IB Business Management SLTopic 1 — StakeholdersPaper 1 & 2Core idea~9 min read
Who a Business Has to Answer To
A business is surrounded by people who care what it does — some inside the building, most outside it. Learn who they are and what each one wants, and you have a ready-made structure for almost every long answer in this course.
📘 What you need to know
A stakeholder is any individual or group that affects the business or is affected by it.
Internal stakeholders are inside the organisation: employees, managers and directors, and the owners.
External stakeholders are outside it: customers, shareholders, suppliers and creditors, the local community, government and pressure groups.
Each group has its own objective, and those objectives are the reason conflict happens.
Some people wear two hats — an employee who owns shares is internal and external at the same time.
A business that ignores its stakeholders may survive a year. It rarely survives a decade.
The basic idea
Think about a bakery on your street. The owner cares about it. So do the four people who work there, the flour supplier who is owed money, the neighbours who smell the ovens at 5am, the council that inspects the kitchen, and every customer who has a favourite order. None of them run the bakery. All of them have a stake in it.
Definition
Stakeholder = anyone who affects, or is affected by, the actions of a business
Shareholders are usually classed as external, because owning shares does not mean working in the business. Keep that in mind when you sort a list under exam pressure.
Internal stakeholders and what they want
Stakeholder
What they want
What that looks like
Owners
An income from the business and a share of the profit, plus long-term success
The owner of a small building firm wants a steady wage now and a business worth handing on later
Employees
Fair pay, job security, safe conditions and a chance to progress
Staff push for a pay rise that keeps up with prices, and for training that improves their prospects
Managers and directors
To hit the company’s targets, since their bonuses and jobs depend on it
A restaurant manager cuts waste and raises covers per night to improve efficiency
Owners are worth a second look, because the word covers very different people. A sole trader owns and works in the business, so their income and their profit are the same thing. A shareholder in a large company may never have set foot in the building.
External stakeholders and what they want
Stakeholder
What they want
What that looks like
Customers
Good quality at a fair price, and problems dealt with quickly
Shoppers expect a faulty item to be replaced without an argument
Shareholders
The best possible return on the money they invested
Investors push for new products and rising sales, because those lift the share price
Suppliers and creditors
To be paid in full and on time, and ideally a long-term contract
A supplier accepts a lower price for a guaranteed order every week, because certainty is worth money
Local community
Jobs, a business that is not a nuisance, and support for local causes
Residents want the delivery lorries kept off residential streets at night
Government
Tax paid, laws obeyed, jobs created
Inspectors check safety standards and expect environmental rules to be met
Pressure groups
The business to change one specific behaviour
A campaign group pushes a clothing brand to stop using a particular material
Do not stop at naming a stakeholder. The mark is in the objective. “Suppliers” scores nothing; “suppliers want to be paid on time so their own cash flow works” scores properly.
The two-hat problem
The internal and external boxes are useful, and they leak. Employees and managers often own shares in the company they work for, which puts them on both sides of the line at once. The local community usually contains people who work for the business. The same person can be a customer and a neighbour.
Wearing two hats makes stakeholder needs harder to read, so businesses have to listen carefully rather than assume what a group wants.
Why this matters for marks. If a case study says employees hold shares, that is not decoration. It changes how they will vote, how they react to a pay freeze, and how the business should communicate with them.
Worked examples
WORKED EXAMPLE
Define the term internal stakeholder. [2]
Definition then exampleAn internal stakeholder is an individual or group inside the business who affects it or is affected by its actions,such as employees, managers or the owners.2 marksOne accurate example is usually enough for the second mark. Do not list six.
WORKED EXAMPLE
Identify two external stakeholders of a supermarket and explain one objective of each. [4]
Stakeholder 1 — suppliersFarmers supplying the supermarket want to be paid promptly and in full, because late payment damages their own cash flow and can put them out of business.
Stakeholder 2 — the local communityResidents near a new store want jobs without extra traffic and noise, so they will press for delivery times to be restricted.
4 marks
WORKED EXAMPLE
Explain why the objectives of managers and employees are not always the same. [4]
Point — they are judged on different thingsManagers are measured on hitting company targets, so they want costs down and output up.Develop — the cost being cut is often the wage bill
Employees want pay, security and safe conditions, so a manager cutting labour costs is working directly against what the workers want, even though both people work for the same firm.
4 marksThis is the doorway into the next page. Conflict is not bad management — it is built into the structure.
💡 Exam tip
Name the stakeholder from the stimulus, not a generic list. “The 200 workers at the Leeds plant” beats “employees”.
Every stakeholder point needs an objective attached. Group plus want plus because.
Sort internal and external correctly. Shareholders are external; managers are internal. It is a cheap mark to lose.
Use stakeholders as a plan for any “evaluate this decision” question: winners, losers, then judgement.
Watch for people with two roles in the case study. Spotting them is a quick way to show depth.
⚠ Common mix-up
Stakeholders are not shareholders. Shareholders are one type of stakeholder. Mixing the words up costs marks instantly.
Customers are external, however loyal they are.
Not all stakeholders matter equally. Power and interest vary enormously, which is the whole of the next page.
Employees are not just a cost. They are a stakeholder group with objectives of their own.
Government is a stakeholder, not just a rule-maker. It wants tax and jobs from the business.
Up next: When Stakeholder Interests Pull Apart — what a business does when two groups want opposite things and only one of them can be satisfied.
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