The Role and Importance of Stakeholders in an Organization

Student to be able to define and discuss the role and importance of stakeholders in an organization and their ability to influence the performance of the organization.

Answer In general, a stakeholder can be one of two types: internal (within an organization) or external (outside of an organization). They can affect the firm’s vision and mission, are affected by the strategic outcomes achieved, and have enforceable claims on the firm’s performance.A stakeholder is typically concerned on the organisation’s results to meet its financial objectives.

The 3 stakeholders are:

• Capital Market Stakeholder is shareholders and lenders that expect the firm to preserve and enhance the wealth they have entrusted to it and the returns are commensurate with the degree of risk accepted to hence their wealth to be maximized. Dissatisfied lenders may impose stricter in borrowing of capital and dissatisfied shareholders may reflect their concerns by selling off their stocks.By keeping its interest of both stakeholders, the firm must know how to balance with its concerns for the firm’s future competitive ability.
• Product Market Stakeholder is customers, suppliers, host communities and union officials that can share few commons interests and benefits as firm engage in competitive battles. Customers – demand reliable products at low prices.
• Suppliers – seek loyal customers willing to pay highest and sustainable prices for goods and services. Host communities – firm willing to be long-term employers and providers of tax revenues while minimizing demands on public support services. Union officials – secure jobs and desirable working conditions.

Product market stakeholders are generally satisfied when a firm reaches the balance of profit margin between the returns to capital market stakeholders and the returns in which they share. Organizational stakeholder is employees that expect the firm to provide a comfortable with rewarding work environment and with the opportunities training to those who willing to learn more to achieving their objectives where they are satisfied in their growing and actively developing their skills. Knowledgeable workers are critical to the firm’s success as they are the competitive weapons that affecting the strategic implementation and the firm’s performance.