⚡ Stakeholder Interests and Conflicts
Big Idea: Because different stakeholders want different things, conflicts are almost inevitable. Managers must find ways to balance these competing demands.
Key conflicts
- Owners vs employees -- owners want to minimise costs (including wages); employees want higher pay and better conditions
- Customers vs owners -- customers want low prices; owners want high prices for maximum profit
- Business vs community -- the business wants to expand (more noise, traffic, pollution); the community wants a quiet, clean neighbourhood
- Shareholders vs managers -- shareholders want high dividends now; managers may want to reinvest profits for long-term growth
- Suppliers vs business -- suppliers want prompt payment; the business wants to delay payment to improve its cash flow
- Short-term vs long-term stakeholders -- shareholders may want quick returns; employees and communities benefit from long-term stability
A multinational mining company wants to open a new mine near a village. Shareholders are excited (profits!). Local residents are worried (noise, pollution, damage to farmland). Employees in the area are hopeful (jobs!). Environmental groups are opposed (ecosystem damage). The company must balance all these competing interests.
How businesses manage conflicts
- Communication -- keeping all stakeholders informed about decisions and the reasons behind them reduces misunderstanding and builds trust
- Negotiation -- finding compromises that give each group something they value (e.g. offering employees a smaller pay rise plus better benefits)
- Transparency -- publishing reports on financial performance, environmental impact and social responsibility so stakeholders can see the full picture
- Stakeholder mapping -- identifying which stakeholders have the most power and interest, and focusing attention on managing those relationships
- CSR programmes -- demonstrating commitment to the wider community and environment, not just profit
In exam answers, do not just list generic strategies. Link each strategy to the SPECIFIC conflict in the question and explain HOW it would help resolve the tension.
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Who has the most influence?
Not all stakeholders have equal power. Some can significantly impact business decisions, while others have limited influence.
- Major shareholders -- can vote to change company direction, replace directors, or block decisions
- Government -- can pass new laws, increase taxes, or impose regulations that force the business to change
- Large customers -- if one customer accounts for a big share of revenue, they have significant bargaining power
- Key suppliers -- if a supplier provides something the business cannot easily get elsewhere, they hold power
- Trade unions -- represent employees collectively and can organise industrial action (strikes)
- Media and pressure groups -- can influence public opinion through campaigns, affecting reputation and sales
Stakeholder mapping
Businesses use stakeholder mapping to categorise stakeholders by their power (ability to influence) and interest (how much they care). High-power, high-interest stakeholders need the most attention.
Stakeholder power varies. A small group of vocal customers on social media can sometimes have more impact than thousands of quiet shareholders. Context matters! 📢
🎯 Answering stakeholder conflict questions
These questions are common in Paper 1 and Paper 2. Here is a reliable approach:
- Step 1: Identify the specific stakeholder groups involved
- Step 2: Explain what EACH group wants from the situation
- Step 3: Explain WHERE and WHY their interests clash
- Step 4: Suggest strategies to reduce the conflict
- Step 5: Link everything to the specific business in the question
Question: 'The company plans to automate its factory. Discuss the impact on stakeholders.' Good answer structure: Shareholders benefit from lower costs and higher profits. Employees may lose jobs through redundancy, causing anxiety and demotivation. Conflict: shareholders gain at employees' expense. Strategy: the company could offer retraining programmes and voluntary redundancy packages. But this costs money, reducing the financial benefit shareholders expected.
For extended response questions (8-10 marks): discuss at least TWO stakeholder groups, explain the conflict, suggest a resolution, and evaluate whether the resolution actually works.