ACCA Applied Knowledge · Business and Technology
Stakeholders in Business Organisations for ACCA Business and Technology
A **stakeholder** is any person or group that affects, or is affected by, an organisation's activities. To solve exam questions, identify the stakeholder type, state their objective, spot any conflict, then place them on Mendelow's power-interest matrix to choose how to manage them.
What this chapter covers
This chapter covers who has a stake in a business and why it matters. You learn to classify stakeholders as internal (such as employees and managers), connected (such as shareholders, lenders, customers and suppliers) or external (such as government, regulators, the community and pressure groups). You also learn what each group wants and where those wants clash.
The second half is about action. Mendelow's matrix sorts stakeholders by power and interest. Each box suggests a strategy: keep satisfied, manage closely, keep informed or minimal effort. The chapter ends with two views of the firm's purpose: shareholder theory and stakeholder theory.
This chapter links to much of the BT paper. Governance, ethics, corporate social responsibility, strategy and organisational structure all depend on knowing who stakeholders are and what they expect. Questions in other chapters often use stakeholder language, so this chapter gives you vocabulary you will reuse.
Stakeholder ideas are easy to learn and appear in both objective test questions and the four-mark multi-task questions. Many questions are scenario-based: you read a short case and pick the stakeholder type, the likely objective or the right matrix box. The material is mostly definitions and logic, so careful study turns directly into reliable marks. It also supports your answers on governance, ethics and strategy, which makes it one of the best-value chapters to master early.
Stakeholders in business organisations: topics in the order to study them
- 1Types of Stakeholders and Stakeholder ClassificationEverything else depends on knowing who the stakeholders are and which group each one belongs to.
- 2Stakeholder Objectives and Conflicts of InterestOnce you can name the groups, you learn what each wants and why their wants collide.
- 3Mendelow's Power-Interest MatrixThe matrix gives you a tool to rank the stakeholders you have already met by power and interest.
- 4Stakeholder Influence and Managing Stakeholder RelationshipsThis applies the matrix to real actions, so it follows once you can place stakeholders correctly.
- 5Stakeholder Theory versus Shareholder TheoryThe two theories frame the whole chapter, and they are easier to compare once you know the detail.
How to prepare Stakeholders in business organisations
Aim to understand the logic first, then drill with scenario questions. Short sessions work well on a phone.
- Learn the three stakeholder groups (internal, connected, external) and write two examples of each from memory.
- For each group, note its main objective in one line, such as profit and dividends for shareholders or job security and pay for employees.
- Pick pairs that conflict, for example shareholders wanting higher profit against employees wanting higher pay, and explain the clash in one sentence.
- Draw Mendelow's four boxes from memory. Label each box with its power level, interest level and strategy.
- Practise placing stakeholders from short scenarios into a box, then name the matching strategy.
- Write a two-line summary of shareholder theory and of stakeholder theory, and one point for and against each.
- Finish with timed objective test questions, including multiple response ones where you must select the stated number of answers.
Common mistakes in Stakeholders in business organisations
Mixing up connected and external stakeholders.
Fix: Ask whether the party has a direct contractual or economic relationship with the business. If yes, it is connected. If not, it is external.
Placing a stakeholder in the wrong Mendelow box by reading interest as power.
Fix: Judge power and interest separately. Power is the ability to influence; interest is how much they care.
Giving the wrong strategy for a matrix box.
Fix: Derive the strategy from the box: high power needs more attention, high interest needs more information.
Assuming all stakeholders want the same thing.
Fix: Match each group to its own objective and look for conflicts between groups in the scenario.
Treating stakeholder theory as always better than shareholder theory.
Fix: Know the argument for each: shareholder theory is clear and measurable; stakeholder theory recognises wider impacts and long-term risks.
Selecting the wrong number of answers in multiple response questions.
Fix: Read the stated number first, eliminate clearly wrong options, then pick exactly that many.
Last-day revision: Stakeholders in business organisations
- A stakeholder affects or is affected by the organisation.
- Internal stakeholders include employees and managers.
- Connected stakeholders include shareholders, lenders, customers and suppliers.
- External stakeholders include government, regulators, the community and pressure groups.
- Shareholders typically want returns through dividends and share price growth.
- Lenders want interest paid and the loan repaid safely.
- Mendelow's matrix uses two axes: power and interest.
- High power, high interest: manage closely.
- High power, low interest: keep satisfied.
- Low power, high interest: keep informed.
- Low power, low interest: minimal effort.
- Shareholder theory puts owners' wealth first; stakeholder theory balances the needs of all groups.
Stakeholders in business organisations practice questions
- Using Mendelow's matrix, a pressure group has high interest in a company's pollution record but little power to influence its decisions. How…
- A bank has lent heavily to Tolan Co. The directors propose a large special dividend funded by new borrowing. Which statement best explains t…
- A local residents' association has little power over a quarry company but is highly interested in noise and dust from its operations. Accord…
- Which statement about the use of Mendelow's power-interest matrix is most accurate?
- A retailer's major institutional shareholder has historically shown little interest in day-to-day matters. The retailer now announces a cont…
- Lantern Foods plans to close a local factory. The local community has little formal power but is strongly affected and highly interested. Us…
- Which of the following is an example of a stakeholder using resource dependency to influence an organisation?
- Under stakeholder theory, which of the following is the most appropriate way to view a company's employees?
Stakeholders in business organisations in other exams
The same ground in other exams, if you are preparing for more than one or want another angle on it.
- ACCA Strategic ProfessionalStakeholder analysis and organisational social responsibility
- ACCA Applied SkillsFinancial objectives and relationship with corporate strategy
- Actuarial Core Principles (IAI)Professionalism and ethics case studies
- CFA Level ICorporate Governance: Conflicts, Mechanisms, Risks, and Benefits
Stakeholders in business organisations: frequently asked questions
What is the difference between internal, connected and external stakeholders?
Internal stakeholders work inside the organisation, such as employees and managers. Connected stakeholders have a direct economic or contractual link, such as shareholders, lenders, customers and suppliers. External stakeholders have no direct link but are affected, such as government, the community and pressure groups.
How do I use Mendelow's matrix in the exam?
Decide whether the stakeholder has high or low power, then high or low interest. Place them in the matching box and give the strategy for that box. Do not mix the two axes.
Can stakeholders belong to more than one group?
Yes. An employee who also owns shares is both an internal stakeholder and a shareholder. Read the scenario to see which role the question is focused on.
Is this chapter tested in objective test questions or multi-task questions?
Both formats can test it. Section A questions are often short scenario or definition items. Section B multi-task questions may include stakeholder points alongside other topics. Practise both formats.