Question

Differentiate between internal and external stakeholders with two examples of each type.

Answer 1

Solution:

Internal stakeholders are the parties within a business entity that own or are involved in management or operation of the business. They are responsible for either directly or indirectly managing the business activities or operating the business by undertaking economic or support activity that forms part of it under the direction and supervision of the management.

External stakeholders are external parties that are nor involved in the aforesaid business activities but are dependant or are affected by these activities. They do not form part of the business entity's internal envirionment but interact or interface with it or are dependant on it for their own economic or consumption benefit. They are not privy to several internal decisions made by the business entity but are made aware of it through publicly available information or which includes press, media or the internet.

Two examples of internal stakeholders are owners who own the business entity as shareholders and employees who are involved in the management and operation of the business in return for a remuneration.

Two examples of external stakeholders are customers who are dependant or are influenced by business activities of the entity and the suppliers which provide or sell raw material, finished goods, supplies, consumables etc to the business entity or provide services to them.

The differences are presented in the table beloiw

S. No. Point of distinction Internal stakeholders External stakeholders 1 Environment Internal to the business entity and own, manage and operate the entity External and are affected, dependant or influenced by the business entity 2 Form part of the entity Yes No 3 Impact on business Directly impact business activity Indirectly impact or may not impact business activity but are influenced or may be dependant on business activities 4 Access to business information Direct access and use it for internal decision making or operations Indirect access to limited information theough financial reports, media, press or internet and use it to make their own economic or business decisions