Stakeholders

An internal stakeholder operates inside the business and is part of its structure — for example an employee or a manager. An external stakeholder is outside the business but is still affected by its activities — for example a customer or the local community. The key difference is position relative to the firm: inside versus outside.

Two stakeholders of a supermarket are its customers (external — they buy the groceries) and its employees such as checkout and shelf-stacking staff (internal — they work for the store).

Shareholders are owners who want the firm to maximise profit so they receive higher dividends and a rising share price. Employees want higher wages, secure jobs and good conditions. A conflict arises because paying employees more raises the firm's wage costs, which reduces profit available for dividends. For example, if the workforce demands a 5% pay rise, the firm's costs increase and shareholders may see a smaller dividend that year — so the two groups' interests are not aligned. This clash is common because the same revenue must be split between rewarding owners and rewarding workers.

Two external stakeholders affected are the local community and suppliers. The local community may benefit from new jobs and greater spending in local shops, but it is also likely to suffer more traffic, noise and pollution from the larger factory, so its interest in a clean, quiet neighbourhood conflicts with the firm's growth. The severity depends on how close homes are to the site and how organised residents are — a strong local campaign could delay planning permission. Suppliers, by contrast, are likely to benefit: a bigger factory needs more raw materials and components, so orders rise, improving suppliers' revenue and encouraging a longer-term relationship. Overall the expansion affects these two external groups in opposite ways — creating potential conflict with the community but a mutually beneficial outcome for suppliers.

The move online creates a sharp conflict between two internal stakeholder groups. Shareholders (the owners) want higher returns and will welcome the decision: closing costly stores lowers rent and staffing costs and, since online retail has lower overheads, should raise profit, dividends and the share price. Employees want job security and fair treatment, and 300 of them face redundancy — so their interest is directly opposed to the shareholders'.

StyleHouse should first assess the nature and severity of the conflict. It is severe for the affected staff, whose livelihoods are at stake, and if handled badly it could trigger negative publicity, harming the brand that online shoppers still buy. However, the shareholders' interest is strong too: keeping loss-making stores open to protect jobs would erode returns and could threaten the firm's competitiveness against online-only rivals.

Several management approaches are available. StyleHouse could soften the trade-off rather than simply choosing one side: offering generous redundancy packages, redeploying some staff into the growing online fulfilment and customer-service operations, retraining, and consulting employees (and any union) early through honest communication. This partly satisfies employees while still achieving the cost savings shareholders want. Prioritisation matters: because the firm competes in a fast-moving market, the strategic shift is hard to avoid, so shareholders' interest in survival and profit is likely to dominate — but the WAY it is implemented can protect employees and reputation.

A key consideration is the firm's view of itself. Under a pure shareholder view, StyleHouse closes the stores and minimises redundancy costs. Under a stakeholder view, it accepts higher short-term costs (better redundancy, redeployment) to meet its ethical responsibilities to staff and community, protecting long-term reputation and morale among remaining employees.

In conclusion, StyleHouse should proceed with the online move — the shareholders' interest and the firm's competitiveness make it necessary — but should manage the conflict through redeployment, retraining, fair redundancy and early consultation rather than abrupt closure. This is the strongest option because it delivers the cost savings shareholders need while limiting harm to employees and protecting the brand that online sales depend on; the decision should be judged not just on whether stores close but on how humanely the change is managed.

This decision sets an internal stakeholder against an external one. Shareholders want AquaPure to expand extraction because higher output raises revenue, profit and dividends. The local community — including farmers reliant on groundwater — and the pressure group representing them want the water table protected, so their interest in a sustainable local environment conflicts directly with expansion.

The nature of the conflict is a classic growth-versus-community/environment clash, and its severity is high: the community's very livelihoods (farming) are threatened, the pressure group can mobilise media attention and lobby the local government, and any damage to the water table could be long-lasting and irreversible. That gives the community real, if indirect, power, because bad publicity and possible regulation could harm AquaPure's reputation and even its licence to operate — which ultimately hurts shareholders too.

