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Business stakeholder analysis

Executive summary

In this report, the stakeholder analysis of Nestle has been presented so that the fundamental role of the identified stakeholders is assessed and presented. A PESTLE analysis has been conducted in this regard to identify the stakeholders of the company and segregate them on the basis of the internal and external stakeholders as part of the business stakeholder analysis. The internal stakeholders are employees and managers, whereas, the external are suppliers, customers, shareholders, communities, Government, NGOs, communities, academia, trade union representatives and reporting agencies. Again, based on the stakeholder matrix the high power low-interest stakeholders are customers, suppliers, shareholders, union and trade representatives; high power high interest with managers/owners, employees, government; low power low interest: communities, reporting agencies; and high-interest low power: NGOs, academia.

Introduction and Background

Stakeholders are important members of an organisation who impacts the success of a company. A stakeholder may be an employee or investor or even the government and have a direct role in the performance and growth of an organisation (Goodpaster, 1991). However, many companies fail to correctly identify their stakeholders of the company which leads to the company struggling and even fail in achieving success. Therefore, it is imperative for any organisation to conduct business stakeholder analysis which allows the company to identify its potential stakeholders and analyse their roles in the progression of the business (Reed et al., 2009). Stakeholder analysis is simply not always meant for the overall business but also for specific project completion within the company and achievement of a task. However, the basis of stakeholder analysis is the identification of the people involved or who need to be included and identify their roles and responsibilities.

In this report, the stakeholder analysis of Nestle has been presented so that the fundamental role of the identified stakeholders is assessed and presented. A PESTLE analysis has been conducted in this regard to identify the stakeholders of the company and segregate them on the basis of the internal and external stakeholders as part of the business stakeholder analysis. In addition, the findings have been used to identify the most important stakeholder of the company and their influence over the company’s performance and growth. In addition, the report has also presented a stakeholder matrix which actually helped in the identification of the most important stakeholders of Nestle. Lastly, the report has also formed a comparison between the stakeholders of two different companies from different industries to present the indifferences of stakeholders and their roles.

Main Body

Functional areas of the chosen organisation

Nestle was formed in the year 1957 is a leading food and beverage company globally and over the years have developed over 2000 brands and present in over 150 countries (Nestle, 2020a). According to the company profile, the purpose of the company is,

Enhancing quality of life and contributing to a healthier future. Driven by our purpose we want to help shape a better world and inspire people to live healthier lives. This is how we contribute to society and ensure our long-term success.”

Nestle has multiple functions starting from marketing and sales to research and development and from supply chain to financial support. The function of Nestle starts from the procurement of raw materials in a sustainable manner that neither harms nature nor the source of the materials and help in the improvement of the community (Nestle, 2020b). The resources are transported using a dedicated logistics method that is then processed at the company’s processing units. Another function in this regard for the company is to look after the labourers working in the same with respect to occupational safety and health and use of ethical methods to conduct their tasks. The company applied legal aspects to make sure that the procurement is within the sustainability pledges and objectives of the company and no unethical operation is conducted. The R&D segment functions in the development of new sustainable methods to produce food and beverages by reducing carbon footprint and environmental conservation (Nestle, 2020b). On the other hand, the finance segment makes sure to look after the treasury, business development, acquisitions, and other financial functions. The human resource segment functions to hire and recruit exceptional talents that will help in business performance improvement and also look after the employee needs and expectations. Similarly, the company also has information technology (IT) based functions that allow the company to efficiently process their work globally and in coordination and maintain the ubiquity of the infrastructures (Nestle, 2020b). The supply chain is an important function of the company as it looks after the procurement strategies, logistics, customer services and even inventory management.

The theoretical framework around stakeholder

The most common theory that revolves around stakeholders is the stakeholder theory which was first given by Freeman in the 1980s indicating the stakeholders as “those groups without whose support the organization would cease to exist.” According to Freeman, stakeholders are those who are impacted by the operations and policies and logic of conducting their business and their organisational goals (Freeman, 2001). However, M Friedman used the existing stakeholder theory to include shareholders as the one stakeholder that a company must look for or think for, especially in a capitalist environment. However, both Freeman and Friedman conceptualise that there are two main forms of stakeholders; the internal and the external. Friedman implicated that the main stakeholders of a company are its employees, customers, vendors or suppliers and shareholders (Friedman & Miles, 2002). In addition to these, there are business partners, NGOs, government, trade union representatives, competitors and many others to name. Prior to the development of stakeholder theory, there was strategic planning which gave little or no importance to the inclusion of stakeholders.

