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The role and importance of stakeholders Essay

In this coursework, I have been given an external task about two businesses I must choose, in order to investigate the value of stake and interest in the company and how the stakeholders affects its business. The two businesses that were exhibited for decisions were Tesco PLC and Guilford Spectrum. However, the business I have decided to investigate about is Tesco PLC because it is known in existence and it is one of the biggest retailers in the UK, whereas it has a wide range of stakeholders and information to consider the facts about Tesco PLC.

Task 2A The role and importance of stakeholders

In this part of the coursework I will be identifying Tesco’s stakeholders, their relationship with Tesco. I will also be showing how stakeholders and Tesco’s interest clash and how they solve this.

People who are affected by the company or can influence it but who are not directly involved with in the company work. Examples are Managers affected by the day-to-day running, Owners, People who work there, internal departments that support the day-to-day operation, customers, suppliers, and financial department.

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Common and conflicting interests of stakeholders

The different stakeholder groups have different interests some in common with other stakeholders and some in conflict.

Examples of common interests:

* Shareholders and employees have a common interest in the success of the organisation.

* High profits which not only lead to high dividends but also job security.

* Suppliers have an interest in the growth and prosperity of tesco.

Examples of conflicting interests

* Wage rises might be at the expense of dividend.

* Managers have an interest in organisational growth but this might be at the expense of short term profits.

* Growth of the organisation might be at the expense of the local community and the environment.

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:

* External pressure from the market place, including competitors, customers, suppliers, shareholders, pressure groups threatening a boycott, the government (through taxation and spending).

* Internal pressures from existing commitments, managers, employees and their trade unions.

* 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:

* Employees

* Managers

* Owners

* Financiers

External stakeholders are on individuals or groups who have some claim on firm i.e customers, suppliers. The external stakeholders are:

* Customers

* Pressure Groups

* The Local Community

* Government

* Suppliers

* Bankers

Tesco’s Stakeholders:

The internal stakeholders of Tesco’s are:

* Staffs

* Owners

The external stakeholders of Tesco’s are:

* Suppliers

* Customers

* Investors

* Non-governmental organizations

Internal Stakeholders

Type of Stakeholder

Internal or External

What interest they have in the business i.e. Tesco PLC.

Staffs

Internal

Staffs interest in the business covers a wide range of expectations. Staffs expect a safe and clean working environment, to receive salaries and wages promptly and on time.

Owners

Internal

Owners are directly affected by Tesco’s because they own the business, and they must rely on Tesco’s because, if they gain a loss or profit, it will be a big effect on them. The owners will have similar interest as their staffs, because if Tesco’s gain high profits, this will interest the owners because they presume that their business is very successful and they will want more shares in their company from the profits Tesco’s make.

Managers

Internal

Managers are directly affected by Tesco’s because they will have to take decisions by managing financial information, i.e. sales from Tesco. They will make managerial decisions about Tesco’s due to its sales and profit; therefore, it will be easier to take decisions, i.e. expansion, new products because the sales in Tesco’s are profitable.

Financiers

Internal

The financiers are affected by Tesco’s because, if Tesco’s gain a large income from customer attraction, this will interest the financiers and will enable them to finance large sums of money for Tesco’s own use to help the business and keep investments from the income gained, to keep Tesco’s secure about their inflow.

External Stakeholders

Type of Stakeholder

Internal or External

What interest they have in the business i.e. Tesco PLC.

Suppliers

External

Suppliers are indirectly affected in a way because they are externally supplying for Tesco’s. They would want to supply more goods and services, if Tesco’s pay for invoices and they will pay their suppliers on credit, therefore, the supplier will be reliant on Tesco’s because, firstly Tesco’s may be profitable which indicate that they will have no worries about owing their suppliers

Customers

External

Customers are indirectly affected by Tesco’s because, although, they don’t work in Tesco’s, they buy food products for provision, in order to help Tesco’s increase its sales and profit.

Investors

External

Investors are directly affected by Tesco’s because they may give money to Tesco’s to keep shares in the company, therefore, if Tesco’s gain a profit, the investors would take shares of the profit made.

Non-Governmental Organizations

External

Non-Governmental organizations are indirectly affected by Tesco’s because they would be interested in the tax they gain from the profits Tesco’s make to ensure that Tesco’s are a profitable business.

http://www.tesco-careers.com/home/community/local-support

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.

How to cite this page

Choose cite format:

The role and importance of stakeholders. (2017, Oct 07). Retrieved from https://studymoose.com/the-role-and-importance-of-stakeholders-essay

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