Chapter 3, Problem 1UTC

Summary Introduction

To determine:

The difference between internal and external stakeholders.

Introduction:

Internal and external stakeholders

Every organization has stakeholders that can be classified as internal stakeholders and external stakeholders. Internal stakeholders are individuals or parties within the organization. Whereas, external stakeholders are individuals or parties that are outside the organization, which affect the business.

Internal stakeholders are also called primary stakeholders that provide direct services to the company. They are those parties that get directly affected by the business. They can influence and get influenced by the success and failure of the business. Without internal stakeholders the company will not be able to function.

External stakeholders are also called secondary stakeholders that do not participate in the day to day business of the organization. They are those parties that deal with the company externally without interfering in the business affairs and do not get directly affected by the business. They are not involved directly in the decision making.

Answer to Problem 1UTC

Solution:

Every company is a combination of both internal and external stakeholders. Internal stakeholders are involved in the company’s activities and have the influence to make the important decisions. However, external stakeholders are not involved in the company’s activities and have no influence to make business decisions.

Explanation of Solution

Given Information:

How would you explain the difference between internal and external stakeholders?

Differences between internal and external stakeholders are:

• Internal stakeholders are the individuals or parties employed by the organization that actively participates in the management of the company. Whereas, external stakeholders are the individual or partiesnot employed by the organization and they do not participate in the activities of the company.
• Internal stakeholders are involved in the day to day business of the company, whereas external shareholders deals with the company only externally.
• Internal stakeholders have a larger influence on the functioning of a company than external stakeholders.
• Internal stakeholder are called primary stakeholders that includesmanagers, employees, owners, board of directors, etc. whereas external stakeholders are called secondary stakeholders that includes society, government, suppliers, customers, etc.
• Internal stakeholders are employees of the company, whereas external stakeholders are not employees.
• Internal stakeholders have knowledge about the internal matters of a company, whereas external stakeholders have no idea about them.
• The activities of a company directly influence the internal stakeholders, whereas such activities do not directly influence theexternal stakeholders.