
Seek to participate in the organisation’s activities. e.g. managers, employees, pressure groups.
Passive stakeholders
Do not normally seek to participate in an organisation’s policy making. e.g. most shareholders, government, local communities.
A stakeholder is a term to describe any organisation or an individual that has a direct interest in actions or decisions of a business. Internal stakeholders are people who work for or own the business i.e. employees, managers, owners. The internal stakeholders are:
External stakeholders are on individuals or groups who have some claim on firm i.e customers, suppliers. The external stakeholders are:
Tesco’s Stakeholders:
The internal stakeholders of Tesco’s are:
The external stakeholders of Tesco’s are:
- Non-governmental organizations
Internal Stakeholders
External Stakeholders
This pyramid-shape diagram indicates the hierarchy of positions in a business, whereas owners are at the top because they own the business and get paid dividends from the company. Managers are positioned in the middle because they manage the business to success due to sales, i.e. expansion to increase growth of the business. Finally, employees are at the bottom because they work for the business and help the business to gain profit and increase sales through customer service.
Levers operated by government & pressure groups
The government can exert influence through taxation, government spending, legal action, regulation and threatened changes in the law.
Community and pressure groups can exert influence by:
- Publicising business activities they regard as unacceptable.
- Political pressure for changes in the law
- Refusing to buy goods/services fro named firms
- Illegal actions such as sabotage
Stakeholder Influences
Employees
Employees may want an increase in pay rise. Staffs have a very big interest in Tesco; they have an interest in the business in the form of wages, bonuses, discounts, and holiday pensions. The business may be affected by how well their staffs do in customer service. If a customer experiences poor customer service, it is more like that they will tell someone else that if they got a good customer service. Therefore employees need the right type of customer training in order to be successful to the business.
Non-governmental organizations
They regularly meet with non-governmental organizations to understand and respond to issues of concern.
Suppliers
Suppliers are probably the third most significant part in a business, they provide the products and if they are not on time it brings a great threat to the financial state of a business. On the other hand, suppliers aren't that important in decision making because they're scared of losing their contract with Tesco. The main jobs of the suppliers are to sell fresh stock daily at market price.
Investors
Tesco’s Investor Relations team regularly meets analysts from the financial institutions which invest in themselves or represent their shareholders.
Owners
In contrast it may want a decrease in pay rise for their employees. You could say that the owners are probably one of the most significant people in a business because they set rules. However, they expect repetitive business profits and respectable customers.
