There are two main types of stakeholders – internal and external. Internal stakeholders refer to those who have a direct involvement in the company. This may be through employment or ownership. Show
External stakeholders are those who have an indirect involvement with the company. This may be through a business agreement, an interest in the products, or an interest in its impact on the wider community. Let us take a look at some examples of these types of stakeholders.  Employees have a direct interest in how the business performs as it has a consequential impact on them. For instance, if the business is not doing well, employees may be at risk of losing their jobs. When business is good, they may be in line for a nice pay increase or a bonus. Interest: Job stability and income. The owners have many interests, but the number one is profit. After all, without profit, the business would not be able to compete. In turn, the owner has an interest in factors that contribute to profit. For example, employee morale and productivity, and the long-term business plan. Is the business investing in the right areas, lowering costs, and improving profit margins. Interest: Profit, employee morale, business sustainability. Company management in the form of executive managers and the board of directors have very different incentives from both the owners and employees. Not only do they get a salary, but frequently receive stock options or grants of stocks. That means the incentives do not necessarily line up with that of the other stakeholders. Instead, there is an incentive to increase the price of the firm’s stocks for their financial gain. This can lead to short-term decisions to boost the stock price, at the cost of long-term sustainability. Interest: Stock price and business performance. Customers are stakeholders in the sense that a business’s decision may impact on their choice and the price they must pay. For example, a firm may decide to cut costs and use lower-quality materials – thereby affecting the final product consumers receive. A stakeholder is a party that has an interest in the business, so anything the business does that affects the price, quantity, or quality of the good will affect them. Interest: Quality, quantity, and price of goods. Another example of an external stakeholder includes creditors. This may range from family and friends to the big Wall Street Banks. They all have an interest in the business because if it fails, they are unlikely to receive their investment back. Interest: Repayment of debt. The government is stakeholder with an interest in almost every business. First of all, businesses provide employment to the population. This means more people in work, lower benefit payments, and generally, a more content voting population. Second of all, businesses provide new revenue streams through employment as well as corporate taxes. The more people businesses hire, the more it will receive through income tax. And the more money businesses make, the more government takes in corporation taxes. Interest: Employment and taxes. Some businesses may create spillover effects on the local community. This may come in the form of pollution, traffic, or aesthetically. At the same time, as an external stakeholder, the local community has an interest in positive spill-over effects such as opportunities for employment and a new place to shop. Interest: Spill-over effects. Suppliers’ interest is purely financial. If the business they are working with is not doing well, it will have an impact on their sales. For instance, Foxconn is a supplier to Apple and would have a direct interest in the number of sales the new iPhone gets. More sales mean more orders and that means more profit. Interest: Demand for its goods and profits.
On the other hand, external stakeholders represent outside parties, which affect or get affected by, the business activities. Due to the complexity of the business environment, it is very difficult to identify that which factor is considered as the internal or external stakeholder. So, here in this article, we are presenting you the differences between internal and external stakeholders.
Comparison Chart
Definition of Internal StakeholdersInternal Stakeholders are those parties, individual or group that participates in the management of the company. They can influence and can be influenced by the success or failure of the entity because they have vested interest in the organisation. Primary Stakeholders is the second name of the Internal stakeholders. Internal Stakeholders are dedicated to providing services to the company. They are highly affected by the decisions, performance, profitability and other activities of the company. In the absence of internal stakeholders, the organisation will not be able to survive in the long run. That is why they have a great impact on the company. Further, they are the ones who know all the secrets and internal matters of the entity. The following are the list of internal stakeholders:
Definition of External StakeholdersExternal Stakeholders are those interested parties, who are not a part of the management, but they indirectly affected by the work of the company. They are the outside parties which form part of the business environment. They are also known as Secondary Stakeholders. They are the users of financial information of the company, in order to know about its performance, profitability, and liquidity. External Stakeholders, do not participate in the day to day activities of the entity, but the actions of the company influence them. They deal with the company externally. They have no idea about the internal matters of the company. Given below is the list of external stakeholders:
Key Differences Between Internal and External StakeholdersThe following are the major differences between internal and external stakeholders:
ConclusionEvery enterprise operates in an environment, and there are some factors in that environment. The company has to deal with those factors and fulfil the responsibilities towards them like it is the responsibility of the company to pay fair wages to the workers and should not discriminate between employees. Similarly, it is the duty of the company to pay money to suppliers, deliver goods to customers, pay taxes to local authorities on time. They are the readers of the financial statement of the company so the company should provide a true and fair view of its financial statement along with transparency in their accounts. The trade union is a combination of both internal and external stakeholders. What do external stakeholders include?External stakeholders include clients or customers, investors and shareholders, suppliers, government agencies and the wider community. They want the company to perform well for a multitude of reasons. Customers want to receive the best possible product or service.
IS employees an external stakeholder?Internal stakeholders include employees, owners, shareholders, and managers. They are simply anyone within the organization. By contrast, external stakeholders include suppliers, governments, customers, trade unions, and creditors. These are people and organizations that are outside of the business.
What are external stakeholders responsibilities?External stakeholders play an important role in the operations of any business. By monitoring business activities, buying products or services and creating basic expectations, external stakeholders like customers and government regulations help ensure a safe, fair market.
Is a stakeholder internal or external?'Stakeholders' are by definition people who have a 'stake' in a situation. Stakeholders can be described in organisation terms as, those who are maybe 'internal' (e.g. employees and management) and those 'external' (e.g. customers, competitors, suppliers, etc.).
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External stakeholders include employees, owners, and the board of director, if there is a board.
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