2 Comments Required On Topic : Stakeholder Approach

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A stakeholder invests money in the company and works for a company even though they do not own the company compared to the shareholders. This concept was primarily focused on the relationship between the business and its customers, employees, suppliers, communities, and the organization. A theory was introduced, and I.e., stakeholder theory, and this theory, is also referred to as the stakeholder’s approach. This whole theory fights on a single concept I.e.in, creating value for the stakeholders compared to shareholders. Moreover, now this theory was gaining much significance in the business world, as well as this theory is considered one of the key concepts in business ethics. The main reason for this theory formation is to provide the best maximum level of share to the stakeholders also, which is related to the business ethics concept. Moreover, the company was also starting to think of this concept and argues that the stakeholders should also be given the maximum profitability (Freeman 2020). This concept of stakeholders approach is very much significant because it assists in building trust for the company as well as assists in maintaining sustainable growth in the organizational activities. The stakeholder approach is a six-step process I.e. firstly, identifying the stakeholders for the company, the second step is describing the stakes in the organization, and the third step is considering the importance of the stakes and claims; the fourth step is evaluating the performance. The fifth step is considering the responsibilities of the stakeholders. The final step is to consider the enhancing changes and the stakeholder’s theory, explains the relationship between the businesses and their associating factors, and the importance of the stakeholder approach.


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Stakeholders are the people who have some share or stakes in the organization. The stakeholder approach is primarily focused on the relationship between the organization’s owner with the customers, suppliers, investors, and others who has a stake in the organization. The stakeholder approach demands equality among the stakeholders and the shareholders of the organization. The management takes significant steps towards making this approach successful in satisfying stakeholders for the long last. The active involvement of every individual of the organization towards improving the organization’s efficiency involves converting the challenges into opportunities (RE Freeman, 2001).

The shareholder approach is based on the stakeholder that draws the attention towards satisfying the stakeholders rather than the shareholders of the organization. This approach enables the business organization to develop more opportunities and achieving a competitive advantage in the dynamic market over the business rivals (Jamali., 2008).

The following are the advantages of the stakeholder approach that allow the business association to attain a competitive advantage by developing effective communication and collaboration between the organization’s stakeholders. It also assists in creating value among the process and equipment through developing innovative ideas with transformational leadership behavior in the environment.

There are certain drawbacks of the stakeholder approach, such as conflicts among the employees, misinterpretation about the value of the stakeholder. The organization must manage the stakeholder in creating opportunities for the employees and the association in accomplishing the objectives (B Yoon, 2018).

Overall, the stakeholder approach develops an effective relationship between the organization’s stakeholders by developing coordination and coordination among the various stakeholders of the business association. It has more advantages over drawbacks that make it an important approach to improve the overall performance.



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