Complete guide outlines what are stakeholders in a business, types of stakeholders, stakeholder value and stakeholder approach
Decisions that you make as an entrepreneur do not only affect you, your company or your employees. As a rule, business processes involve all groups of people who are directly or indirectly connected to your company. These are called stakeholders. Stakeholders can significantly influence the success of your company. You should therefore address the goals and interests of your stakeholders.
so… what are stakeholders in a business?
In the business administration area, this term means an associated interest group. A stakeholder in business definition can be people, groups, organizations or institutions. And they all have one thing in common: They are either directly or indirectly affected by the company’s activities and are interested in the outcome of a project or expectations of a company.
Their claims can either be of a non-material, economic or financial nature. Regardless of whether they are directly involved in the project / company or not, they expect something from the company in some way. Each of the individual groups pursues its own and individual interests and tries to influence the company’s decisions to its own advantage. Customers or employees can be cited as examples. But your competition or opponents are also relevant stakeholders.
A stakeholder definition could therefore be as follows: A stakeholder (or stakeholder group) refers to all people who are interested in the outcome of a project and who are directly or indirectly affected by the activities of a company. As a result, you have interests in or claims to companies.
These people, groups or institutions can be stakeholders in a business:
- Trading partner
- Administration (public administration)
- Associations (consumer protection)
- Banks and other capital providers
As part of its stakeholder management, a company should keep an overview of who its stakeholders actually are. You usually have different ways of influencing the company. In examining what are stakeholders in a business, it is necessary to divide these stakeholder groups into two categories: internal and external stakeholders.
On one side you can see the internal stake holders. Internal interest groups are directly involved in what is happening and work directly on the project or in the company. Of course, you want the project to be successful and the end results to be satisfactory. They include, for example, the employees, the owner (s) or the management. Among other things, you are interested in ensuring that secure jobs are available, your own company is successful and profits are increased.
On the other hand are the external stakeholders . This group includes all people who are only indirectly involved in the company or in what is happening. So you are not largely responsible for the fact that products are manufactured, for example.
These would be customers, suppliers, the state, the public, creditors, banks or competitors, to name a few. In contrast to the internal staff, they have different requirements. For example, customers want good products that are offered at an acceptable price. The suppliers, in turn, want a reliable buyer so that they can secure their own business. Various environmental organizations are also showing great interest in how sustainable and environmentally friendly companies produce. Nowadays more attention is paid to corporate social responsibility (CSR). Companies try to take on social responsibility by relying more on environmentally friendly resources and doing business sustainably.
What are stakeholders in a business: types and examples
Imagine you are planning an investment. You would like to bring a new product line onto the market and are making use of outside capital – for example a bank loan or a promotional loan. In the future, not only you and your employees as well as the shareholders of your company will be interested in the development of the project, but also the corresponding credit institutions and development institutions. Banks expect interest on the invested capital and the timely repayment of the loans. Funding from public funds can also be linked to certain conditions.
If you use products from suppliers for production, they too have an interest in the development of your business processes. The success or failure of your product line has a direct impact on the sales of your suppliers . And you too will have to deal with the business processes of your suppliers.
In addition, it is important to keep an eye on the interests and demands of the customers . They have a certain idea about the price-performance ratio of your goods, expect appropriate service and And goodwill. Don’t underestimate the power of the customer!
When you launch your new products, you will quickly attract the attention of the competition . First and foremost, they expect fair economic behavior from you. Strategic partnerships may be an option. In any case, your actions in the market will affect the actions of your competitors.
Further stakeholder groups can be assigned to the state and society category. You should also meet the demands of these stakeholders. State institutions require you to conduct business in accordance with the law, as well as taxes and social benefits. In addition, you are expected to take on corporate social responsibility (CSR). This is expressed in the claims that associations and lobbies, political parties, citizens’ initiatives, the press and the general public make of you. Where and under what conditions are your products manufactured? Do you produce sustainably or are your business processes a burden for people and the environment? It is best if you have the right answer to these questions.
How you identify stakeholders who take their goals and interests seriously and serve them appropriately is the subject of the so-called stakeholder value and stakeholder approach.
Now that you know how to precisely define the word, we can move on to other terms related to the topic. Perhaps you have come across ” stakeholder value “. This technical term is often used in practice, but it is difficult to define clearly. In the more common definition, it means the value or benefit that the company has for the stakeholders or interest groups. However, you can also see it the other way around and interpret stakeholder value as the value of the individual stakeholder groups for the company.
When you talk about stakeholder value, you cannot avoid the so-called stakeholder approach. In the following secction we will explain exactly what this term is all about.
The stakeholder approach is also referred to as the stakeholder value approach or stakeholder concept, and is key to stakeholder management. The basic idea for the companies is to know the wishes of their interest and stakeholder groups and to plan them in their projects. In this approach, management aligns purpose, strategy, and objectives with its most relevant and influential stakeholders. So your company tries to find ways to take these wishes and interests into account and meet them.
The aim of stakeholder management is, among other things, to ensure that the company cannot be damaged by the wishes of influential stakeholders. If you ignore your stakeholders and ignore their goals and expectations, this can have fatal consequences. If, for example, you do not take into account the wishes of the stakeholder “customers”, a smooth production process will not do you any good if you make the wrong product.
It is important to identify the individual stakeholders. Once you have identified their goals, you can then define specific measures for your company and apply them. Do your customers want a certain product feature? You’re trying to implement this. Are your employees dissatisfied with the working atmosphere? You are looking for ways to improve the situation. Your influential competition wants to wipe you out? You are trying to prevent this with the right countermeasures.
However, when there are often contradicting and differing demands, it is not that easy to reconcile all of them using a stakeholder approach. You will see that it is unlikely that all wishes can be granted. By precisely recording and analyzing the needs and requirements, you can nevertheless examine where your company can still exploit potential and where there may be dangers.