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What is the difference between internal and external stakeholders for a business?

Asked by Phoebe Smythe on March 18th 2012 10:08 a.m.

1 Answer to this question...

Answered by Alex Linde on April 11th 2012 8:25 a.m.
Internal stakeholders of a business are people who have a vested interest in the company i.e., they benefit financially if the company does well and vice- versa. They include employees, managers and investors. External stakeholders of a business include 2 groups of people: 1. People who do business with the company or are dependent on the company. For instance, suppliers depend on business generated by the company; customers use the products and they'll want good quality products at cheap prices; government depends on the company for tax receipts 2. People who do not depend on the company but are indirectly affected by it. For instance, in the case of an off-shore oil exploration and drilling company, fishermen in the region are directly affected. Moreover, if the drilling is close to the shore, the tourism industry in the region could be affected. In this instance, the whole of the community living close to the drill site are external stakeholders The main difference between internal and external stakeholders is how much of an effect a company has on them. The internal stakeholders are heavily invested in the company and they will want the company to succeed at any cost. If the company goes bankrupt, they stand to lose a lot. On the other hand, the external stakeholders will be affected but do not have to deal with such massive losses if a company is liquidated. They usually switch to other companies for business. However, of late, we have witnessed the effects of reckless decisions made by companies on external stakeholders. Examples that come to mind are BP's Macondo oil spill, the Chernobyl disaster, Fukushima Daiichi nuclear disaster.