1.5.2 The role of stakeholder groups

This section explores the roles played by external stakeholders in a business. External stakeholders are groups that are not directly involved in the day-to-day operations of the business but can significantly influence its success. Understanding the needs and expectations of these groups is crucial for effective business management.

External Stakeholder Groups

The following are key external stakeholder groups:

• Customers
• Suppliers
• Lenders/Banks
• Government
• Local Community

1. Customers

Customers are the individuals or organisations who purchase a business's products or services. They are arguably the most important external stakeholders as their satisfaction directly impacts profitability and reputation.

Role of Customers:

• Providing revenue through purchases.
• Influencing business decisions through their purchasing choices.
• Providing feedback on products and services.
• Contributing to the business's reputation (positive or negative word-of-mouth).

Business Responsibilities towards Customers:

• Providing good quality products/services.
• Offering competitive prices.
• Ensuring effective customer service.
• Meeting customer needs and expectations.
• Protecting customer data and privacy.

2. Suppliers

Suppliers are businesses or individuals who provide the resources (materials, components, services) that a business needs to operate.

Role of Suppliers:

• Providing essential inputs for production.
• Influencing the cost of goods and services.
• Contributing to the quality of the final product.
• Potentially influencing the business's operational efficiency.

Business Responsibilities towards Suppliers:

• Maintaining fair and ethical relationships.
• Paying suppliers promptly.
• Communicating clearly about requirements.
• Considering suppliers' needs and concerns.
• Exploring opportunities for long-term partnerships.

3. Lenders/Banks

Lenders, such as banks, provide financial resources (loans, credit) to businesses to help them start, grow, and operate.

Role of Lenders/Banks:

• Providing capital for investment and working capital.
• Monitoring the financial health of the business.
• Influencing the business's financial stability and growth potential.
• Setting terms and conditions for borrowing.

Business Responsibilities towards Lenders/Banks:

• Maintaining good financial records.
• Meeting repayment schedules.
• Providing accurate financial information.
• Managing risk effectively.
• Maintaining open communication.

4. Government

The government sets laws and regulations that businesses must comply with. It also provides various services and support to businesses.

Role of Government:

• Setting legal frameworks (e.g., employment law, environmental regulations).
• Implementing economic policies (e.g., taxation, trade agreements).
• Providing infrastructure (e.g., roads, utilities).
• Offering support schemes (e.g., grants, loans).
• Regulating industries to protect consumers and the environment.

Business Responsibilities towards Government:

• Complying with all relevant laws and regulations.
• Paying taxes and levies.
• Adhering to government policies.
• Contributing to the economy through job creation and economic activity.
• Participating in consultations on policy matters.

5. Local Community

The local community is the area where a business operates. Businesses have a responsibility to the community in which they are located.

Role of Local Community:

• Providing a workforce.
• Being customers for the business's products/services.
• Providing a supportive environment for the business to operate.
• Holding the business accountable for its actions.

Business Responsibilities towards Local Community:

• Providing employment opportunities.
• Supporting local charities and community initiatives.
• Minimizing negative environmental impact.
• Being a responsible neighbour.
• Contributing to the local economy.

Stakeholder Group	Key Role	Business Responsibilities
Customers	Provide revenue, influence decisions, feedback	Good quality, competitive prices, good service, meet needs
Suppliers	Provide inputs, influence cost, quality	Fair relationships, prompt payment, clear communication
Lenders/Banks	Provide capital, monitor finances, influence stability	Good financial records, repayment, accurate info
Government	Sets laws, provides services, regulates	Comply with laws, pay taxes, adhere to policies
Local Community	Provide workforce, customers, supportive environment	Employment, support initiatives, minimise impact, be responsible