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    Who and what is a stakeholder? Define and explain by using a local example.


    Paper Details

    Who and what is a stakeholder? Define and explain by using a local example.Based on Margerum.


Subject Business Pages 5 Style APA



Stakeholders play a key role in influencing the success of any business. They can be defined as persons or parties with interests in an organization, and can either impact or be affected by its policies, actions, or decisions (Freeman p. 23). Some of the primary responsibilities of stakeholders include financing and implementing projects; approving significant project deliveries; and ensuring that tasks are within the objectives of an organization,  among other duties (Clarkson p. 93). This paper will discuss the stakeholder theory and identify various stakeholders within the Margerum wine company.

The stakeholder theory is a concept that emphasizes the interconnected relationship between businesses and stakeholders. It argues that the effectiveness of an organization is determined by its ability to satisfy both its stakeholders and shareholders (Freeman p. 26). It also addresses the values and morals that are essential in managing a corporation.  The theory analyzes three concepts including descriptive accuracy, instrumental power, and normative validity (Bal p. 70). Descriptive accuracy focuses on specific behaviors within corporations that influence the relationship between firms and their stakeholders. Instrumental power, on the other hand, creates a framework for establishing a balance between a company’s performance and that of its stakeholders (Atkinson et al., p. 25). Lastly, the normative validity concept is used to interpret the main purpose of an organization. In this regard, the theory acts as an appropriate lens for determining the value that stakeholders seek and new ways of measuring it (Harrison et al., p. 98). Critics of the theory, however, argue that it is vague and does not provide a clear perspective, of the complexity of the relationship between a firm and other groups likely to be affected by it.

Stakeholders can be categorized into two groups including internal and external. Internal stakeholders refer to individuals or groups that engage in economic transactions, or have a direct relationship with the organization either through ownership, employment, or investment (Harrison et al., p. 13). Examples of internal stakeholders include customers, employees, and shareholders, just to mention. A customer is a recipient of services, goods, and ideas, obtained from a vendor through a financial transaction or other valuable consideration. In this regard, persons and businesses that purchase products and services at Margerum Wine Company are considered to be its customers. They also play an important role in providing feedback, regarding the firm’s goods and customer service. In contrast, employees contribute expertise and labor to an employer or firm, and are hired to perform specific duties within their job context (Harrison et al., p. 98). Employees at Margerum ensure that customers receive quality goods and services. Lastly, shareholders are institutions or persons with one or more shares of stocks within a private, or public corporation. Shareholders at Margerum make financial investments and influence key decisions within the company, such as the appointment of directors.



External stakeholders refer to persons who have no direct economic engagement with a business, but influence or are affected by its actions and decisions. Examples of external stakeholders include communities, suppliers, and the government, just to mention (Freeman p. 25). Companies, often, operate within communities and their activities can either impact people positively or negatively. It is, therefore, the sole responsibility of businesses to run their operations ethically and in a manner that does not affect the environment negatively. The Margerum Wine Company is among the leading organizations in Santa Barbara that has been recognized for community social responsibility and environment conservation. It has also participated and contributed to various charitable organizations to support the needy.  Suppliers are also key external stakeholders that are closely related to businesses. Timely payment, communication, and shipment are essential in maintaining a good relationship with them (Harrison et al., p. 98). Examples of Margerum suppliers include Simple Farmer Wines, Brittany Marcum, and Michael Urban, among others. In contrast, the government provides regulatory insights and ensures that the company operates ethically.

In conclusion, stakeholders are vital in ensuring growth and successful performance within organizations. They play a significant role in influencing key decisions, and providing relevant feedback regarding certain goods and services of various companies, thus enhancing change and accountability. A stakeholder refers to any person, group, or organization that is likely to impact or be affected by the actions or decision of an entity.  They can be categorized into internal and external stakeholders. Internal stakeholders are those that have a direct relationship, or engage in economic transaction with a company. The relationship can either be through ownership, employment, or investment. Examples of internal stakeholders include employees, shareholders, and customers, just to mention. On the other hand, external stakeholders refer to persons or groups that have no direct economic engagement with an organization, but can impact or be affected by its actions or decisions. Examples of external stakeholders include the government, communities, and suppliers. It is, therefore, the responsibility of every institution to ensure that it takes into account the needs of its stakeholders and operate in a manner that is not harmful to the environment.




Atkinson, Anthony A., John H. Waterhouse, and Robert B. Wells. “A stakeholder approach to strategic performance measurement.” Sloan management review 38.3 (1997): 25.

Bal, Menoka, et al. “Stakeholder engagement: Achieving sustainability in the construction sector.” Sustainability 5.2 (2013): 69-71.

Clarkson, Max E. “A stakeholder framework for analyzing and evaluating corporate social performance.” Academy of management review 20.1 2015): 12-17.

Freeman, R. Edward. “Divergent stakeholder theory.” Academy of management review 24.2 (2013): 23-27.

Harrison, Jeffrey S., and Andrew C. Wicks. “Stakeholder theory, value, and firm performance.” Business ethics quarterly 23.1 (2013): 97-124.



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