What are stakeholders in business economics

In the business world, the term "stakeholder" has a significant influence on how companies operate and make decisions. We often find ourselves asking: what are stakeholders and why are they so crucial to the success of a business? This question is fundamental to understanding modern business dynamics and how organizations interact with their environment.

In our guide, we will dive into the concept of stakeholders in-depth, starting with their definition and identification, and arriving at the identification of the different categories of stakeholders and how they differ from shareholders.

What are corporate stakeholders

But what does it mean exactly? stakeholders are individuals or groups who have an interest in the activities of a company and can influence or be influenced by the achievement of the company’s objectives.

Stakeholder definition

The term stakeholder comes from English and can be literally translated as "bearer of interest". These individuals are considered "de facto owners of business interests", unlike shareholders who are legal owners of the company’s shares.

Stakeholders can be both internal and external to the organization. Internal stakeholders include employees, managers, and owners of the company. External stakeholders include customers, suppliers, creditors, government institutions, and the local community.

Who are stakeholders

The importance of stakeholders lies in the fact that they can have a significant influence on the success or failure of a company. For example, employees with their skills and commitment are essential to the productivity of the company. Customers, with their purchasing decisions, determine the revenue of the company. Suppliers can influence the quality of the products and the costs of production.

It is important to note that the interests of the various stakeholders do not always coincide and can sometimes conflict with each other. For example, employees may want higher wages, while shareholders may want to maximize profits. The company, therefore, has the task of balancing and mediating between these different interests.

Stakeholder theory, developed in the 1980s, argues that companies should take into account the interests of all stakeholders, not just shareholders. According to this view, the long-term success of a company depends on its ability to create value for all stakeholders.

To effectively manage stakeholders, companies must first identify them and understand their interests and expectations. This process is known as stakeholder analysis. Once identified, the company can develop strategies to engage and communicate with them effectively. stakeholder engagement can take many forms: from simple information to active consultation and collaboration. Many companies today publish sustainability reports or social balance sheets to communicate not only their financial but also social and environmental performance to various stakeholders.

Types of stakeholders to know: the main categories

In the business world, stakeholders are mainly divided, as mentioned, into two categories: internal and external. This distinction is fundamental to understanding the different dynamics and relationships that are established between the company and its stakeholders.

• Internal stakeholders are those who have a direct connection with the organization and actively participate in its daily life. Among these, we find employees, collaborators, owners, and investors who sit on the board of directors. These individuals have a direct interest in the success of the company and can significantly influence its decisions and performance.
• On the other hand, external stakeholders are those who, despite not being directly involved in day-to-day operations, still have an interest in the company and can influence its success. This category includes customers, suppliers, local communities, government institutions, and even competitors.

Another important classification is that between primary and secondary stakeholders.

• Primary stakeholders, also known as key stakeholders, are essential to the survival of the company. These include shareholders, employees, suppliers, and customers. Their engagement and satisfaction are crucial to the long-term success of the organization.
• Secondary stakeholders, on the other hand, can influence or be influenced by the company, but are not essential to its survival. These can include the media, trade associations, unions, and public interest groups.

Examples of stakeholders

To better understand these categories, it is helpful to look at some concrete examples of stakeholders:

• employees: These are key internal stakeholders whose commitment and expertise are essential to the productivity and success of the company.
• owners and shareholders: These provide capital and have a direct interest in the financial performance of the company.
• customers: These are key external stakeholders, as their purchasing decisions directly determine the success of the company.
• suppliers: They can be considered external stakeholders, but their role is fundamental to the company’s supply chain;
• local communities: These are external stakeholders that can be affected by the company’s activities, for example in terms of employment or environmental impact;
• government and institutions: These are external stakeholders that regulate the environment in which the company operates through laws and policies;
• competitors: Although they are external, they can influence the company’s strategies and decisions.

It is important to note that effective stakeholder management requires careful analysis and mapping of these groups. Companies need to understand the interests, expectations, and power of influence of each stakeholder group to develop appropriate engagement strategies.

Difference between stakeholders and shareholders

The terms stakeholders and shareholders are often mentioned in business economics and management, but it is important to understand that they refer to very different roles and interests within an organization.

• shareholders, or shareholders, are those who own shares in a company. Their primary interest is financial, focused on return on their investment. Shareholders primarily aim to maximize the value of their shares and obtain short-term profits. Their involvement in the company is directly linked to their ownership of shares and can vary over time based on their decisions to hold or sell their shares.
• stakeholders, on the other hand, represent a much larger and more diverse group. These include not only shareholders, but also employees, customers, suppliers, local communities, governments, and even the environment, as we have already analyzed. Stakeholders have an interest in the overall well-being of the organization, which goes beyond the purely financial aspect. Their involvement is often long-term and can concern aspects such as sustainability, social responsibility, working conditions, and community impact.

