IGCSE Business Studies 0450

1.5.2 The role of stakeholder groups

Internal Stakeholder Groups

Internal stakeholders are groups of people who are directly involved in the operation of a business. Their interests are usually closely linked to the success of the business. Understanding and managing the needs of these groups is crucial for effective business management.

1. Owners

Owners are the individuals or entities who have a financial stake in the business. Their primary objective is typically to maximise profit and return on investment.

• Sole Traders: A business owned and controlled by one person. The owner has unlimited liability.
• Partnerships: A business owned and controlled by two or more people who agree to share profits or losses. Partnerships can be general (all partners share liability) or limited (some partners have limited liability).
• Shareholders: Owners of shares in a limited company. Shareholders have limited liability, meaning they are only liable for the amount they invested. They receive dividends if the company is profitable.

2. Managers

Managers are responsible for planning, organising, leading, and controlling the business's activities. They have a responsibility to achieve the business's objectives, which often include profitability, growth, and efficiency. Managers are often tasked with balancing the competing interests of other stakeholders.

3. Employees

Employees are individuals who work for the business and receive a salary or wages in return for their services. Employees have a vested interest in the business's success as it affects their job security, wages, and opportunities for advancement. Fair treatment, safe working conditions, and opportunities for training are important for employee satisfaction and productivity.

Stakeholder Group	Primary Objectives	Key Interests	Examples
Owners (Sole Traders)	Maximise profit, retain control	High profitability, business growth, independence	Self-employed professionals, small shop owners
Owners (Partnerships)	Profit sharing, business growth, mutual support	Fair profit distribution, business stability, clear roles	Doctors, lawyers, accountants in a partnership
Owners (Shareholders)	Maximise return on investment, dividend income, capital growth	Profitable company, increasing share value, stable dividends	Investors in a public limited company
Managers	Achieve business objectives, efficiency, growth, reputation	Resources to do their job, clear direction, recognition, opportunities for development	CEO, Marketing Manager, Production Manager
Employees	Job security, fair wages, good working conditions, opportunities for advancement	Stable employment, competitive salary, safe environment, training and development	Clerks, factory workers, sales staff

The interests of these internal stakeholders can sometimes conflict. For example, managers may need to make decisions that increase profitability, which could lead to cost-cutting measures that negatively impact employees. Effective business management involves finding ways to balance these competing interests to ensure the long-term success of the business.