How to frame a business case
How to frame a business case

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How to frame a business case

1.7 Stakeholder analysis – a different set of concepts

STEP analysis is a categorising framework so it is easy to see how STEP concepts are used to frame a case. However, framing the case can be done using any business studies concept. Throughout this course you will practise framing cases with various other concepts.

For the rest of this course you will look at a conceptual framework called stakeholder analysis. This also categorises information about the environment of a business. However, the concept questions that are used to organise stakeholder information are:

  • Does this organisation or person have an interest in the business?
  • Does this organisation or person have power in relation to the business?

The two concepts framing this analysis are power and interest.

Activity 17

Purpose: to introduce the concepts power and interest.

Task: read extracts C and D below. Which one can be summarised by the word power and which can be summarised by the word interest?

Extract C

Many individuals, groups and organisations are likely to be affected by the strategic decisions that a business makes. As a result of these decisions, employees may have to work harder, undertake new tasks, or face the prospect of leaving the company. Shareholders in the company, banks which have loaned the organisation money, governments concerned about employment will be watching company performance closely. Customers and suppliers will also be involved in different ways.

Extract D

In different types of organisation, different stakeholder groups have a dominant position. Commercial organisations are either shareholder-led or dominated by directors and senior managers. The views of both of these groups are important for the direction of the organisation. Service industries are usually customer-led. Co-operatives tend to be member-led.

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Answer

Extract C, interest; extract D, power.

Comment

The abstract nouns power and interest are both important concepts in business studies. One way of defining them is to use them in a sentence. Here is an example using the noun groups, high power and high interest.

Stakeholders with high power are those who can do most to affect the organisation.

Stakeholders with high interest are those who will be most affected by the actions that the organisation does.

Analysing a business case using the stakeholder frame work follows the same general process as STEP analysis (Figure 7).

Figure 7 The process of writing a stakeholder analysis
Figure 7 The process of writing a stakeholder analysis

There are several different stakeholder frameworks in business studies but they are all generally based on the concepts of power and interest. The one introduced in the next activity creates a set of four categories using these concepts.

Activity 18

Task 1

Purpose: to learn the categories in a stakeholder analysis framework and to practise some active reading strategies on a textbook text.

Look quickly at Text 13, ‘Analysing stakeholders’, to get an impression of what it is about and how it is organised.

Task 2

Figure 8 is called a ‘matrix diagram’. It is referred to in the first paragraph of Text 13. Read this paragraph and note down the four missing words on the diagram.

Figure 8 Stakeholder matrix diagram
Figure 8 Stakeholder matrix diagram
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Answer

Figure 9 Answer to Activity 18, Task 2
Figure 9 Answer to Activity 18, Task 2

Task 3

Search-read Text 13 to find some examples of stakeholders. Note down the words that should appear in the empty bubbles in Figure 9. Two are filled in for you already.

Figure 10 The stakeholders in an organization
Figure 10 The stakeholders in an organization
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Answer

Figure 11 Answer to Activity 18, Task 3
Figure 11 Answer to Activity 18, Task 3

Comment

Figures 8 and 9 show how the concepts of power and interest can be used to organise individuals and groups into stakeholder categories.

Next you will look at a stakeholder analysis assignment with the following title:

“Use the stakeholder model of the business environment to analyse the main influences on the Automobile Association during its demutualisation process.”

The case study for this assignment is Text 14.

Activity 19

Purpose: to practise framing an analysis using the concepts stakeholder, power and interest.

Task: Extract 15 is from an analysis text with the title above. The original text was organised using the categories you have just read about. However, in Extract 15, the sections of the text are mixed up. The section headings, the categories and the words high and low have been removed from the text. Read the text and decide where the following headings should go.

  • Stakeholders with high power and high interest (category D)
  • Stakeholders with high power and low interest (category C)
  • Stakeholders with low power and high interest (category B)
  • Stakeholders with low power and low interest (category A)
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Answer

The order of categories in the extract is A, C, B and D.

Comment

To produce an analysis, the writer reorganised the structure of the case study text. The original text has a story structure with time sequence words organising the events (By 1990, During the 1990s, and so on). The new structure is organised into categories using the key concept words power and interest and categorising words such as category.

In Activity 19, you had to find evidence in the text to decide where to put the headings. This is what a case analysis writer does when analysing a case study. To put a particular stakeholder in a category, the writer has to judge the stakeholder’s level of power and interest.

Activity 20

Purpose: to focus on how the ‘AA stakeholder analysis’ uses evidence from the case to categorise stakeholders.

Task 1: print out and read Text 16. For each stakeholder, highlight the sentences or words which tell you which category the stakeholder belongs to and write C in the notes column. Then highlight the sentences or words which give the reason why the particular stakeholder belongs in this category and write R in the notes column.

Here is an example from the first paragraph.

John Maxwell and his management team were key players with high power and high interestC
as their planning and decision making would determine their future with the AA, the future of the AA, the future of those who worked for the AA, and the future of AA members.R

Task 2: in the notes column, write down:

  • a.whether the evidence for the category comes from the case study (Text 14) or from the writer’s general business knowledge
  • b.whether the reason is an example of the power or the interest of the stakeholder, or both.

Answer

Paragraph 1

The AA and stakeholders with high power and high interest (category D)

The key players were the Director-General of the AA and his immediate management team carrying out the strategic review, as well as the full members of the AA. John Maxwell and his management team were key players with high power and high interest …C
as their planning and decision making would determine their future with the AA, the future of the AA, the future of those who worked for the AA, and the future of AA members.R
The full members would collectively decide whether the AA was to demutualise. They might have chosen to support any demutualisation recommendations made by John Maxwell and his team, or to reject them in favour of a bidder, such as Ford, buying the AA.R

Paragraph 2

The AA and stakeholders with high power and low interest (category C)

The merchant bank Schroders was a category C stakeholder ... C
as it had relatively little interest in whether the AA finally decided to demutualise. However, as corporate adviser to the AA, it was relatively powerful as it was able to advise and potentially influence John Maxwell and his management team.R

Paragraph 3

The AA and stakeholders with low power and high interest (category B)

The category B stakeholders, those with high interest and low power in the demutualisation issue, included associate members and employees.C
The associate members clearly had a high interest in whether or not the AA decided to demutualise. The primary concerns for associate members were the effect of demutualisation on the services they received and the cost of associate membership. However, as non-voting members, associates had no direct power to influence the outcome of any ballot on demutualisation.R
Equally, employees had a high interest in the future of the AA and would be concerned as to the effects of demutualisation. Potential effects of demutualisation could have included the AA becoming more competitive and this being achieved via cost cutting and job losses. However, employees had no direct role in the ballot and would ultimately have to accept its outcome.R

Paragraph 5

The AA and stakeholders with low power and low interest (category A)

The category A stakeholders are those with low power and low interest. For the AA, non-members fell into this category.C
They were unable to receive breakdown services from the organisation and had no influence over its demutualisation decision.R

Comment

Each time a group of stakeholders is categorised, the analyst gives particular examples of their power or interest to show why they belong in this category. This means the analysis moves up and down between high-level generalisations (power and interest) and low level details (examples of power and interest). The paragraphs begin with a general statement about the stakeholder and their power and interest and then moves down to particular details which show their power and interest in action.

The writer can use three kinds of evidence to decide which category a stakeholder belongs in.

  1. The case study text may say directly how much power or interest a stakeholder has.
  2. The stakeholder’s actions or the organisation’s actions may show who has power or interest.
  3. The person analysing the case study may have general business knowledge that helps them decide.
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