Relative importance and influence of stakeholders
➜ Stakeholders differ in how much power and influence they have on business decisions
Examples:
➜ Owners/shareholders → high influence (control decisions)
➜ Customers → high influence (affect demand)
➜ Employees → moderate influence (productivity, strikes)
➜ Government → high influence (laws, taxes)
Analysis:
➜ Powerful stakeholders → influence decisions → shape business strategy
➜ Less powerful stakeholders → limited direct impact → but still important for reputation
Evaluation:
➜ Importance depends on situation (e.g. during financial crisis → banks become more important)
➜ Businesses must prioritise key stakeholders → but cannot ignore others completely
Impact of business decisions on stakeholders and their reactions
➜ Business decisions directly affect stakeholder welfare
Examples:
➜ Wage cuts → employees dissatisfied → lower motivation or strikes
➜ Price increases → customers may switch → reduced sales
➜ Expansion → benefits shareholders → may create jobs
Analysis:
➜ Negative impact → stakeholder dissatisfaction → reduced productivity/demand → lower profits
➜ Positive impact → support from stakeholders → improved performance
Evaluation:
➜ Stakeholder reactions vary → depends on alternatives available
➜ Strong negative reactions → can significantly damage business
Impact of stakeholder aims on business decisions
➜ Stakeholders try to influence decisions to meet their own objectives
Examples:
➜ Shareholders → want higher profits → pressure for cost-cutting
➜ Employees → want higher wages → may demand pay increases
➜ Government → wants tax revenue → imposes regulations
Analysis:
➜ Conflicting aims → force businesses to compromise → balanced decisions
➜ Stakeholder pressure → influences strategy → affects long-term direction
Evaluation:
➜ Some stakeholders have more power → their aims dominate
➜ Businesses must balance short-term vs long-term interests
Accountability to stakeholders
➜ Businesses must be answerable for their actions
Why accountability is important:
➜ Builds trust
➜ Improves reputation
➜ Ensures ethical behaviour
Examples:
➜ Financial reports to shareholders
➜ CSR reports to the public
➜ Compliance with laws
Analysis:
➜ Accountability → transparency → stronger relationships → customer loyalty → long-term success
Evaluation:
➜ Too much accountability → may slow decision-making
➜ Level depends on size and type of business
Conflict between stakeholder objectives
➜ Stakeholders often have different and conflicting aims
Examples:
➜ Employees want higher wages vs shareholders want higher profits
➜ Customers want low prices vs business wants higher revenue
➜ Community wants less pollution vs business wants lower costs
Analysis:
➜ Conflict → difficult decision-making → need for compromise
➜ Poor handling → disputes → strikes → loss of reputation
Evaluation:
➜ Conflict is unavoidable → must be managed effectively
➜ Long-term success depends on balancing interests
Impact of changing business objectives on stakeholders
➜ When objectives change → stakeholders are affected
Examples:
➜ Shift to profit maximisation → cost-cutting → possible job losses
➜ Expansion objective → more jobs → increased production
➜ CSR focus → better environmental outcomes → higher costs
Analysis:
➜ Change in objectives → change in decisions → direct stakeholder impact
➜ Positive or negative effects → influence stakeholder support
Evaluation:
➜ Sudden changes → may create uncertainty
➜ Clear communication → reduces negative impact
➜ Success depends on how well changes are managed
Exam Tips
➜ Always link:
Stakeholder → objective → decision → impact → reaction
➜ Use evaluation phrases:
• “However…”
• “This depends on stakeholder power…”
• “In the long term…”