Difference Between Internal And External Stakeholders

Business exists in a large environment, and many factors have an impact on it, both directly and indirectly. Every organization has stakeholders, regardless of size, nature, structure, or purpose. Any person or entity that influences or is influenced by the company’s activities is considered a stakeholder.

Internal Stakeholders and External Stakeholders are the two types of stakeholders in the business world.

Identifying stakeholders is one of the first steps in project management planning. To do so, you must first understand what a stakeholder is. A stakeholder is a person or group of people who can affect or are affected by a given project.

In this article, we will explain the internal and external stakeholders’ definition and the difference between internal and external stakeholders.

What are internal stakeholders?

Internal stakeholders are individuals or parties directly involved in the management of the business are referred to as internal stakeholders. These stakeholders have a vested interest in the business and can thus directly affect or be affected by the company’s successes or failures.

Internal stakeholders, also known as primary stakeholders, are involved in the decision-making process. These stakeholders provide services to the organization and are heavily influenced by the company’s outcomes, decisions, and performance. Furthermore, they are aware of all of the company’s internal issues.

Internal stakeholders include all those who work for the organization, such as employees, individuals or groups who own the organization, those involved in the organization’s management, the board of directors, and investors. All of these have a direct stake in the organization’s activities and are critical to the company’s survival.

Internal stakeholders typically have a significant impact on an organization’s operations. Owners, for example, are the ones who make critical business decisions. Furthermore, managers and employees are actively involved in a company’s routine operations and make various decisions daily regarding different business activities.

Internal Stakeholder Examples

The following are a list of internal stakeholder examples to understand the internal stakeholder’s definition:

Employees: Employees are individuals who work for a company in return for remuneration.
Owners: The person or group who owns the company. They can be partners, shareholders, and so on.
Board of Directors: They are the individuals in charge of the incorporated entity. They are elected by the company’s members at the AGM (Annual General Meeting).
Managers: A manager refers to the person in charge of the entire department. For instance, Sales Manager, General Manager, and so on.
Investors: Investors are individuals or groups who put money into a company.

What are external stakeholders?

External stakeholders are individuals, groups, firms, and organizations who are not directly influenced by the business’s performance. These stakeholders may be interested in the organization’s performance and success, but they are not directly affected by it. They are also referred to as an organization’s secondary stakeholders.

The organization’s business environment is made up of these external parties. They use the company’s financial information and other publicly available information to learn about its profitability and performance.

External stakeholders are not involved in an organization’s day-to-day operations; however, organizational activities have an impact on them. They are unaware of the company’s internal issues and deal with them from the outside. Customers, raw material suppliers, clients, creditors, competitors, intermediaries, the general public, and the government are all examples of external stakeholders.

External Stakeholder Examples

Given below is a list of external stakeholder examples to understand the external stakeholder’s definition:

Suppliers: They provide the organization with inputs such as raw materials, equipment, and so on.
Customers: They are considered as the kings of business because they will be the ones to consume the product.
Creditors: They are the individual, bank, or financial institution that provides funds to the organization.
Clients: They are the people with whom the company does business and provides services.
Intermediaries: They are the marketing channels that connect the company to its customers, such as wholesalers, distributors, retailers, and so on.
Competitors: They are the competitors who compete with the organization for resources as well as the market.
Society: Because the enterprise uses valuable resources, a company has a social responsibility.
Government: A firm is guided and controlled by government rules and regulations, such as the requirement to pay taxes and duties levied on the business.

Difference Between Internal And External Stakeholders

The following are the major differences between internal and external stakeholders:

1. Meaning

Internal stakeholders are individuals or organizations with a vested interest in the organization and are directly affected by its activities. External stakeholders, on the other hand, are individuals, groups, or parties who are not directly affected by an organization’s success or failure.

2. Types of Influence

Organizational activities have a direct impact on internal stakeholders. External stakeholders, on the other hand, are not directly influenced by organizational activities.

3. What do stakeholders do?

Internal stakeholders provide services to the organization, whereas external stakeholders interact with it from the outside.

4. Available Information

Internal stakeholders are aware of the organization’s internal problems and issues. External stakeholders, on the other hand, are unaware of the internal issues. Rather, they use publicly available financial and other information for a variety of purposes.

5. Types of Stakeholders

Internal stakeholders are considered primary stakeholders, while external stakeholders are considered secondary stakeholders. Read more about different types of stakeholders.

6. Included Parties

A company’s internal stakeholders include its owners, managers, employees, and investors. Customers, competitors, suppliers, creditors, the general public, and the government are examples of external stakeholders.

Relationship between internal and external stakeholders

The supplier and client/owner relationship shows one of the major relationships between the internal and external stakeholders. Without clients, suppliers would have no project to work on. And vice versa, without suppliers, clients would not be able to deliver material to finish their project. All stakeholders have a specific working relationship with each other, regardless of whether they are internal or external stakeholders.

Conclusion

Every business operates in an environment, and that environment contains some factors. The company must deal with those factors and fulfil its responsibilities to them, such as paying fair wages to employees and not discriminating against them.

Similarly, it is the company’s responsibility to pay suppliers, deliver goods to customers, and pay taxes to local governments on time. They are the readers of the company’s financial statements, so the company must provide a true and fair view of its financial statements, as well as transparency in their accounts. The trade union includes both internal and external stakeholders.

Key Differences between internal and external stakeholders:

Internal Stakeholders are individuals or groups who work for a company and play an active role in the company’s management. External Stakeholders, on the other hand, are individuals or groups who are not employed by the organization but are concerned about its activities.
Internal Stakeholders are directly affected by the company’s activities because they are a part of the company, whereas External Stakeholders are not.
Internal stakeholders are able to get access to the company’s private matters. External stakeholders, on the other hand, are unaware of such matters.
Internal Stakeholders help the company, whereas External Stakeholders have an external relationship with the company.
The company employs internal Stakeholders, but external stakeholders are not.
Internal Stakeholders, on the other hand, are the primary stakeholders. Secondary stakeholders are external stakeholders.