Employees customers suppliers and the community are examples of

A small business's success depends on the actions of numerous stakeholders. Because stakeholders affect the business so greatly, the business has an ethical responsibility to consider how it affects them. A mutually beneficial relationship with all stakeholders will generate goodwill toward a small business, which will lead to lasting success.

Importance of Customers as Stakeholders

Customers depend on the company to supply a product or service. They support the company with every purchase they make, and each purchase also shows the company what products and services to invest in further. In doing so, customers help guide the direction of a small business. Customers also share their opinions and experiences with the customer service department, and they may directly request changes in products or services. Because customers often speak directly with small business owners in their community, these businesses have the opportunity to cultivate a strong understanding of what their customers need or want.

Employees Depend on Companies for their Livelihood

Employees of a small business depend on the business for their livelihood. Contractors may derive a large part of their income from the business as well. Their daily work helps the company to succeed. Thus, a small business might train its employees to improve their skills, preparing them to step into advanced positions as the business grows.

Furthermore, maintaining a positive, productive work environment depends on the cooperation of all employees. Managers must work to oversee daily operations, motivate employees and improve efficiency as needed. Even if a small business owner works alone, she likely depends on family or friends who pitch in to help at a local market, or to set up a website, fulfilling the same functions that employees may later fill. These volunteers may be stakeholders in that they wish to boost their family's income or assume a paid role in the company one day.

Suppliers as Stakeholders

Suppliers provide the raw materials or components that a company uses to create its products. In some cases, suppliers provide finished products. A business may depend on one particular supplier that produces a superior or rare good, in which case the supplier has heightened importance. A small business with a narrow niche may be particularly likely to rely on the specialized materials of one supplier. This also increases the risk to the company and other stakeholders. If the business can't purchase supplies from this source, it may need to dramatically adapt its offerings.

Community and Government as a Stakeholder

The government collects taxes from the company, so it benefits from the company’s profits. It may invest taxes back in society. As a small business grows, it can affect the community in positive or negative ways. A business may provide jobs, and it may contribute funds to local schools and community organizations. Even a very small company can give back in order to generate support and improve the community.

A socially responsible company of any size works to develop more environmentally friendly practices so it doesn’t pollute the community or the broader world, too. Local organizations may advocate for such practices on behalf of citizens and the environment, representing these stakeholders. When a company's activities affect the community directly, such as with many ecotourism ventures, the company has the ethical responsibility to involve community groups and organizations in planning its activities.

In general, stakeholders are people or entities that have an interest in a company; they affect the business or are affected by the operations of the business. Stakeholders are classified as primary stakeholders and secondary stakeholders. Primary stakeholders are people or entities that participate in direct economic transactions with an organization. Examples of primary stakeholders are employees, customers and suppliers.

Secondary stakeholders are people or entities that do not engage in direct economic transactions with the company. According to the American Society for Quality, secondary stakeholders are indirectly affected by an organization's operational activities. Secondary stakeholders examples are local communities, local workforce boards, activist groups, business support groups and media.

Secondary Stakeholders' Importance

Secondary stakeholders are important to a company because they affect the company's reputation. Secondary stakeholders tend to be more vocal than primary stakeholders. Primary stakeholders are small groups compared to secondary stakeholders. The concerns raised by primary stakeholders, such as suppliers, stay well within that supplier’s group and the business owners. The public perception toward the organization might not be affected even if the organization takes its time in addressing the supplier's issue.

The concerns raised by secondary stakeholders, such as local communities, receive wide media coverage and disseminate to the general public quickly. Any delay in addressing their concerns could damage the company's reputation.

Secondary Stakeholders Effects on Businesses

If a company's production activities damage the air and underground water, local communities and activist groups will likely speak out. For example, In 2018, Sterlite Copper, a subsidiary of Vedanta Group of India, was forced to shut down its operations after continuous protests from residents claiming that the company caused severe damage to air and water.

Secondary stakeholders can also create positive word-of-mouth about an organization in the market. For example, participating in community fundraisers or offering tuition for children of employees can motivate local communities, activist groups and the media to speak in glowing terms about a company.

How to Deal With Secondary Stakeholders

A company should treat secondary stakeholders with dignity and respect. If they voice a genuine concern, the organization should take appropriate steps to address it. If a local workforce board claims that outsourcing activities are increasing layoffs and the company feels the concern is genuine, it should negotiate with the board to arrive at a win-win situation. Organizations that act aggressively toward secondary stakeholders and try to impose their will on them may face severe criticism and negative publicity. The company should show in its actions that it cares for the well-being of secondary stakeholders and values their opinions.

Primary and Secondary Stakeholders in Project Management

Managing stakeholders is an important principle of project management. While planning a project, the project manager should draw a stakeholder matrix to prioritize stakeholders based on their ability to influence the project and the interest they have in the project. According to the Food and Agricultural Organization of the United Nations, projects with a complex set of overlapping stakeholders must have a clear framework for identifying and ranking them. The stakeholder matrix states that powerful stakeholders in a project should be managed carefully. Secondary stakeholders such as local communities, activist groups and media are influential and can affect the success of projects.

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