The Impact of Business Decisions on Stakeholders

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  • 0:01 Stakeholders
  • 1:26 Community Benefits
  • 2:30 Customer & Investor Benefits
  • 3:28 Employee Benefits
  • 4:37 Lesson Summary
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Lesson Transcript
Instructor: Jennifer Lombardo
In this lesson, you will learn about the impact of business decisions on stakeholders and the various difficulties in making appropriate ethical decisions that result in fair outcomes for all constituents.


Businesses do not function in a black hole where they are not responsible to anyone else but themselves. In fact, organizations have numerous individuals and groups that they must cater to in order to be a productive part of society. The question is, exactly who are they responsible to? The answer is, they are responsible to every stakeholder.

In this lesson, you will learn the definition of a stakeholder and how they are impacted by business decisions. A stakeholder is any person or group associated with the organization that has a stake in the organization's output.

Examples of stakeholders include society, customers, investors, government and employees. Most companies have found that employees, customers and shareholders are the three most important stakeholders to an organization. An organization's performance has a direct impact on the stakeholders. Many companies have adopted a belief to act ethically and be responsible to all of their different stakeholders. The problem is that each type of decision influences stakeholders differently. Let's take a look at the top ways that a company's decisions can impact stakeholders via our company example of Life Drugs, who is a local medicine manufacturer.

Community Benefits

Modern organizations have embraced the idea of social responsibility within their company. This is when companies feel an ethical responsibility for the interests and welfare of society. Companies, such as Life Drugs, that follow this philosophy bring positive changes to their stakeholders' lives, including clean environments, charitable donations, responsible programs and participation in community events. This can result in community benefits, and the result is community loyalty to a company. For example, Life Drugs ensures that they do not pollute the environment with product runoff.

They also use solar power for factories, provide stock dividends and donate money to the community. They even built a local autism school for the town to help disabled youths. Life Drugs' business decisions have been socially responsible and have created a better community for the stakeholders, which include investors, private interest groups, local citizens, customers and the government.

Customer and Investor Benefits

Product decisions also vastly impact stakeholders and result in many benefits to customers and investors. Investors want good quality products that will return excellent profits. Customers are concerned with product quality, pricing and product safety.

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