Nature of Conflict: Conflicts arise because different stakeholders have mutually exclusive goals. For example, increasing employee wages (employee objective) may reduce short-term profits (owner objective).
Environmental vs. Economic Trade-offs: A business might face pressure from the local community to reduce pollution, which could involve expensive technology that increases costs and prices for customers.
Resolution Strategies: Businesses must prioritize stakeholders based on their power and interest. This often involves compromise, transparent communication, and corporate social responsibility (CSR) initiatives to align diverse interests.
| Feature | Internal Stakeholders | External Stakeholders |
|---|---|---|
| Location | Inside the organization | Outside the organization |
| Direct Control | High (employees/managers) | Low (customers/government) |
| Primary Focus | Daily operations and profit | Impact on society and value |
| Examples | Staff, Board of Directors | Suppliers, Creditors, Public |
Analyze the Impact: When discussing a business decision, always identify at least two different stakeholder groups and explain how the decision affects them differently. This demonstrates a deep understanding of conflicting interests.
Evaluate Response: Don't just list stakeholders; evaluate which ones the business must listen to. Use the Power/Interest framework to justify why a business might prioritize a major supplier over a small local pressure group.
Chain of Analysis: Connect a stakeholder's reaction to a business outcome. For example: 'Unfair treatment of employees low morale high staff turnover increased recruitment costs lower overall profit.'
Check for Nuance: Remember that a single person can belong to multiple stakeholder groups (e.g., an employee who lives in the local community and also owns shares).
