Stakeholders and power interest - Mendelow matrix analysis

Learning Outcomes

After reading this article, you will be able to explain how organisations identify and analyse stakeholders using the Mendelow matrix. You will learn how to classify key stakeholder groups by their power and interest, understand the strategies for managing each group, and recognise how stakeholder influence should be considered in decision making. You will also be able to apply the Mendelow matrix to real business scenarios.

ACCA Business and Technology (BT) Syllabus

For ACCA Business and Technology (BT), you are required to understand how to identify, analyse, and manage stakeholders using the Mendelow matrix. In your exam, you should be able to:

• Define stakeholders and explain the differences between internal, connected, and external stakeholders
• Identify the main stakeholder groups and describe their objectives
• Explain how conflicts may arise between different stakeholder groups
• Compare the power and interest of stakeholders and apply the Mendelow matrix
• Determine appropriate management strategies for each category of stakeholder

Test Your Knowledge

Attempt these questions before reading this article. If you find some difficult or cannot remember the answers, remember to look more closely at that area during your revision.

1. What are the two axes used to classify stakeholders in the Mendelow matrix?
2. Which stakeholder group should be managed with a "keep satisfied" strategy according to the Mendelow matrix?
3. True or false? Stakeholders with low power but high interest should be kept informed about major organisational changes.
4. A new investor buys a substantial shareholding in a company and begins requesting detailed reports. How should the company’s management approach this stakeholder group using the Mendelow matrix?

Introduction

Every organisation has a range of stakeholders—groups or individuals who have an interest in the organisation’s activities or who can influence the achievement of objectives. Success depends on correctly identifying stakeholders and understanding their ability to affect or be affected by decisions. The Mendelow matrix is a simple but practical framework for mapping stakeholders by power and interest, helping managers decide which groups need close attention, communication, and resources.

Key Term: stakeholder
A stakeholder is any individual or group that can affect or is affected by an organisation's actions, objectives, or policies.

Stakeholder Categories

Stakeholders are typically grouped into:

• Internal stakeholders: individuals within the organisation, such as employees and managers
• Connected stakeholders: parties with a contractual relationship, e.g. shareholders, suppliers, customers, lenders
• External stakeholders: groups without direct contracts but with an ability to affect or be affected by the organisation, e.g. government, community, media

Each group can have different, and sometimes conflicting, objectives. For example, shareholders may seek dividend growth, while employees prioritise job security.

Stakeholder Power and Interest

The degree of power (influence over decisions) and interest (concern about organisational actions or outcomes) varies for each stakeholder.

Key Term: power (of a stakeholder)
The ability of a stakeholder to influence the organisation’s decisions, resources, or activities.

Key Term: interest (of a stakeholder)
The level of concern or involvement a stakeholder has with the outcomes of the organisation’s actions.

The Mendelow Matrix

The Mendelow matrix helps organisations map stakeholders according to two axes: power and interest. By categorising each stakeholder group, management can determine how to communicate with and manage each group effectively.

Key Term: Mendelow matrix
A tool used to analyse and classify stakeholders based on their relative power and interest in an organisation.

The matrix is divided into four quadrants:

Stakeholder Management Strategies

• Minimal effort (Low power, Low interest): Monitor this group with minimal communication. Example: individual small customers.
• Keep informed (Low power, High interest): Regular updates are important. Example: employees in large companies.
• Keep satisfied (High power, Low interest): Satisfy key needs to prevent them from becoming more active. Example: large financial institutions who are content with the current strategy.
• Key players (High power, High interest): Engage actively—consult, negotiate, and take their views into account. Example: major shareholders or regulators.

Worked Example 1.1

Scenario:
Horizon Ltd is considering closing a manufacturing site to cut costs. Major customers rely on this site for products, while the local government owns the land, and employees’ union is well-organised.

Question:
Classify each stakeholder group using the Mendelow matrix and suggest appropriate actions.

Answer:

• Major customers: High power (can switch to competitors), High interest. Key players—actively consult and involve them.
• Local government: High power (owns land), Low interest (unless wider impact). Keep satisfied.
• Employees’ union: High power (can strike), High interest. Key players—engage, negotiate, consider their input.

How to Analyse Power and Interest

Sources of stakeholder power:

• Legal authority (e.g. shareholders can vote out directors)
• Control of resources (e.g. large suppliers or funds)
• Impact on reputation (e.g. media, pressure groups)
• Specialist knowledge or skills

Indicators of high interest:

• Likelihood of being affected by decisions
• Activism or history of challenging the organisation
• Level of information requested

Worked Example 1.2

Scenario:
A small supplier occasionally provides specialist materials to a large multinational, but represents a tiny fraction of the client’s total costs.

Question:
Where does this supplier fit in the Mendelow matrix?

Answer:
They have low power (organisation can easily switch) and low interest (their risks are not greatly affected). Minimal effort.

Managing Stakeholder Conflict

When stakeholder objectives conflict, prioritising those with greatest power and interest is key. Strategies may need to balance short-term and long-term gains, or find compromise solutions.

Exam Warning Avoid assuming all stakeholders should be treated equally—exam questions may test your ability to prioritise groups based on both power and interest, not just one or the other.

Changing Stakeholder Positions

Stakeholder positions can shift over time. For example, a minor shareholder who acquires more shares may move from low to high power, or a passive group may mobilise if affected by a major change.

Revision Tip

Be ready to explain not only where a stakeholder fits on the Mendelow matrix, but also recommend communication and management strategies for each quadrant.

Summary

The Mendelow matrix is essential for identifying which stakeholders to prioritise in decision making. Analysing both power and interest helps organisations allocate resources, select communication approaches, and anticipate possible opposition. The matrix can be adapted as stakeholders’ positions and levels of influence change.

Key Point Checklist

This article has covered the following key knowledge points:

• Define stakeholder types: internal, connected, external
• Explain power and interest as stakeholder characteristics
• Describe the structure of the Mendelow matrix
• Classify stakeholders into the four quadrants of the Mendelow matrix
• Suggest management strategies for each stakeholder category
• Recognise that stakeholder power and interest can change over time

Key Terms and Concepts

• stakeholder
• power (of a stakeholder)
• interest (of a stakeholder)
• Mendelow matrix