Who are the stakeholders of a business, what is their interest, and how can their interests conflict?
The main stakeholders of a business (owners and shareholders, managers, employees, customers, suppliers, banks/lenders, government and the local community), their interest in and influence over the organisation, and how stakeholder interests can conflict.
A focused answer to the SQA National 5 Business Management content on stakeholders, covering who they are (owners, managers, employees, customers, suppliers, lenders, government, the local community), the interest and influence of each, and how stakeholder interests can conflict.
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What this dot point is asking
The SQA wants you to identify a business's stakeholders, describe each one's interest in and influence over the firm, and explain how their interests can conflict. Stakeholder questions are very common in the question paper, so learn each group's stake precisely.
What a stakeholder is
A stakeholder is any individual or group that is affected by, or can affect, the activities of a business. Stakeholders are usually split into internal stakeholders (inside the business, such as owners, managers and employees) and external stakeholders (outside it, such as customers, suppliers, lenders, government and the community).
The main stakeholders, their interest and their influence
A useful exam skill is to weigh both interest and influence. A major shareholder has high interest and high influence; a single customer has interest but little individual influence, though customers as a group have a great deal.
How stakeholder interests conflict
Because each stakeholder wants something different, their interests often clash. The business cannot fully satisfy everyone at once, so managers must balance competing demands.
Other common conflicts include: owners wanting to expand a factory while the local community objects to noise and pollution; managers wanting to reinvest profit for growth while shareholders want larger dividends now; customers wanting low prices while suppliers want higher prices for their goods. Recognising and explaining these clashes is exactly what the question paper rewards.
Try this
Q1. Identify two internal stakeholders of a business. [1 mark]
- Cue. Any two of: owners, managers, employees.
Q2. Describe the interest a supplier has in a business. [2 marks]
- Cue. Regular orders so it keeps trading; to be paid in full and on time.
Q3. Explain one conflict between the owners and the local community. [2 marks]
- Cue. Owners want to cut costs or expand to raise profit; the community wants low pollution and protection of the area, so the two clash.
Exam-style practice questions
Practice questions written in the style of SQA exam questions on this dot point, with worked answer explainers. The year tag is the paper they imitate, not the source.
SQA-style Describe4 marksDescribe the interest that different stakeholders have in a business.Show worked answer →
Award 1 mark per stakeholder whose interest is correctly described, up to 4. Owners and shareholders are interested in profit and the return on their investment through dividends and a rise in share value (1). Employees are interested in fair pay, good working conditions and job security (1). Customers are interested in good-quality products, fair prices and reliable service (1). Suppliers are interested in regular orders and being paid on time (1). Other valid stakeholders include banks (interested in the business repaying loans), government (interested in taxes, jobs and following the law) and the local community (interested in jobs and a clean environment). Markers reward the interest, not just naming the stakeholder.
SQA-style Explain4 marksExplain how the interests of different stakeholders in a business can conflict.Show worked answer →
Award marks for each explained conflict (two stakeholders and why their aims clash), up to 4. Owners may want to maximise profit by keeping wages low, but employees want higher pay, so the two interests conflict (1). Owners may want to cut costs by using cheaper materials or expanding a site, but the local community wants quality, low pollution and protection of the area, so they conflict (1). Managers may want to grow the business by reinvesting profit, but shareholders may want larger dividends paid out now, so they conflict (1). Customers want low prices, but suppliers want higher prices for their goods, which the business cannot satisfy at the same time (1). Markers reward a clear clash between two named stakeholders.
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Sources & how we know this
- National 5 Business Management Course Specification — SQA (2024)