The main internal and external stakeholders of a business, the different objectives and interests each group has, and how and why stakeholder interests can conflict.

What this dot point is asking

AQA wants you to identify the main stakeholders of a business, explain what each group wants from the business, and explain how and why the interests of different stakeholder groups can conflict.

What is a stakeholder?

The main stakeholder groups

Each group has a stake because the business affects them and they affect the business. Customers provide the revenue, suppliers provide the inputs, employees provide the labour, owners provide the capital, and the government provides the legal framework and collects tax. Because the business depends on all of them to some degree, it cannot simply ignore any one group, even where their wishes are inconvenient.

Owners, managers and employees are usually called internal stakeholders (they are part of the business), while customers, suppliers, the community, the government and pressure groups are external stakeholders (they are outside it but still affected). Stakeholders also differ in power and interest: a major shareholder or a large customer can heavily influence decisions, while a single member of the public has little sway. Businesses tend to listen most to the stakeholders who can affect them most, which is why a firm may prioritise shareholders and key customers over the wider community.

Why interests conflict

Because each group wants something different, decisions that help one group can harm another. This is the heart of the topic: almost every business decision is a trade-off between stakeholder interests, and a good answer shows the chain from decision to who gains to who loses.

For example, if owners want higher profit, they may cut costs by lowering wages, which upsets employees. Charging lower prices pleases customers but reduces the profit owners receive. Opening a new factory creates jobs the community wants, but may add pollution the same community dislikes. Paying suppliers later improves the firm's cash flow but harms the suppliers who are paid late. Managing these conflicts is a key skill: businesses cannot satisfy everyone, so they prioritise, compromise, or accept that some stakeholders will be unhappy with a given decision.

Try this

Q1. State two external stakeholders of a business. [2 marks]

• Cue. For example, customers and the local community.

Q2. Explain one way the interests of owners and employees might conflict. [2 marks]

• Cue. Owners want higher profit and may cut costs, while employees want higher wages, so cutting pay raises profit but upsets staff.