A key difference is that while all shareholders are stakeholders, not all stakeholders are shareholders. This means that the scope of stakeholders is much broader and more inclusive.

The distinction between stakeholders and shareholders has important implications for corporate management. Stakeholder theory argues that companies should consider the interests of all stakeholders in their decisions, not just those of shareholders. This approach can lead to more balanced and sustainable strategies in the long term, as well as more durable performance.

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The importance of stakeholders for business

Stakeholders have a significant influence on the success and sustainability of a company. Their importance extends far beyond simple economic interest, extending to various aspects of corporate life.

Influence on corporate decisions

Stakeholders have a direct impact on corporate decisions through various mechanisms. They can provide feedback on business processes, influence strategies through their loyalty or participation, and even change financial investments. Their opinions and actions have the potential to alter the priority functioning of the company.

For example, employees, as internal stakeholders, significantly influence business productivity. Their satisfaction has a direct impact on production and, consequently, on the success of the company. Similarly, customers, as external stakeholders, play a crucial role in determining success through their purchasing decisions.

Impact on reputation

Corporate reputation is an intangible but highly valuable asset, and stakeholders play a key role in shaping it. Stakeholders’ opinions and perceptions can significantly influence how the company is seen by the public and the market.

customers, for example, can influence a company’s reputation through reviews, word of mouth, and brand loyalty. local communities can impact the perception of the company in terms of social and environmental responsibility. Employees, through their experiences and opinions, can influence the company’s image as an employer.

A strong reputation can facilitate access to crucial resources such as funding, partnerships, and talent.

Contribution to business success

Business success is also influenced.

First, stakeholders provide essential resources: employees provide skills and labor, customers generate revenue, investors provide capital, and suppliers provide needed goods and services.

Furthermore, stakeholders can be a valuable source of innovation and improvement. Customer feedback can drive new product development, while employee ideas can lead to more efficient processes. Local communities can offer insights into how the company can better integrate into the social and economic fabric of the area.

Effective stakeholder engagement can also lead to better risk management. By understanding stakeholder concerns and expectations, companies can anticipate potential problems and develop strategies to mitigate them.

How to Effectively Manage Stakeholders

Effective stakeholder management is critical to the success of any project or organization. It requires a structured and intentional approach to identifying, analyzing, and engaging stakeholders in a meaningful way.

Stakeholder Mapping

The first step in effective stakeholder management is Identification and Mapping. This process helps us understand who are the people or groups that have an interest or influence on our project.

• Stakeholder mapping can be done through different techniques, but one of the most effective is the Power/Interest Matrix. This matrix classifies stakeholders based on their level of authority (power) and degree of interest in the project’s objectives. This allows us to identify who needs more attention and develop appropriate engagement strategies for each group.
• Another useful technique is saliency analysis, which assesses stakeholders based on three criteria: power, legitimacy and urgency. This approach allows us to recognize not only who has influence, but also who has a legitimate interest or urgent needs that we need to meet.

Communication strategies

Once stakeholders have been identified and mapped, it is essential to develop effective communication strategies. Communication is at the heart of stakeholder management and requires a tailored approach for each group.

• For stakeholders with high power and high interest, it is important to maintain frequent and detailed communication. We can organize regular meetings, provide constant updates, and actively involve them in the decision-making process.
• For stakeholders with high power but low interest, we need to ensure that they are informed about key aspects of the project, but without overloading them with details. Regular updates and concise summaries may suffice.
• low power, high interest stakeholders may benefit from more frequent but less formal communication. We can use newsletters, social media, or informal meetings to keep them updated and engaged.
• Finally, for low power, low interest stakeholders, minimal but clear communication may be sufficient. We can provide general project updates when needed.

Balancing interests

One of the most challenging aspects of stakeholder management is balancing their often conflicting interests. It is important to remember that we cannot always fully satisfy all stakeholders, but we can try to find a balance that is acceptable to most of them.

To do this, we must first fully understand the expectations and concerns of each stakeholder group. This requires active listening and open dialogue. We must be willing to receive feedback, even if critical, and to seriously consider perspectives that differ from our own.

Once we understand the various positions, we can try to find points of convergence and compromise solutions. This may require negotiation and adjustments to our original plan, but it can lead to more sustainable and universally accepted outcomes.

Original article published on Money.it Italy 2024-10-03 17:45:03. Original title: Cosa sono gli stakeholder in economia aziendale