Page 26 - Strategic Management

Strategic Management 5 Stakeholder theory

5 Stakeholder Theory

5.1 Introduction – definition of Stakeholders

groups or individuals that have an interest in the well-being of the company and/or are affected by the goals, operations or
activities of the organisation or the behaviour of its members. They have a ‘stake’ in what the organisation does Freeman 1984

5.2 Explanation

Stakeholders can be broadly categorised into:

(a) internal stakeholders - employees, management, etc;

(b) connected stakeholders - customers, suppliers, competitors, etc;

(c) external stakeholders - government, pressure groups, etc.

Managers - from the board of directors

Government - tax, trade and Employees - current, pensioners
employment depts.

Community - local, Business strategy Debt holders - banks, individuals
environmental agencies and investment institutions
and the public at large

Suppliers Shareholder - investment
Customers - direct customers, institutions, family members,
end users and consumer groups individual managers and
prospective investors

Figure 5.1

There are obviously close links between stakeholder theory and the adaptive mode of strategy, which is discussed elsewhere
in this text.

5.2.1 Internal stakeholders

These include:

Entrepreneurs - who wish to ‘do their own thing’ - become financial magnates, develop their own technical or commercial
ideas, be independent.

Managers - are likely to have a particular interest, and concern for, the size and growth of the organisation and its
profitability, job security, status, power and prestige (office size, type of company car, number of staff working for them).

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