Based on Freeman’s work Donaldson and Preston in 1995 gave the normative theory which implicated the role of the business towards its stakeholders and the level of interests the business must undertake (Donadson & Preston, 1995). However, the theoretical implications of Donaldson and Preston were based on the ethical aspects of business operations and the need to include stakeholders over a singular shareholder. They implied that businesses must consider the impact of decisions they take and the operations that do on the stakeholders and consider ethical grounds. On the other hand, Freidman implicated that “organization itself should be thought of as grouping of stakeholders and the purpose of the organization should be to manage their interests, needs and viewpoints.” According to Friedman & Miles, (2002), it is the work of a manager and not the organisation as a whole to look after the benefit of its stakeholders. It was Friedman who further identified all the stakeholders including rivals and competitors, media, creditors and financiers and also policymakers.

Identification of the internal and external stakeholders

In this section, the internal and external stakeholders of Nestle have been identified on the basis of PESTLE analysis (Widya Yudha, Tjahjono, & Kolios, 2018). The measures on which the stakeholders have been identified are presented in the following table;

Political The decision-maker, the sponsor of the company, third parties
Economic Financial management
Sociological Training provided to, a group that is impacted, resources
Technological Technical support
Legal The regulatory body, policymakers
Environmental Environmental protection

Based on the above table as well as the stakeholder report of Nestle the stakeholders of the company for each of the components of PESTLE are in the following table;

Political Union representatives, Shareholders, Trade associations, Suppliers, Employees, Owners
Economic Shareholders, Managers and the external auditors, Customers, Owners
Sociological Communities, Suppliers, Reporting agencies or media, Academia, General Public
Technological Academia, Industry representative, Government
Legal Government, Intergovernmental organisations
Environmental NGOs, Communities, Academia

Based on the PESTLE analysis all the stakeholders of Nestle have been identified and with the help of Friedman’s stakeholder categorisation the following table segregates the internal and the external stakeholder of the company (Nestle, 2020c).

Internal stakeholders External stakeholders
·       Employees (Technical support and Financial auditors and other members)

·       Managers

·       Owners

·       Communities

·       Academia

·       NGOs

·       Government

·       Reporting agencies or media

·       Intergovernmental organisations

·       General Public

·       Customers

·       Suppliers

·       Shareholders

·       Union representatives and Trade associations

Roles and responsibilities of the stakeholders

Internal stakeholders

The employees play a major role in the performance and the development of the organisation. Employees are the core stakeholders in the internal stakeholder segment as they are responsible for carrying out the functions of the company and other required tasks so that the company meets its objectives and goals (Phillips & Freeman, 2010). For instance, in the case of technical assistance, the IT employees are responsible for making sure that there is a smooth flow of work and other processes and also have remote access to other global offices and business operations. Again, the employees from the marketing segment are responsible to make sure that the company meets its sales target and improve the customer base and have a competitive advantage over its competitors.

The managers and the owners in a company may also be termed the managing board or the senior decision-makers who identify the demand in the market and ascertains that achievable goals are formed and achieved. They are responsible for the ultimate decisions for the benefit of the company as well as other stakeholders. However, in the case of Nestle, the owners and managers are basically the board members or board of directors.

External stakeholders

Customers form one of the major stakeholders in the external segment as they are solely responsible for brand growth and product sales (Phillips & Freeman, 2010). They help the company in achieving revenues by purchasing the products and also help in the marketing the brand by brand loyalty, word of mouth methods and others. If they are not happy with a product or the company does not meet the demand then it significantly impacts the company performance.

Communities are the people where the company manufacturing unit is established or the people that help the company to procure raw materials (Freeman, Harrison, & Wicks, 2007). They are mostly rural people or farmers. The communities are responsible for forming a mutual relationship with the company as they expect the company to help with menial jobs and even training for skill development. They in turn help with low-level employment in the manufacturing units of Nestle.

Suppliers are the group or businesses and sometimes even small scale farmers or smallholders that help the company in proving the company with materials and resources for product development (Freeman et al., 2007). Without reliable suppliers, it is very difficult for large companies to achieve quality goods and thereby the production deteriorates. They are also responsible for the timely shipment and supply of goods and are also a key stakeholder of the company. The vendors are also part of the suppliers as external stakeholders.

Intergovernmental organisations and the Government are responsible for regulating the operations of the company and make sure that the authorities rightly audit the company against the regulations and other policies (Phillips & Freeman, 2010). The company operations and objectives are based on the laws formed by the Government and they have to pay taxes to the Government for trade and operations.

Shareholders are another important external stakeholder who is basically the investors and small scale investors into the shares of the company (Freeman et al., 2007). Shareholders expect profits from the company as they help the company to make expenditures that allow improving company sales and product development. They purchase shares from the company and even invest directly as they expect to improve their personal finances.

The NGOs supervises the company’s activities and their ethical operations like human safety and occupational healthcare, environmental conservation, pollution control and others. For instance, the NGO ‘PETA’ makes sure that the company does not use animal models for testing their products.

