Business Management
Senior 4 · Entrepreneurship
Business Management
Lesson 3 of 5
25 min
Two partners own a brickworks in Rwamagana that employs 25 people. Builders want more bricks than they can make, so the partners plan to build a second kiln and fire it at night. A bank has offered a loan. Before anything is built, the workers ask for a pay rise for the night shift, the families living next to the site worry about smoke, the district wants to know that the clay pits will be refilled, and the firewood suppliers hope for bigger orders. (The brickworks and all figures are illustrative.)
Think about it: whose wishes should the partners put first? Can they satisfy everyone, and what happens if they ignore one group?
Definition
Stakeholder: any person, group or organisation that can affect, or is affected by, the activities and objectives of a business. R. Edward Freeman made the idea central to management in Strategic Management: A Stakeholder Approach (1984).
Example: the families next to the brickworks, who are affected by its smoke.
Definition
Shareholder (owner): a person or organisation that owns part of a company, through shares, and is entitled to a share of its profit. Every shareholder is a stakeholder, but most stakeholders are not shareholders.
Definition
Internal stakeholders are inside the business: owners, managers and employees. External stakeholders are outside it: customers, suppliers, lenders, the government and its agencies, competitors, the local community and the environment's guardians. A stakeholder's interest is how much they care about a decision; their power is how much they can influence it.
| Stakeholder | What they want from the business | How they can influence it |
|---|---|---|
| Owners (shareholders, partners) | Profit, growth, a safe return on what they invested | Appoint managers, approve big decisions, add or withdraw capital |
| Managers | Good pay, power, career growth, a successful firm | Make and carry out day-to-day decisions |
| Employees | Fair and regular pay, safe conditions, job security, respect | Effort and quality of work; leaving; collective bargaining |
| Customers | Good quality at a fair price, reliable delivery | Buy elsewhere; complain; spread their opinion |
| Suppliers | Regular orders and payment on time | Prices, credit terms, reliability of supply |
| Lenders (banks, SACCOs) | Interest and repayment on time | Grant or refuse loans; set conditions; take security |
| Government and its agencies (district, RRA, regulators) | Taxes, jobs, obedience to the law, safe products | Permits, licences, inspections, taxes, fines |
| Local community | Jobs, no pollution or nuisance, support for local projects | Complaints to authorities, protests, good or bad reputation |
A manager cannot give every stakeholder the same attention. Aubrey Mendelow's power–interest matrix (1991) sorts them into four groups, each with its own strategy: manage closely (high power, high interest), keep satisfied (high power, low interest), keep informed (low power, high interest) and monitor (low power, low interest). The partners scored each stakeholder from 1 to 10:
Stakeholders move. The neighbours have little power alone, but if they complain together to the district, they gain power quickly; that is why "keep informed" is a real duty, not a formality.
Tip
Map, then match the strategy. The matrix does not tell you who matters morally; it tells you how to manage the relationship. In an exam, give the score, the quadrant and the action: "The bank has high power and high interest, so the partners should manage it closely, sharing monthly figures."
Stakeholders' aims often conflict: owners want higher profit while workers want higher pay; customers want lower prices while suppliers want higher ones; the community wants clean air while the firm wants cheap firewood. In 1970 the economist Milton Friedman argued that a firm's one social responsibility is to increase its profits within the rules of the game (the shareholder view). Freeman's stakeholder view answers that a firm lasts only if it creates value for all the groups it depends on. In practice the two views meet more often than they clash: a firm that treats workers, customers and neighbours well usually earns more over time. Managers handle conflict by consulting early, explaining decisions, negotiating compromises and keeping promises.
Worked example 1: reading the matrix
Using the scores in the matrix (interest, power), recommend an action for four stakeholders.
Worked example 2: a conflict in numbers
The 25 workers each earn Frw 90,000 a month and ask for a 10% rise. The brickworks makes 1,200,000 bricks a year, sells them at Frw 120 each with a variable cost of Frw 85, and earns a profit of Frw 15,000,000 a year. (a) What does the rise cost per year? (b) By what percentage does profit fall? (c) How much must output rise for the extra bricks to pay for the rise?
(a)
(b)
(c) Each extra brick adds its contribution Frw.
Interpretation: if better-paid, better-motivated workers raise output by about 6.4%, the owners lose nothing and the workers gain. Numbers like these turn a quarrel into a negotiation about productivity.
Warning
Common mistakes. "Stakeholder" and "shareholder" are not the same word. Competitors and the government count as stakeholders even though they do not trade with the firm every day. And a low-power stakeholder is not unimportant: power can grow quickly when people organise or the media take up their cause.
KeepUp Education, "Power-Interest Grid: Mendelow's Matrix Model" (about 8 minutes). Pause after each quadrant and place one stakeholder of a business you know into it, with a reason.
Practice
Key points
Sources and credits
Written by Ganzaa: the Rwamagana case, the power–interest matrix and its scores, the tables, the worked examples and the practice items. People, businesses and figures are illustrative (2026).
Quick check
The district has high power over the brickworks but little interest in its night shift. On the power–interest matrix, how should the partners treat it?
