Internal & External Stakeholders: Definition & Examples

Internal & External Stakeholders: Definition & Examples
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  • 0:00 What Are Stakeholders?
  • 0:42 Internal Stakeholders
  • 1:17 External Stakeholders
  • 3:13 Lesson Summary
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Lesson Transcript
Instructor: Deborah Schell

Deborah teaches college Accounting and has a master's degree in Educational Technology.

Individuals within a company as well as those outside of a company are interested in the financial well-being of a business. In this lesson, you will learn about internal and external stakeholders.

What are Stakeholders?

Jake owns the Books Worth A Look bookstore and he's just reviewed the financial information for his first year of operation with his accountant. His accountant mentioned a number of individuals who would be interested in the results. Jake's accountant discussed internal and external stakeholders but he isn't clear on the distinction between the two groups. Let's see if we can help Jake with this problem.

Stakeholders are organizations, individuals or groups that are concerned about the activities of a business. Stakeholders can be internal or external and each group has a different interest in the company. Let's examine these stakeholders in more detail.

Internal Stakeholders

First, let's start by defining internal stakeholders. Internal stakeholders are those individuals or groups within a business such as employees, owners, shareholders and management who have an interest in the company. For example, Jake's employees at the Books Worth A Look bookstore are concerned about the company's ability to operate into the future since they obviously want to know if they'll still have their jobs. Management employees like Jake will always be concerned about whether the business will continue to operate, his advancement opportunities, and his possible salary increases.

External Stakeholders

External stakeholders are groups, individuals or organizations outside of a company such as its customers (those individuals who purchase its goods and services), creditors (individuals or groups to whom the company owes money), the government, suppliers (companies from whom the business purchases its products), or society in general.

When customers purchase a product, they're of course going to expect it to be high quality and to represent good value for their money. They're also going to want to know that a company will be in business to honor any warranties that it provides with its products. Creditors, such as banks, are interested in a company's ability to pay its debts. If Books Worth A Look took out a loan, its bank would want to know that Jake's business is making enough money to pay the loan when it is due.

The government is also interested in Jake's business because he pays taxes, which fund important things such as education, health care, and road maintenance, to name a few. If Books Worth A Look doesn't make money, then the government will have less money to fund its programs, so it's in their best interest that businesses like Jake's succeed.

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