Union representatives and Trade associations are the ones that make sure that the company follows the policies and the regulations of trade and is a member of the group (Freeman et al., 2007). These associations also see that the company does not trade outside the authorised areas or with members not within the association. They also look after the employee grievances and employee concerns.

Stakeholder matrix

Figure 1: Stakeholder matrix (Developed by author)

The stakeholder matrix is based on the model named Mendelow’s Power-Interest Grid which indicates that all stakeholders of a business do not have equal priority or importance (Polonsky, 1996). Based on this aspect, the following stakeholder matrix was formed whereby the first quadrant is measured by high power low interest, the second by high power high interest, low power low interest and the last by high-interest low power. Using this format the stakeholders of Nestle based on priority and importance were identified. The segregation has been done in the following;

Figure 2: Stakeholder matrix of Nestle

Based on fig 2, the high power low-interest stakeholders are customers, suppliers, shareholders, union and trade representatives; high power high interest with managers/owners, employees, government; low power low interest: communities, reporting agencies; and high-interest low power: NGOs, academia. The managers and the employees and the Government are the most important decision-makers and the modulators of the company and hence identified as the key players. Similarly, customers and suppliers and trade unions fall under ‘meet their needs because they do not have direct control over the company but have high power to influence the company indirectly. The communities and reporting agencies have the lowest interest in the company and also do not have any power on the same; likewise, NGOs and academia may have a high interest in the company on their policies and operations but have no power on the same.

Dissimilarities of stakeholders from an IT company

Comparing the stakeholders of Nestle to an IT company, there is a huge difference in the same. There are multiple stakeholders in the case of Nestle as it has to deal with numerous people and organisations, whereas, the stakeholders of an IT company are sponsors or shareholders, users/customers, employees, and suppliers. Unlike shareholders in Nestle, the shareholders and sponsors in an IT company keep changing on the basis of project completion. Again, the supplier deals with IT components like circuit boards, PCs, network components, applications and others, which is very different from the supplier roles in Nestle (Karlsen, 2008). The customers may vary on the basis of the IT product and hence the role of customers is different from one another and segmented. The employees are mainly engaged in IT, HR and management-related tasks and also marketing and sales, whereas, the employees of Nestle had larger segregation of functions and roles.

Conclusions

The current report presented a stakeholder analysis of Nestle whereby PESTLE helped to identify the internal and external stakeholders and their roles and the stakeholder matrix helped to segregate stakeholders on the basis of priority. The segregation was found as high power low-interest stakeholders are customers, suppliers, shareholders, union and trade representatives; high power high interest with managers/owners, employees, government; low power low interest: communities, reporting agencies; and high-interest low power: NGOs, academia.

Reference list

Donadson, T., & Preston, L. E. (1995). The stakeholder’s theory of the corporation: Concepts, evidence and implication. Academy of Management Review20(1), 65-69.

Freeman, R. E. (2001). A stakeholder theory of the modern corporation. Perspectives in Business Ethics Sie3, 144.

Freeman, R. E., Harrison, J. S., & Wicks, A. C. (2007). Managing for stakeholders: Survival, reputation, and success. Yale University Press.

Friedman, A. L., & Miles, S. (2002). Developing stakeholder theory. Journal of management studies39(1), 1-21.

Goodpaster, K. E. (1991). Business ethics and stakeholder analysis. Business ethics quarterly, 53-73.

Karlsen, J. T. (2008). Forming relationships with stakeholders in engineering projects. European Journal of Industrial Engineering2(1), 35-49.

Nestle (2020a). About Us. Retrieved Jan 10, 2019, from https://www.nestle-cwa.com/en/aboutus.

Nestle (2020b). Other Functions. Retrieved Jan 10, 2019, from https://www.nestle-caribbean.com/careers/our-teams/other-functions.

Nestle (2020c). Stakeholder Engagement. Retrieved Jan 10, 2019, from https://www.nestle-cwa.com/en/csv/what-is-csv/stakeholder-engagement-new.

Phillips, R. A., & Freeman, R. E. (2010). Stakeholders. Edward Elgar Publishing.

Polonsky, M. J. (1996). Stakeholder management and the stakeholder matrix: potential strategic marketing tools. Journal of Market-Focused Management1(3), 209-229.

Reed, M. S., Graves, A., Dandy, N., Posthumus, H., Hubacek, K., Morris, J., … & Stringer, L. C. (2009). Who’s in and why? A typology of stakeholder analysis methods for natural resource management. Journal of environmental management90(5), 1933-1949.

Widya Yudha, S., Tjahjono, B., & Kolios, A. (2018). A PESTLE policy mapping and stakeholder analysis of Indonesia’s fossil fuel energy industry. Energies11(5), 1272.

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