Who has an interest in a business, and how can their objectives conflict?
Who business stakeholders are (shareholders, employees, customers, managers, suppliers, local community, pressure groups, government) and their different objectives; how stakeholders are affected by and impact business activity; and possible conflicts between stakeholder groups.
A focused answer to Edexcel GCSE Business 1.5.1, covering who business stakeholders are and their objectives, how they are affected by and influence business activity, and the conflicts that can arise between stakeholder groups.
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What this dot point is asking
Edexcel wants you to identify a business's stakeholders and their different objectives, explain how they are affected by and influence the business, and analyse the conflicts that arise when their objectives clash.
Who stakeholders are and their objectives
Stakeholders split loosely into internal stakeholders (owners, employees, managers) who are part of the business, and external stakeholders (customers, suppliers, community, pressure groups, government) outside it. The key point is that each group wants something different from the business.
How stakeholders affect and are affected by the business
The relationship runs both ways. A business decision (to expand, cut costs or change a product) affects its stakeholders, and stakeholders in turn affect the business: motivated employees raise productivity, loyal customers bring sales, and a hostile pressure group or new government law can force a change. This is why a business must consider its stakeholders, not just its owners, when making decisions.
Stakeholder conflict
Because stakeholders want different things, satisfying one often means disappointing another.
A business usually cannot satisfy every stakeholder at once, so it must prioritise. In the short term it often prioritises the owners' objective of survival or profit, but ignoring other stakeholders has costs: unhappy employees become less productive, a damaged community relationship harms reputation, and pressure-group campaigns can hit sales. The skill the exam rewards is recognising the conflict and weighing whose objective the business should prioritise, and why.
Try this
Q1. State one objective a supplier has as a stakeholder in a business. [1 mark]
- Cue. Regular orders, or prompt payment.
Q2. Explain one way a conflict could arise between a business's owners and its employees. [3 marks]
- Cue. Owners want higher profit and may cut wages or jobs; employees want better pay and security, so the objectives clash.
Exam-style practice questions
Practice questions written in the style of Pearson Edexcel exam questions on this dot point, with worked answer explainers. The year tag is the paper they imitate, not the source.
Edexcel 20192 marksState two stakeholders of a business other than its owners. (Paper 1, Section A)Show worked answer →
A 2-mark state question, one mark per correct stakeholder.
Any two of: employees, customers, managers, suppliers, the local community, pressure groups, the government.
Markers want two distinct stakeholder groups from the specification list, excluding the owners/shareholders as the question asks. Choose two clearly different groups, for example "employees" and "the local community".
Edexcel 20216 marksDiscuss the possible conflicts between stakeholder groups when a business decides to cut costs by reducing staff. (Paper 1, Section B)Show worked answer →
A 6-mark discuss question rewards developed analysis of competing objectives, with a judgement.
Conflict one: shareholders (owners) want higher profit, so cutting staff to reduce wage costs serves their objective, but employees want job security and pay, so redundancies directly harm them; the two objectives clash.
Conflict two: the local community and customers may also be affected: job losses hurt the local economy (community objective), and fewer staff may mean worse customer service, conflicting with customers' objective of good service. So one decision pulls different groups in opposite directions.
A strong answer judges that the business cannot satisfy every stakeholder at once and must prioritise, often the owners' objective of survival or profit in the short term, while recognising the long-term cost to employee morale and reputation. Markers reward developed analysis of the conflict, not a list of stakeholders.
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Sources & how we know this
- Pearson Edexcel GCSE (9-1) Business (1BS0) specification — Pearson Edexcel (2017)