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1.4 Stakeholders

1.4 Stakeholders

Learning outcomes

Stakeholders are individuals, organizations or groups with a vested interest in the actions and outcomes of a specific organization. All stakeholder groups are directly affected by the performance of the business. Different stakeholder groups have different degrees of influence on the organization.

Robert Edward Freeman (b. 1951), an American philosopher and professor of business administration at the Darden School of the University of Virginia, is considered to be the father of stakeholder theory. Freeman's Strategic Management: A Stakeholder Approach (1984), widely regarded as being the foundation of stakeholder theory, defines stakeholders as:

"any group or individual who can affect or is affected by the achievement of the organization's objectives." (page 46)

Fran Ackermann and Colin Eden provided an alternative definition of stakeholders in their book Making Strategy: The Journey of Strategic Management (1998):

"People or small groups with the power to respond to, negotiate with, and change the strategic future of the organization." (page 117)

The learning outcomes (or assessment objectives) for this section of the IB Business Management syllabus are:

    Stakeholders - Getting it wrong...

    Here's an example of a business getting it wrong and ignoring the importance of customers as key stakeholders. In 2009, "United Breaks Guitars" was released by Canadian musician Dave Carroll and his band, Sons of Maxwell. It was a protest song that went viral following the country musician and band's real-life experience of how Dave Carroll's custom-made guitar was broken during flight on United Airlines back in 2008, and the airline refusing to take responsibility for their actions. "United Breaks Guitars" became an immediate YouTube (with over 20 million hits) and iTunes hit. The music video has become a public-relations embarrassment for United Airlines.

    As one fan commented, "This is the most impressive complaint about poor customer service I have ever seen!". Businesses that ignore the interests of their stakeholders do so at their own peril.
    Stakeholders - Getting it right...

    By contrast, this video for Southwest Airlines (a rival to United Airlines) went viral in the following year, showing how a flight attendant took the initiative to engage passengers during the pre-flight safety checks, putting their safety at the forefront of customer care:

    InThinking Business Management resources

    Click the hyperlinks below to access the resources for this section of the IB Business Management syllabus:

    Return to the Unit 1 Business organization and environment homepage

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