By Chantal India, on 17 May 2021
In the marketing world, stakeholders are the different groups of people who influence a company such as employees, suppliers, shareholders. Even government departments or agencies can be stakeholders.
Stakeholders are fundamental to the way that companies function. Their decisions can greatly affect a company's results and objectives, and in turn, the company's activities impact them. Let's take a look at what exactly stakeholders are, what their impact is on business, and what types exist.
What Are Stakeholders?
The definition of stakeholder was proposed in the 1980s by American philosopher, Robert Edward Freeman, and refers to the people or groups that are affected by the actions of a company.
This concept becomes important when we consider that the actions of a company not only influence its owners and workers, but also third parties such as its suppliers, competitors, customers, etc. Taking it further, we can say that the company's actions also affect the families of all these groups and, ultimately, society as a whole.
Therefore, before making strategic decisions that affect the company, we need to reflect on the impact they will have on these groups.
What Types of Stakeholders Are There?
There are many different types of stakeholders, since a company's operations have an impact on a variety of individuals and groups. However, we can distinguish between primary and secondary stakeholders and also between internal and external stakeholders.
Primary and Secondary Stakeholders
This classification refers to the importance of the stakeholders for the operations of the company.
Primary stakeholders are those who are essential, since they have a direct economic link with the company. Within this category, there are the following types:
Shareholders who provide the capital necessary to start the company.
Corporate partners who share the same profit-related interests.
Workers who provide the labor that allows the company to put out its products and services.
Customers who ultimately decide whether or not the business is viable.
Secondary stakeholders, on the other hand, are those who do not have a direct economic link to the company, but are affected by its activities. This category is very broad, but we could highlight the following:
The competition, meaning other companies that offer similar products and services .
The market in general, meaning the companies listed on the stock exchange, but all economic activity influences the market.
The media who is responsible for reporting on the company's activities, as they have interests related to transparency.
Financial institutions which are responsible for ensuring solvency and transparency.
Suppliers and subcontractors whose economic activity impacts the company even though they do not work for it directly.
Political parties, religious institutions, and trade unions who have their own interests related to legality, values, and social or labor rights.
Internal and External Stakeholders
This classification is based on the relationship the stakeholders have with the company, meaning whether they are part of the company or are interested third parties.
Internal stakeholders include owners, managers, employees, suppliers, and customers.
External stakeholders are entities such as public administration, competitors, customer advocates, environmentalists, the media, and other interest groups.
Stakeholders vs. Shareholders
Sometimes there can be some confusion between the terms "stakeholders" and "shareholders" as they not only sound similar but are also closely related.
A shareholder is a person who owns shares in a company. Therefore, shareholders are a type of stakeholder.
Shareholders are directly involved in company and are able to influence the company's decisions, since if they withdraw their support, the company cannot function.
How Do Stakeholders Impact the Company?
Not all stakeholders have the same degree of influence over a company's strategic decisions. Furthermore, not all of them benefit in the same way by the company's results.
In order to assess the impact that a specific stakeholder has on a company, two factors must be taken into account: their impact on the company's projects and the company's attitude toward them.
As we have seen above, some stakeholders have a major impact on the formation, management, and execution of a company's plans, while others have a less influential role. For example, suppliers are usually replaceable but if a public administration office does not grant a necessary license, there is usually no way forward.
Similarly, not all stakeholders are equally impacted by the company's activity. Owners, employees, and shareholders are closely linked to the success or failure of the business, while for others such as the media, the impact is much smaller.
Bear in mind that there are stakeholders who benefit from the company's good results and others who have a more antagonistic relationship. For example, shareholders would fall into the first category and competitors into the second.