It is often assumed that shareholders are the most important

stakeholder group in any business. Drawing on any relevant theories,

discuss this idea.

In the traditional view of a company, the shareholders are viewed at the most
important stakeholder and the company had a duty to put their needs first to
increase value for them. Economists such as Milton Friedman believed that the
only purpose businesses should have is to make as much profit as possible for
their owners. Originally detailed in Freemans landmark book Strategic
Management: A Stakeholder Approach identifies and groups which stakeholders
of a corporation, and both describes and recommends methods by which
management can give due regard to the interests of those groups.
Internal: Directors, Managers, Employees
Connected: Shareholders, Customers, Suppliers
External: Government, Local community, Pressure groups, Media
Customers Peter Drucker defined the purpose of a company as this; to create
customers. Without customers the company cannot survive, so in almost all
situations, the customers needs are the priority. As customers are able to vote
with their feet and take their custom to competitors, it is essential to offer both
good products, and value for money.
Employees The task of executives is to create as much value as possible for stakeholders
without resorting to tradeoffs. Great companies endure because they manage to
get stakeholder interests aligned in the same direction Freeman
Sometimes these demands are in conflict and one has to be prioritised over
another.

Mendelows Power/Interest Matrix

The Mendelow Matrix is a useful matrix for determining the potential influence of
the stakeholder groups of an organisation. It looks at two dimensions the level
of interest the group has in the organisation, and the level of power or influence
they have over the organisation. Power can be defined in many ways by the
organisation from expertise in an area that fits with the organisations needs, to
simply having a strong network of connections that the organisation requires
access to. The organisation can use the matrix to plot stakeholder groups
regularly in order to highlight potential threats from the stakeholders, or areas
where a group may be able to assist. It is a particularly useful tool during times
of strategic change such as the introduction of a new strategy, or the
modification of an existing one. The stakeholder group can take one of four
positions in the matrix, based on their level of interest and power or influence:
BOX A A stakeholder group in box A is considered minimal effort and of little
focus to the organisation as they are both low level of interest and low

power/influence. This means they are more likely to go along with change with
no resistance.
BOX B The organisation should keep informed stakeholder groups in box B
as they have high level of interest but do not have any power of note. However,
due to their interest in the organisation, they must be kept informed in order to
prevent them from joining forces with other stakeholder groups and perhaps
increasing their power.
BOX C Keep satisfied those in box C with low interest in the organisation,
but high power. By keeping these stakeholders satisfied, it will prevent them
from gaining more interest and shifting into the key player box.
BOX D These are the key players with both high power and high interest, and
are a very strong group that can oppose new strategy effectively and drive
change if they so wish. It is up to the organisation to invest in the relationship
with these stakeholder groups by educating them as to the reasons for change to
get them on board, communicating to them and consulting with them to gain
their support.

Also Porters 5 Forces

Balanced Scorecard