AquaPure could manage the conflict in several ways. A pure shareholder-view response would push the expansion through to maximise profit, but this risks reputational damage, boycotts and tighter regulation. A stakeholder-view response would seek a compromise: limiting the increase in extraction to a sustainable level, investing in efficient extraction technology or alternative sources, funding local water projects for farmers, and consulting the pressure group transparently. Such negotiation and trade-offs sacrifice some short-term profit but reduce the severity of the conflict and protect the firm's long-term social licence to operate.

Prioritisation is central. In the short term shareholders have most formal power, but the community's ability to damage reputation and trigger regulation makes it a group that must be 'kept satisfied'. Because water sustainability is an ethical and long-term issue, ignoring the community would be short-sighted.

In conclusion, AquaPure should NOT pursue unrestricted expansion. It should adopt a stakeholder approach: expand extraction only to a scientifically sustainable limit, invest in efficiency, and negotiate visible safeguards with the community. This is justified because it still allows some growth for shareholders while protecting the firm from the reputational and regulatory damage — and the loss of its resource base — that unchecked extraction would cause. The best decision here balances profit against the firm's ethical responsibilities and its own long-term survival.

The government wants the business to pay the taxes it owes (such as corporate and payroll taxes), which fund public services. It also wants the business to create and protect employment, because higher employment reduces welfare spending and raises living standards. (Other valid interests: obeying laws and regulations, or contributing to economic growth.)

Two groups affected are FreshCart's employees and its customers. The checkout employees are harmed most: many face redundancy or reduced hours, so their interest in secure work and income is damaged, and morale among remaining staff may fall as they fear being replaced too. A minority may benefit if retrained to support and maintain the self-service tills. Customers are affected in mixed ways: those who value speed and shorter queues benefit from more tills open at once, but others — for example older or less confident shoppers — may find the machines frustrating and miss the personal service of a staffed checkout, so their interest in a convenient, helpful experience can be harmed. The severity depends on how well FreshCart supports both groups: offering redeployment softens the blow for employees, and keeping some staffed tills protects customers who dislike the machines. Overall the decision serves FreshCart's cost-cutting aim but creates a real conflict with employees and a divided reaction among customers.

This decision forces a choice between the shareholder view and the stakeholder view of the firm. Prioritising shareholders points towards offshoring: much lower overseas wages would cut production costs sharply, raising profit margins, dividends and the share price, and helping TechAssemble compete with rivals who already manufacture cheaply abroad. Under a shareholder view, the firm exists mainly to maximise owners' returns, so the 500 domestic jobs are a cost to be minimised.

Prioritising wider stakeholders points the other way. The 500 employees want job security and would suffer redundancy; the local community loses jobs and the spending that supports local shops; domestic suppliers may lose contracts; and the government loses tax revenue and gains welfare costs. A stakeholder view says TechAssemble has responsibilities to these groups and should weigh the social harm, not just the profit gain.

The strength of each side depends on context. The shareholder case is strong if TechAssemble faces intense price competition and cannot survive on high domestic costs — then offshoring may be necessary for the firm to exist at all, which ultimately protects the remaining stakeholders too. But the stakeholder case is strong because abrupt closure risks serious reputational damage: consumers and the media may criticise a profitable firm for cutting 500 jobs purely to boost dividends, which could reduce sales and offset the saving. Product quality and control can also suffer when production moves far away, a risk to customers and to long-term profit.

There is also a middle path that reduces the conflict rather than simply choosing a side: TechAssemble could offshore only part of production, phase the change with generous redundancy and retraining, redeploy some staff, and consult the community and government early. This captures much of the cost saving shareholders want while limiting harm to employees and protecting the brand.

In conclusion, TechAssemble should not prioritise shareholders to the exclusion of everyone else. If competitive pressure genuinely threatens the firm, some offshoring is justified because a failed firm helps no stakeholder — but it should be implemented through a stakeholder-sensitive approach (phased change, redundancy support, retention of some domestic quality control) rather than an abrupt, purely profit-driven closure. This is the strongest position because it protects the firm's long-term survival and profitability for shareholders while honouring its ethical responsibilities to employees, community and government; the right answer depends on how severe the competitive threat really is, and a well-run firm balances the two views rather than treating them as a straight either/or.