IB Business Management HLUnit 1.4 — StakeholdersPaper 1 & 2Core idea~10 min read
Who a Business Has to Answer To
No business gets to make decisions in private. Every choice it makes lands on somebody — a worker, a supplier, a neighbour, a tax office. Those people are its stakeholders, and once you can name them and say what each one wants, half the evaluation marks in Paper 1 and Paper 2 open up.
📘 What you need to know
A stakeholder is any person or group with an interest in a business, or affected by what it does.
Internal stakeholders are part of the organisation: employees, managers and directors, shareholders or owners.
External stakeholders sit outside it: customers, suppliers, government, the local community, pressure groups, banks and competitors.
Each group wants something different from the same firm, so their aims often pull in opposite directions.
Some stakeholders have real power over the firm; others only have interest. Saying which is which is where the analysis marks live.
Shareholder and stakeholder are different words. Every shareholder is a stakeholder, but almost no stakeholders are shareholders.
What a stakeholder actually is
The test is simple: if the business closed tomorrow, would this person or group notice? If yes, they are a stakeholder. That covers the obvious ones like staff and customers, but it also covers the newsagent next door who relies on your workers buying lunch, and the council that collects your business rates.
Notice that the definition does not require anyone to own anything. You do not need a share certificate to be a stakeholder. You just need to be affected.
Internal stakeholders are part of the organisation itself. External ones deal with it from outside. Get this split right and the rest of the topic falls into place.
Students often put suppliers in the internal column because the supplier is “involved” with the business. Involvement is not membership. A supplier has its own owners, its own staff and its own accounts. It is a separate business trading with yours, so it is external.
The internal stakeholders
These three groups are inside the firm, which means their fortunes are tied directly to how it performs.
Budgets to hit targets, authority, bonuses, career progress
Cost cuts to their department, interference from above
Shareholders and owners
Dividends, a rising share price, sound long-term decisions
Falling profit, risky spending, money kept back from them
Watch the split inside the firm: managers and shareholders are both internal, yet they frequently disagree. Managers are judged on this year’s results, shareholders on the value of the business over many years. That gap is a ready-made evaluation point.
The external stakeholders
External groups have no vote inside the business, but several of them can stop it functioning altogether.
Group
What they want
How they apply pressure
Customers
Good quality, fair price, honesty, reliable supply
Stop buying, complain publicly, switch to a rival
Suppliers
Regular orders, prompt payment, a long relationship
Raise prices, demand cash up front, refuse to deliver
Government
Tax paid, laws obeyed, employment created
Fines, inspections, new regulation, court action
Local community
Jobs, low pollution, little traffic and noise
Object to planning permission, campaign locally
Banks and creditors
Repayment on time, low risk of default
Refuse to lend, raise interest, call in the loan
Pressure groups
A change in behaviour on one specific issue
Media campaigns, boycotts, protests at premises
Competitors are a slightly odd case. They are affected by what your firm does, so most textbooks list them as external stakeholders, but they want you to do worse, not better. If you mention them, say that clearly — it shows you understand the definition rather than reciting a list.
Not everyone who cares has power
A firm cannot give every group everything it wants, so it has to prioritise. The useful question is not “who cares about this decision?” but “who cares and can do something about it?” A single unhappy customer has interest but almost no power. A bank that is owed two million has enormous power and will use it.
The IB does not ask you to name this grid, but it does reward answers that say which stakeholder matters most and why. This is the thinking behind that judgement.
🧩 How to use stakeholders in an evaluation question
Name two or three groups only, taken from the case study rather than from memory.
Say what each one actually wants in this specific situation, not in general.
Rank them. Which group can hurt the firm most if ignored?
Judge on that ranking. “The decision is justified because it protects the group the firm cannot afford to lose” is a proper conclusion.
Add a time frame. Upsetting staff may be survivable this month and fatal next year.
Shareholder and stakeholder are not the same word
A shareholder has bought part of a company and owns a slice of it. A stakeholder simply has something at stake. Every shareholder is therefore a stakeholder, but the reverse is almost never true — your customers, your cleaner’s employment agency and your local council all have stakes and own nothing.
The relationship
all shareholders are stakeholders, but most stakeholders are not shareholders
The confusion matters because the two words point at different priorities. “Shareholder value” means running the firm to make owners richer. “Stakeholder value” means balancing the owners against everyone else. Firms genuinely disagree about which they follow, and that disagreement is examinable.
EXAM-STYLE
Distinguish between internal and external stakeholders of a supermarket chain. [4]
Define the split
Internal stakeholders belong to the organisation; external ones are affected by it from outside.
Internal, applied to the supermarket
Shelf staff and store managers are employed by the chain, and shareholders own it. Their income depends on the firm trading well.
External, applied to the supermarket
Farmers who supply produce, shoppers, and the council granting planning permission all deal with the chain from outside it.
The difference is membership of the organisation, not how close the contact isa daily delivery driver from a haulage firm is still external
EXAM-STYLE
Explain why a firm might prioritise one stakeholder group over another. [6]
A bakery chain is deciding whether to close two loss-making branches.
Resources are limited
It cannot keep the branches open, protect the jobs and still pay a dividend, so somebody loses.
Power decides the ordershareholders can replace the directors → their view carries most weightthe affected staff have high interest but very little formal power.Survival comes before preference
If losses continue, every stakeholder loses, so protecting the firm’s finances can be defended even by those it hurts.
But the ranking is not permanent
Poor treatment of staff damages recruitment and service quality, which eventually reaches the customer and the shareholder.
Firms prioritise the group whose withdrawal would do the most immediate damage
💡 Exam tip
Always use the case study’s stakeholders, by name. Generic lists of six groups score badly.
Two groups analysed properly beat six groups mentioned in passing.
Say who has power, not just who is affected. That single sentence lifts an answer from description to analysis.
Watch the command word. “Identify” wants a name; “explain” wants the mechanism; “discuss” wants both sides plus a judgement.
Employees are internal even though they do not own the business. Ownership is not the test.
If the question mentions a decision, always ask who gains and who loses from that exact decision.
⚠ Common mix-up
Shareholder is not a synonym for stakeholder. Marking a wrong word here can cost the definition mark outright.
Suppliers are external, however closely they work with the firm.
Managers are internal stakeholders too, and they do not automatically want the same thing as owners.
Being affected is enough. A stakeholder does not have to be involved in decisions or own anything.
Pressure groups are stakeholders, even though the firm never chose to deal with them.
Interest and power are different things. Loud does not mean powerful.
Up next: When Stakeholder Interests Pull Apart — now that you can name the groups, we look at what happens when two of them want opposite things from the same decision, and how firms actually settle it.
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