Speaker 1: Hello, students. In this video, we shall learn what is stakeholders. Our learning objectives for the day are meaning of stakeholders, types of stakeholders, role of stakeholders in the business organization, meaning and types of internal and external stakeholders. Now, when we talk about business or commerce, there are various important terms which we need to understand and learn and one of those important terms in business are stakeholders. Now, when we talk about businesses, no business organization can run their business in isolation. There are efforts of various people which are required in order to run a successful business. There are many people who are associated with the business organization who have their interest in the business. So, all those people who have their interest in the business or who expect some kind of a benefit out of businesses are known as stakeholders. So, when we say that they have a stake in the business organization, it means that they have a vested interest in the business or they are expecting some kind of benefit from the business. Now, these are some key points which will help us to identify that who can be the stakeholders of business. The person who affects a business or the person who can get affected by a business. Now, definitely when we talk about affects a business. So, let's take one example, let's say a supplier. The suppliers are the people who provide raw materials. Supplier is a person who provides raw materials to the business. So, what will be their expectation from the business organizations that the business organizations pay them money on time for the raw materials that they have purchased. So, this is possible only when the business organizations do well in the market. When they earn profit out of the products that they are selling, only then they will be able to pay back the money of the suppliers. So, definitely the supplier has his interest in the business because if the businesses do well, only then the supplier is going to get their money from the business organizations. Similarly, let's take one more example of the customers. What are customers interest or what are their expectations from the business organizations? They are the one who are going to purchase the products that the business organizations are making, right. So, definitely they expect good quality goods for a reasonable price. So, that is their interest in the business. Now, if customers choose to switch the brand, let's say for example, if they choose to purchase some other brand of product, then definitely the current business is going to get affected because their customers has switched from their brand to some other brand. So, definitely the business organization may get affected by the customers. So, therefore, the customers are also their stakeholders. So, I hope the meaning of stakeholders is clear. Let's read out this. All those individuals, groups and institutions which have a stake in the functioning and performance of a commercial organization or a business enterprise are known as stakeholders. So, basically whatever the decisions or whatever decisions the business organization is making, those decisions can definitely affect many people and the people who can get affected by the business decisions are the stakeholders of that particular business organizations. Now, when we talk about stakeholders, there are various types of stakeholders. The people who are working within the organization are known as internal stakeholders and the people who are outside the business organization, but still are connected with the business organization and have their interest in the business are known as external stakeholders. For example, the internal stakeholders are people who are inside the organization such as employees, the managers, shareholders etcetera. And the external stakeholders are the people who are outside the business organization. For example, the suppliers, banks or the financial institutions who lend money to the business organization, government, local community and the customers. Now, let us try to understand these stakeholders one by one. As we discussed that internal stakeholders are group or people who work directly within the businesses such as employees, managers, owners and external stakeholders are group outside the businesses who are still connected with the businesses because they can get affected by the business decisions. For example, customers, suppliers, the local community or the government. Now, moving ahead to the first stakeholder that we have the society or the local community. Now, the society also provides us with a lot of inputs or resources I would say. Let us say for example, human resources. It provides us with people who work with the business organizations as employees. They provide us with financial resources for example, the banks, the financial institutions that we have in the society from whom we borrow money in order to run our businesses. We also use various natural resources in our manufacturing processes. So, when we are getting benefited by the society, it is our responsibility also as business organizations to benefit the society in return. So, the business organizations also provide society with a lot of benefits such as creation of employment, providing a good quality products and services. We pay taxes to the government, the corporate taxes that the business organizations pay to the government through which the government can support various public services such as schools, hospitals, better roads etcetera right. So, even the society or the local community has a stake in the business because it provides jobs which generate economic activity within the community. Now, moving ahead to the second stakeholder that we have is customers. We must have heard with this phrase customer is a king. Definitely customer is a very important stakeholder that we have as they invest their money in purchasing the products that our business organizations make. So, customers definitely they expect it is very obvious that what they expect is good quality products at a reasonable price right. So, therefore, even the customers are interested in the decisions that we as business organizations make because they are investing their hard earned money in purchasing the products that we are providing. So, we need to make sure that we keep our prices reasonable, we