Which of the following would be a good example of a nonmarket stakeholder? A. customers B. nongovernmental organizations C. creditors D. shareholders
The correct answer and explanation is:
Correct Answer: B. Nongovernmental organizations
Explanation (300 words):
In business, stakeholders are individuals or groups that are affected by or can affect a company’s operations. Stakeholders are broadly categorized into two groups: market stakeholders and nonmarket stakeholders.
Market stakeholders are those who engage in economic transactions with a company. These stakeholders are directly involved in the buying, selling, or financial support of the business. Examples include:
- Customers (who buy the company’s products or services),
- Creditors (who lend money or provide financial services),
- Shareholders (who invest capital in the company and expect returns in the form of profits or dividends).
On the other hand, nonmarket stakeholders do not engage in direct economic exchange with a business but can still influence or be influenced by its activities. These stakeholders may shape public perception, policy, and social standards that affect how businesses operate. Examples include:
- Nongovernmental organizations (NGOs),
- Government agencies,
- Communities,
- Media,
- Activist groups.
Therefore, nongovernmental organizations (NGOs) are a clear example of nonmarket stakeholders. They typically advocate for causes such as environmental protection, human rights, or labor standards. While they don’t buy or sell goods or invest in the company, their campaigns, reports, and lobbying efforts can pressure businesses to improve practices, adopt sustainability measures, or change policies. For example, an environmental NGO might challenge a manufacturing company’s pollution practices, encouraging it to adopt greener technologies.
In summary, the distinction lies in the nature of the relationship: market stakeholders are financially linked to the business, while nonmarket stakeholders influence it through political, social, or ethical means. Since NGOs do not participate in direct economic exchange with a business but still affect its behavior, they are the correct choice as a nonmarket stakeholder.