Who are the internal stakeholders of a company?

Posted by Nicole Baskerville in Mar, 2015

Business Stakeholders are a person or group that can affect or be affected by the actions of a business. Stakeholders have a ‘stake’ in the business and can gain or lose as a result of business activity. Business stakeholders hold the key to the environment in which a business operates and the subsequent financial performance of the business. Effective management of relationships between the business and their stakeholders is key to operating effectively.

What do Business Stakeholders do?

Stakeholders have moral and ethical implications for a business. If a business only focuses on making a profit then the business may have no ethical or moral obligations to any other person, business or society. Therefore a business must take into account the values and interests of their stakeholders as well.

What are the different types of Business Stakeholders?

There are internal and external stakeholders of a business. Internal stakeholders are the people who are committed to serving the business, this includes: employees, managers, owners, volunteers and/or donors. External stakeholders are the people who impact the businesses work from outside the business, this includes: clients, customers, community partners, suppliers, government, shareholders and society.

What’s involved with engaging with Business Stakeholders?

The main steps in engaging with business stakeholders, is to identify and prioritise each stakeholder in the order that they would affect or be affected by the business. Begin by identifying the business stakeholders by listing the people, groups or organisations that are affected by your project, who have influence or power over it, or have an interest in the businesses successful or unsuccessful conclusion. Business stakeholders can be assessed using criteria that helps assess their relevance based on their: influence, impact and alignment. Once the internal and external business stakeholders have been identified then focus on prioritising these stakeholders. There is always a long list of business stakeholders so prioritise your most important stakeholders by determining: who has access to key decision makers, who has access to the media, who is able to access key information, who is able to influence other stakeholders, and who is sufficiently motivated to be active about the business issue/situation.

Where does the engagement of Business Stakeholders fit into the process of marketing a small business?

By engaging with stakeholders, businesses can find new ways to reduce impacts, balance business efficiency with economic success and, ultimately ensure the business is more competitive, profitable and sustainable.

How do Business Stakeholders impact on the marketing of a small business?

Business stakeholders can make and break a business. Stakeholders have the power and influence to change the opinion of other stakeholders which can have a direct impact on the environment the business operates in.

What terms are used in relation to Business Stakeholders?

Common terms used when identifying business stakeholders are: stakeholder analysis, primary stakeholders, secondary stakeholders and shareholders. Definitions for these terms can be found at:

//www.stakeholders-socialinclusion.eu/site/en/concepts/stak

Where can I find more information about Business Stakeholders?

//ctb.ku.edu/en/table-of-contents/participation/encouraging-involvement/identify-stakeholders/main

//www.cuttingedgepr.com/articles/stakeholder-relations-management-is-key-skill.asp

//www.saylor.org/site/wp-content/uploads/2013/02/BUS208-3.3.7.1-Stakeholders-and-CSR-FINAL.pdf

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Stakeholders refer to the people, groups of people or entities that are connected to an organization in some or other way. They influence or may be influenced by the policies, procedures and activities carried out by the organization. There are two major groups of stakeholders – internal stakeholders and external stakeholders.

Internal stakeholders are those people who are actively involved in the activities of a business or own shares in the company. These include owners, employees and investors of a company. External stakeholders are those outside parties that are connected to a company due to their shared interests. Examples of these stakeholders include customers, suppliers, competitors, government, etc.

In this article, we will present a description of the internal and external stakeholders and explain the differences between them.

Internal stakeholders

Internal stakeholders are the individuals or parties that are directly involved in the management of the business. These stakeholders have a vested interest in the business and hence, they can directly affect or be affected by the successes or failures experienced by the business.

Internal stakeholders are also known as primary stakeholders. These stakeholders offer services to the organization and are significantly influenced by the outcomes, decisions, and performance of the company. In addition, they are aware of all the internal issues of the company. Internal stakeholders consist of all those who work for the organization, i.e. the employees, the individual or groups who have the ownership of the organization, all those who are involved in the management of the organization, the board of directors and the investors. All of these have a direct stake in the activities in the organization and are critical for the survival of a company.

Internal stakeholders usually have a significant impact on the operations of an organization. For instance, owners are the ones who take critical business decisions. In addition, the managers and employees are actively involved in the routine operations of a company and make various decisions on a daily basis regarding various business activities.

External stakeholders

External stakeholders are all those individuals, groups, firms and organizations that are not directly influenced by the performance of the business. These stakeholders might be interested in the performance and success of the organization, but they are not directly affected by it. They are also known as the secondary stakeholders of an organization.

These external parties constitute the business environment of the organization. They use the financial information and other publicly available information about the company to become aware of its profitability and performance.

External stakeholders are not involved in the everyday operations of an organization; however, the organizational activities do have an impact on them. They are not aware of the internal issues of the company and deal with it from the outside. Some of the external stakeholders are the customers, the suppliers who provide raw materials, clients, creditors, competitors, intermediaries, the general public as well as the government.

Difference between internal stakeholders and external stakeholders

The key points of difference between internal stakeholders and external stakeholders are listed below:

1. Meaning

Internal stakeholders are the people or entities that have a vested interest in the organization and are directly affected by its activities. External stakeholders, in contrast, are those people, groups or parties that are not directly affected by the success or failure of an organization.

2. Kind of influence

There is a direct impact of organizational activities on the internal stakeholders. However, external stakeholders are not directly influenced by organizational activities.

3. What do they do?

Internal stakeholders offer their services to the organization, whereas external stakeholders deal with the organization from the outside.

4. Information available

Internal stakeholders are aware of the internal problems and matters of the organization. In contrast, external stakeholders are not aware of the internal issues. Rather, they use financial information and any other information that is publicly available for different objectives.

5. Kind of stakeholders

Internal stakeholders are considered as the primary stakeholders whereas external stakeholders are considered as the secondary stakeholders.

6. Parties included

Internal stakeholders include the owners, managers, employees and investors of a company. External stakeholders comprise of the customers, competitors, suppliers, creditors, public and the government.

Internal stakeholders vs external stakeholders – tabular comparison

A comparison of internal stakeholders and external stakeholders in tabular form is given below:

Conclusion – internal stakeholders vs external stakeholders

Stakeholders are all those individuals, groups or entities that are interested in the performance of a company. There is direct involvement of internal stakeholders in the operations of a company, and they are directly affected by the way the organization performs. External stakeholders are, however, indirectly affected by the organizational operations and performance.

Both types of stakeholders are important part of the organization. Internal stakeholders are critical for the functioning of an organization. For example, in the absence of employees and managers, an organization cannot carry out its day to day functions. In a similar way, external stakeholders are also very important. Customers are very important external stakeholders as they are the ones who will buy and use the product/service. Similarly, creditors are important as they offer companies the finances they need to carry out their operations. In addition, a company is supposed to adhere to the rules and laws put forward by the government and to pay taxes. Therefore, it is evident that like internal stakeholders, external stakeholders are also very significant. Companies, hence, need to establish good relationships with all of their stakeholders. This can be done when they align their objectives with those of their stakeholders.