provide good quality products to the customers, we provide good after sales services to the customers etcetera right. So, let us say for example, if a company decides to increase the prices of its products then definitely the customers are going to get affected by this decision. Now, the customers may perceive it as a higher quality product, improved quality product because of its high prices, but at the same time they may also find it to be expensive and may not purchase it. So, the business organizations need to make sure that they provide reasonable priced products so that they can fight the competition and at the same time they can also keep their customers happy. Now, the next stakeholder that we have is government. Now, the government is also interested in the business organizations, they may get affected by the decisions that the business organizations make because we pay taxes to the government. The corporate organizations, the commercial organizations they pay taxes to the government and as we all know that the higher your profits are the higher we are going to pay taxes to the government. So, for example, if you decide to expand your business as you may be very sure that you are now stable and have captured a lot of market share and that you will be able to earn good amount of profit if you expand your business. So, the government will be definitely happy as they will be getting more taxes which gives them more money more income right, but if you decide to shut down your business the government can get affected because they know that you are now not going to produce, you are not going to be a factor for the growth of the economy and apart from that you are not going to pay taxes. So, the government is also a stakeholder of a commercial organization who can get affected by the decisions taken by the business organization. Our next stakeholders are employees. Employees are our human resources, they are the people who provide us with physical and mental efforts in order to run our businesses. They have a direct stake in the company as they earn money from the business organizations which helps them to support their families. So, definitely the employees can get affected by the decisions of the company. Now obviously, because the employees do not want to end up working in a company who is at the point of closing or shutting down, they are expecting job security. So, if a company wants to expand or grow its business, the employees will be very happy because they know that their job is secured. They are going to be working in a company and they do not need to look out for another job. They might also get a promotion. So, definitely employees are the people who are investing their physical and mental efforts in the organization and what they are expecting in return is a good remuneration and job security, promotions etcetera right. So, employee are also the stakeholders of our commercial organizations. Next stakeholder is the shareholders who are the co-owners of the company as they hold shares of the company, as they provide capital to the business. So, they definitely expect reasonable returns on the money that they have invested in the business. They expect that the value of their shares increases in the market and this is definitely going to happen only when the company is performing well. So, the shareholders want to make sure that the company is doing well, earning good profits, so that their invested capital remains in safe hands. And for this purpose, shareholders may ask for information on financial position of the company which the company has to provide. So, here our stakeholders are the shareholders who invest their money in the business. So, since they provide capital to the business, they are expecting reasonable returns from the business organizations and hence they are also a very important stakeholders of the business organizations. Moving to the next stakeholders that are suppliers. As we already discussed in the beginning that the suppliers are the people who provide raw materials to the business. So, even the suppliers can get affected by the business decisions that are made by the commercial organizations. Say for example, if you suddenly decide to close down the business, the suppliers will get affected because they know that they now have one client less. The suppliers also provide the business organizations with credit. They allow you to pay after a certain period of time, say two months credit or three months credit on the raw materials that they provide which we as business organizations purchase from them. So, if you perform terribly and the supplier has already given you with the raw materials, but not taken money from you, then definitely they are going to get affected because they now know that they might not get the money as your company is at loss. But if you decide to grow your business, the supplier will be happy as they will be getting more business from you and will get timely payment from you. So, our last stakeholders are creditors. Creditors are the people or institutions who lend money to the business. It can be banks, it can be financial institutions or even the suppliers as suppliers may provide you with raw materials on credit. So, creditors also get affected by the business decisions. Let us say for example, if the bank has given you a loan, the bank wants to know whether you are capable of paying interest and repaying the loan. So, if you suddenly decide to shut down the business because you are unable to run the business or you may go bankrupt, then the bank will not be happy because the bank will not get their money back now. The bank will seal your business and will get hold of your business as a security. But if you decide to grow your business, the bank will be happy because bank knows that now you are more capable of paying back the money. The bank can even lend you more money because they trust you with your credit worthiness now. So, the creditors are the people or institutions who lend money to the business and what they expect in return is that they get timely payment of their money and interest. So, this is a table at a glance which can help you understand the stake of various stakeholders in the business and what are their expectations from the business organizations. I hope the concept of stakeholders is clear to everyone. See you soon and happy learning.