Who’re they: Product market stakeholders are those who influence or are affected by the company’s offerings. They include customers and suppliers. Their satisfaction contributes to the company’s success.
Customers and suppliers are primary stakeholders. Suppliers provide inputs to the company to be processed into products. Meanwhile, customers contribute money to the company when they buy products.
Why product market stakeholders matter
Product success depends on stakeholders. For example, if suppliers are unsatisfied, they may stop providing the inputs needed for production. Meanwhile, if the customer is unsatisfied, they will not buy, meaning no money will flow to the company.
Importance of suppliers to business
Suppliers offer inputs to firms. Their price and quality affect the product’s quality and the company’s cost structure. To be willing to supply, they demand timely payment at the right price.
Supplier dissatisfaction causes input supply to be disrupted. As a result, the production process does not follow the production schedule or even stops. If product inventory is insufficient, customers cannot get goods when needed.
In addition, companies also have to face other risks. For example, they find suppliers unreliable in supplying inputs, causing them to arrive late. Or they don’t conform to the set specifications. These problems can impact cost and quality.
Therefore, companies must strike a balance when working with suppliers. On the one hand, they must maintain good relations with suppliers and provide satisfaction. On the other hand, the company has to ensure the supplier is reliable and meets the requirements.
The importance of customers to the business
Businesses exist to fulfill needs and wants. They make products to satisfy customers. Besides quality and price, their success depends on how well they serve their customers compared to competitors.
If successful in attracting customers, money flows into the company when customers buy products. Companies then use it to pay suppliers, pay employees or pay down debt.
The company might distribute dividends to shareholders if money is still available after covering all expenses. Or they use it as internal capital in the future (retained earnings).
Customer dissatisfaction can have an impact on low income. The company becomes uncompetitive. Thus, customers flow money to competitors because they are unsatisfied with the company’s products.
Satisfying customers requires companies to meet customer expectations. They demand reliable products to meet their needs. They want a quality product (differentiation) at the lowest possible price.
However, the demand for price and quality is a dilemma because companies find it difficult to fulfill both simultaneously. Therefore, companies generally focus on one of them.
First, the company offers a unique product. They adopt a differentiation strategy. Unique products allow customers to be willing to pay a premium price.
Second, the company offers a standard product but at a lower price. We call this strategy cost leadership.
Under cost leadership, companies focus on lower-cost structures to make their products less expensive. They design relatively standard products, similar to competitors’ products. But, because they have a lower-than-average cost structure in the industry, they earn higher profit margins than their competitors.
Product market stakeholders and their interests in the company
Customers need products to satisfy their needs and wants. Which product to buy depends on quality and price. Both are in the customer’s primary interest to the business.
Their other interests are the services provided by the company. For example, they are happy when the company provides after-sales service. Or they get a fast and precise solution when submitting a complaint to the company. Such services add value to the product.
Other interests in the business include:
- Product availability. Customers like it when products are easy to find when they need them.
- Company’s values. For example, companies share value with customers, strengthening their bonds.
- Business ethics. For example, customers demand companies to operate and offer environmentally friendly products.
Meanwhile, suppliers sell inputs to companies. In other words, companies are their customers. They could continue to make money if the company kept buying.
Suppliers have several interests in the business. First, they are interested in a well-performing business because it allows them to get regular orders.
Second, suppliers want companies to pay on time. Thus, their working capital turnover and cash flow are going well. They can pay debts and pay employees on time.
Third, big purchases are another interest. Suppliers want inputs to sell out quickly. Thus, they can save on operating costs such as warehouse costs.
Product market stakeholder influences on the company
Customer influences on business
Customers affect business in several ways. First, they influence firms through their demands on price and quality. They charge low prices for high quality. But, for businesses, it squeezes out profitability.
Second, customers influence the business through their buying decisions. Even if a company offers a quality product, they may not be interested in buying because they prefer a competitor’s product.
Customers may have an attachment to a competitor’s brand. So, even though they have similar qualities, they are more tied to competitors’ products.
Third, customer loyalty affects the company. When customers are loyal, they will continue to buy the same product. For the company, repeat purchases are more profitable because they require fewer promotional costs than when acquiring new customers.
Other influences can take the form (positive and negative):
- Willingness to promote the product
- Feedback for new product development
- Negative reviews on social media
- Lawsuits against companies
Supplier influences on business
Suppliers influence firms through the prices and quality they supply. For example, an increase in inputs increases operating costs. If the company passes the cost increase on to the selling price, customers may respond by reducing demand.
Meanwhile, the quality of inputs affects the quality of the firm’s output. Quality output requires quality materials. Thus, defective inputs degrade quality.
Quality can also affect costs. For example, a company needs to sort inputs before they can be used in production.
In addition, the supplier’s influence on the business can be related to:
- Credit facilities. Soft trade credit supports a company’s cash flow cycle because it can temporarily use the money for other purposes without incurring penalties.
- Delivery. Timeliness affects the schedule and production process.
- Reputation. Supplier reputation affects the company’s image.
- Reliability in supplying. For example, how well a supplier can fulfill a sudden large order when there is a spike in consumer demand.
- Their values. For example, a sustainable business will only work with suppliers with similar values.
