Who has an interest in a business and how do their objectives differ?
The meaning of a stakeholder, the main internal and external stakeholder groups, their differing objectives, how stakeholder and shareholder views can conflict, and how businesses manage these relationships.
A focused answer to AQA A-Level Business 3.1, covering the meaning of a stakeholder, the main internal and external stakeholder groups, their differing objectives, how stakeholder and shareholder views can conflict, and how businesses manage these relationships.
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What this dot point is asking
AQA wants you to define a stakeholder, identify the main internal and external groups and their differing objectives, explain how stakeholder and shareholder views can conflict, and explain how businesses manage these relationships. The conflict between groups is the most examined idea.
What a stakeholder is
The stakeholder view contrasts with the narrower shareholder view, which holds that a firm's first duty is to its owners (maximising shareholder value). The debate between serving shareholders alone and serving all stakeholders runs through the whole course.
Internal and external stakeholder groups
How objectives differ and conflict
Because each group wants something different, their objectives often pull against each other. Shareholders wanting higher profit and dividends can clash with employees wanting higher pay, with customers wanting lower prices, and with the community wanting cleaner, more responsible operations. A decision that pleases one group, such as cutting costs to lift profit, often displeases another, such as the staff who lose jobs. This is stakeholder conflict, and recognising it is central to higher-mark answers.
Managing stakeholder relationships
Businesses manage stakeholder relationships through communication and consultation (keeping groups informed and listening), negotiation and compromise, building long-term relationships, and seeking win-win solutions where one action serves several groups (for example, sustainable practices that please the community and attract customers). Where interests cannot be reconciled, the firm must decide which group to prioritise, a choice that reflects its objectives and values.
Exam-style practice questions
Practice questions written in the style of AQA exam questions on this dot point, with worked answer explainers. The year tag is the paper they imitate, not the source.
AQA 20199 marksAnalyse how the objectives of shareholders and employees might conflict when a manufacturer decides to automate part of its production. (9 marks)Show worked answer →
Set out each group's objective, then show how the decision pits them against each other.
Shareholders typically want higher profit, dividends and share-price growth. Automation can deliver this by cutting labour costs and raising productivity and consistency, so shareholders are likely to favour it. Employees want job security, good pay and conditions. Automation threatens jobs (redundancies) and unsettles those who remain, so employees are likely to oppose it.
The conflict is direct: the same decision that benefits shareholders (lower costs, higher profit) harms employees (lost jobs), so their objectives clash over how the firm uses its resources. A balanced answer notes the firm could ease the conflict through retraining or redeployment, and that some conflicts cannot be fully resolved. Markers reward stating each group's objective, showing the clash through the automation decision, and applying it in context.
AQA 20184 marksDistinguish between an internal and an external stakeholder, giving an example of each. (4 marks)Show worked answer →
An internal stakeholder is part of the business itself, for example employees or managers (and owners who work in it). An external stakeholder is outside the business but affected by or interested in it, for example customers, suppliers, the local community or government.
The key difference is whether the group is inside the organisation or outside it. For full marks give a clear definition of each and a correct example: internal (employees), external (customers). Markers reward the internal versus external distinction and one correct example of each.
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Sources & how we know this
- AQA A-level Business (7132) specification — AQA (2015)