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Influences on Business Decisions

Shareholders versus stakeholders

  • 5 things to know
  • Paper 2 and Paper 3

Overview

Internal and external stakeholders, what each wants from a business, and the conflicts that arise between the shareholder and stakeholder approaches.

What you need to know

Answer each one before you reveal it.

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Key term

Distinguish internal from external stakeholders.

Key term

Which groups are external stakeholders, and why?

Process

What does the shareholder approach expect, and what does government want?

Key term

Explain how reducing product quality to cut costs creates conflict between shareholders and customers.

Numbers

Why might relocating production overseas cause conflict between shareholders and local communities?

Questions from this subtopic

Each one with the model answer underneath.

  1. 1

    Name one internal stakeholder group within an organisation.

    Model answer

    Employees.

  2. 2

    Why are managers classified as internal stakeholders?

    Model answer

    Managers work within the organisation and have a direct interest in its activities, decisions, and success.

  3. 3

    What makes shareholders or owners internal stakeholders rather than external ones?

    Model answer

    Shareholders/owners have a direct ownership stake in the organisation, giving them an internal interest in how the business operates and performs.

  4. 4

    Define external stakeholders.

    Model answer

    Groups outside the organisation who have an interest in its activities.

  5. 5

    Why are customers considered external stakeholders?

    Model answer

    Customers are outside the organisation but have an interest in its activities because they purchase and use its products or services.

  6. 6

    Give one reason why suppliers are classified as external stakeholders.

    Model answer

    Suppliers operate outside the organisation but have an interest in its activities because they depend on it for orders and payment.

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