Stakeholders are critical parties in every organization. They refer to those individuals that have an interest in the company. In the past, shareholders and owners were perceived to be the primary organizational stakeholders. Nonetheless, in the modern society, other groups such as employees and the community, among others, have become critical business stakeholders. Stakeholders are divided into the market and non-market stakeholders. Market stakeholders are directly involved in marketing approaches, as well as other commercial business transactions. Good examples of these stakeholders are employees and customers, among other individuals who dedicate their time, effort, and finances to making the operations of an organization more efficient and successful. On the other hand, non-market stakeholders refer to external forces that are powerful enough to influence an organizations success such as regulatory agencies. In addition, these stakeholders have no direct involvement in business operations. The actions of both of these parties determine the triumph or failure of a company or business.
The Impact of Stakeholders on Companies
Nonmarket stakeholders have a significant impact on the attainment of a company’s set goals and objectives. They influence a company’s corporate social responsibility. For instance, in the case of high leverage companies, creditors impose a lot of pressure on organizations to behave in ways that are in their best interest. Creditors force organizations to stay in line. According to Harrison, Freeman, & Abreu (2015) when a firm acts in a manner that may negatively impact the society or the environment, it is at high risk of facing lawsuits, penalties, as well as boycotts. As a result, firms respond to the expectations and demands of creditors by disclosing CSR-related data to creditors to legitimize the actions of the corporation to these stakeholders.
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Furthermore, the government imposes laws and regulations to govern the operations of businesses. The rules developed by this nonmarket stakeholder are essential since they force corporations to be socially responsible, and engage in activities that are beneficial to the society ( Harrison, Freeman, & Abreu, 2015 ), and those that safeguard the environment from harm. Non-market stakeholders are therefore vital in promoting and influencing corporate social responsibility in firms.
Market stakeholders are directly involved in the maneuvers of the business since they dedicate their time, hard work, or money to promoting the success of a business. These individuals provide the company with resources which are required for the attainment of the set goals, such as human labor, as well as raw materials. Employees, for instance, are a vital resource in any organization. It is through the hard work and dedication of staffs that an organization produces high-quality commodities for the maximum gratification of consumer needs. The levels of satisfaction of workers in a company determine the quality of performance, as well as the levels of productivity in an organization. Employees enable the organization to increase its sales and maximize its profits, which is critical to business success.
Customers are essential since they enable a company to meet its sale margin. In addition, the levels of loyalty in customers give a corporation a competitive advantage over other companies in the same industry. When customers are satisfied, they refer more people to the company, and the company gets additional clients. Moreover, a company’s reputation is highly contingent on its customer base ( Matuleviciene & Stravinskiene, 2015 ). The experiences that the consumers have with the company’s products impact the development of a certain reputation for the company. For instance, if a company produces delicious foods, customers are likely to advertise the company to others, increasing the company’s brand in the global society. Likewise, if a company produces low-quality foods which do not satisfy the needs of the consumers, then the customers are bound to spread the word of the low-quality foods produced by that firm, deterring others from purchasing its products. Through customers, a company gains an impeccable or a tarnished reputation. Customers are therefore critical advertising agents, as well as image formulators.
Suppliers are also significant market stakeholders in corporations. They determine whether a business will engage in quality production or not. Through suppliers, companies can produce the desired products in the required quantities. In addition, suppliers have a significant impact on a company since the quality of the goods provided is contingent on the quality of the resources that are offered by these stakeholders. Poor quality supplies may jeopardize the company’s image since the products produced will be of the same quality. Companies carefully select suppliers for different resources and establish a good rapport with them to foster loyalty, since suppliers are critical determinants of the type of goods and services that a company will produce to its target market. Matuleviciene & Stravinskiene (2015) argue that non-market and market stakeholders are not only significant since they can control the stability of the organization, but also because they have the power to shape the reputation of the company.
Stakeholders have a great influence on a business and its endeavors. Nonmarket stakeholders are particularly significant in promoting corporate social responsibility since companies act in the best interest of these stakeholders. Market stakeholders, on the other hand, determine the quality of the commodities that a company will offer, as well as its reputation in the society. It is therefore critical for the best interests of each organizational stakeholder to be prioritized and long-standing relationships to be developed, for the long-term success of an organization. The attainment of organizations goals is dependent on the type of relationship that a corporation has with its market and non-market stakeholders.
References
Harrison, J. S., Freeman, R. E., & Abreu, M. C. S. D. (2015). Stakeholder theory as an ethical approach to effective management: Applying the theory to multiple contexts. Revista Brasileira de gestão de negócios , 17 (55), 858-869.
Matuleviciene, M., & Stravinskiene, J. (2015). The importance of stakeholders for corporate reputation. Engineering Economics , 26 (1), 75-83.
