How business activity affects stakeholders: follow one decision outwards

1. A business decision never stops at the firm's own accounts, because every choice it makes moves money, work or surroundings for people outside it.
2. Take a food manufacturer that closes its factory in one town and moves production to a larger site 80 miles away, then trace where that decision lands.
   1. Employees: 200 staff lose their jobs, so household income drops to whatever redundancy pay and benefits provide, and anyone who cannot find similar pay locally has to retrain or move.
   2. Customers: the larger site makes each unit more cheaply, so shop prices can be held down, although supply may be patchy for a few weeks while the new lines are set up.
   3. Suppliers: the haulier and the packaging firm next to the old factory lose their contracts, so their revenue falls and they may have to cut their own staff.
   4. The local community: 200 wage packets stop being spent in nearby shops and cafes, so takings there fall, while the new town gains that trade along with extra lorry traffic on its roads.
   5. Shareholders: running costs fall, so profit rises, so dividends and the share price can climb, which is the reason the board approved the move.
   6. The government: it collects less income tax and National Insurance from the workers who lost their jobs and pays more out in benefits, while gaining tax revenue in the town that gained the site.
3. Each of those is a chain rather than a label, because the decision changes something specific for the group and the group is then forced to act differently.

How stakeholders impact business activity: every group holds a lever

1. Stakeholders are not only on the receiving end, because each group controls something the business needs and can withhold it.
   1. Customers: they can stop buying and spend at a rival instead, which is the most direct pressure of all, since revenue falls the same week rather than after a meeting.
   2. Employees: they can leave, work with less care, or refuse to accept a change to shifts and pay, so output drops and the business pays again to recruit and train replacements.
   3. Shareholders: they can vote against the directors at the annual general meeting or sell their shares, and heavy selling pushes the share price down.
   4. Suppliers: they can withdraw the 30 days' credit, raise their prices or stop supplying altogether, which drains cash and can halt production within days.
   5. The local community: it can object to a planning application, which can delay or block a new store, car park or extension for months.
   6. Pressure groups: they campaign publicly over issues such as packaging or pay, and the damage to reputation costs sales even where the business has broken no law.
   7. The government: it can change the law or the tax the business pays, and HMRC collects what is owed whether the owners agree with it or not.
2. Managers usually act before a lever is pulled, because keeping customers and staff costs far less than winning them back once they have gone.

The size of a stakeholder's influence: how easily could the business replace them?

1. How hard a group can push comes down to one test, which is how easily the business could manage without it.
   1. A supplier that is the only source of a part has real power, because refusing to supply halts production and the buyer has nowhere else to turn, so it can raise its price and still keep the order.
   2. A supplier that is one of twenty firms selling the same cardboard boxes has almost none, because the buyer can switch within a week and still pay £2 a box.
2. The test works the same way for people, since an engineer trained over five years is hard to replace and can press for a rise, while one shopper leaving Tesco for Aldi changes nothing until thousands do the same.
3. The government is the exception, because a business cannot replace it or trade around it, so its laws and taxes bind a market stall and a supermarket chain alike.