Six o'clock at Lena's Bakery: Lena's Bakery Ltd now has three shops. Here is who is around it between six and seven in the morning.
Six to seven in the morning
The bakers
At six the bakers are shaping the first loaves.
The flour mill
The van from the flour mill is unloading at the back door.
The family upstairs
The family who live over the first shop are woken by the van, again.
The queue
By seven there is a queue at the counter.
The rival
Across the road the manager of the Goldcrust shop is counting it.
None of these people own the bakery. Every one of them has something riding on how it is run.
Having something to gain or lose from a business is having a stake in it. A person or group that is affected by what a business does, or that can affect what it does, is a stakeholder.
The definition runs in both directions. The family upstairs are affected by the bakery: the van wakes them. The flour mill can affect the bakery: if the flour is late, there is no bread.
Two ways to have a stake
Affected by the bakery
The family upstairs hear the van at six. The customers in the queue get fresh bread, or do not. Neither decides anything at the bakery, but both feel what it decides.
Able to affect the bakery
The flour mill can deliver late. The bank can refuse the next loan. The council's food inspector can close a kitchen that fails a hygiene check.
Usually both at once
The bakers are paid by the bakery, so its success is their wage. And if they do not come in, no bread is baked. Most stakeholders sit on both sides.
Stakeholder is not shareholder: A shareholder owns part of a company: Lena, Marco and Marco's cousin hold the shares in Lena's Bakery Ltd (back in 1.2.3). A stakeholder is anyone with an interest in the business, whether they own any of it or not.
Every shareholder is a stakeholder. Most stakeholders are not shareholders: the family upstairs own nothing, and they still count.
So the bakery has a crowd of stakeholders, far more than the three people who own it. The simplest way to sort them is by where they stand: inside the business, or outside it.
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Some of the bakery's stakeholders are part of the business itself. They own it, run it or work in it. These are the internal stakeholders, and at Lena's Bakery Ltd there are three groups of them.
Owners (shareholders)
- Lena, Marco and Marco's cousin, who hold the shares
- Want: profit, a dividend each year, and a bakery worth more than it was
- They put their own money in, so they carry the risk if it fails
Managers
- Marco, who runs the second shop, and Jonas, who manages the third
- Want: a business that succeeds, and the budget and staff to hit their targets
- Also want: good pay, recognition and the chance of promotion
Employees
- Nine bakers and counter staff across the three shops
- Want: fair pay on time, safe working conditions and a secure job
- Also want: training, sensible hours and a say in how the work is done
Owners who never come in: Goldcrust plc has thousands of shareholders. Many are pension funds that have never seen a Goldcrust shop. They are still internal stakeholders, because they own the company.
Internal is about belonging to the business, as an owner, a manager or an employee. It is not about being in the building.
In a large company the list grows but the three groups stay the same. Goldcrust's board of directors, elected by the shareholders (1.2.3), sits with the managers: they run the company. Its 6,000 bakers and drivers are its employees.
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Everyone who deals with the bakery from outside: Some people are not part of the business but still deal with it. These are the external stakeholders.
Outside, but involved
- The customer in the queue does not work for Lena.
- The flour mill does not belong to her.
- The council is not hers to run.
- Yet each of them deals with the business, feels what it does, and can change what happens to it.
| Group | At Lena's Bakery | What they want |
|---|---|---|
| Customers | The morning queue, and the three cafés and the hotel that buy bread wholesale | Good bread at a fair price, fresh every morning, with friendly service |
| Suppliers | The flour mill, which buys its wheat from Valley Grain | Regular orders, paid on time, and a customer who stays for years |
| Lenders (financiers) | The bank that lent the money for the new ovens | Repayments on time, with the interest |
| Government | The tax office, and the council's food inspectors | Taxes paid, food safety and employment laws followed, jobs in the area |
| Local community | The family upstairs, the street, and Second Helpings, the food charity that collects unsold bread each evening | Local jobs, quiet mornings, clean pavements, and help for local causes |
| Competitors | Goldcrust plc, whose shop is across the road | The same customers: they watch Lena's prices and copy what sells |
Competitors can look like an odd entry. They are stakeholders because the definition fits both ways: when Lena launches a sourdough, Goldcrust loses some customers, and when Goldcrust cuts its prices, Lena's queue gets shorter.
Outside does not mean unimportant: An external stakeholder can shut the bakery faster than any internal one. The bank can call in the loan; the food inspector can close a kitchen in an afternoon.
External and internal only say where a group stands. They say nothing about how much it matters.
A letter from Bag Free Town: One Monday a letter from Bag Free Town arrives at all three shops. The group wants Lena to change a decision.
Who Bag Free Town is
- 300 local people. They want every shop on the high street to stop handing out plastic bags.
- Not staff, mostly not customers. None of them works for Lena, and most have never bought her bread.
- What they did. They want her to change a decision, and they have written to ask her to.
Bag Free Town is a pressure group: a group of people who share a common interest and who try to influence the decisions a business makes. It stands outside the bakery, so a pressure group is an external stakeholder. Some pressure groups are local and fight one issue, like Bag Free Town. Others are national or worldwide and campaign on the environment, animal welfare or workers' pay.
The three parts of a pressure group
A group with a shared interest
People who care about the same cause: here, plastic in the town's streets and rivers.
Outside the business
Not the owners, the managers or the staff. That makes it an external stakeholder.
Trying to influence its decisions
It wants the business to do something differently, and that aim is what makes it a pressure group rather than a club.
One person, two roles: Sam bakes at Lena's first shop, so he is an employee: internal. On Sunday he queues for a loaf like anyone else: a customer, external. If he joins Bag Free Town, he is in a pressure group too.
Sort the role, not the person. Ask what the question is about: Sam as a baker, or Sam as a shopper.
That is the rule behind every hard case. Owning the business, running it or working in it puts a group inside. Every other link, buying, selling, lending, regulating, living next door, competing or campaigning, puts it outside.
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How this comes up: Stakeholders come up in short questions: a term to define, or groups to state.
The questions
- Define a term from the case, for two marks. Pressure group has been asked, and stakeholder is its obvious partner. A full meaning earns both; no example is needed.
- State two internal or two external stakeholders. A short question.
- A case question that names a stakeholder group. The answer starts with who that group is and what it wants.
The two-mark definition
- Who they are. A group of people who share a common interest.
- Where they stand. Outside the business: a pressure group is an external stakeholder.
- What they do. They try to influence the decisions the business makes.
- Then stop. One sentence, no example, no names from the case.
Two traps: Using the word to define itself. 'A group that puts pressure on a business' only repeats the term. It is a basic idea at best: one mark.
Giving the case's example. 'Friends of the Planet, who criticised the festival' is an example, not a meaning, and it does not score. The meaning must work for any pressure group.
Define the term pressure group.
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