Stakeholders (AQA A Level Business): Revision Note
Syllabus Edition
First teaching 2026
First exams 2028
Exam code: 7132
Introduction to stakeholders
A stakeholder is any individual or group with an interest in, or who is affected by, the activities of a business
Internal stakeholders | External stakeholders |
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Stakeholders have different objectives, meaning what they want from the business, and these can sometimes conflict with each other
Internal stakeholders
Internal stakeholders are individuals who are directly involved in the day-to-day running of the business
Their decisions, skills and efforts directly shape business performance
Without motivated, well-managed internal stakeholders, a business is unlikely to achieve its objectives
Employees
Employees want fair pay, job security, safe working conditions and opportunities for career development
They are directly affected by business decisions such as redundancies, pay freezes and changes to working practices
Employees often have a strong personal stake in the success or failure of the business
Managers
Managers want job security, career progression and recognition for their performance
This may be in the form of pay increases or performance-related bonuses
They are responsible for making day-to-day decisions that affect all other stakeholder groups
They may have different priorities from owners and shareholders
For example, managers may prefer lower-risk strategies while shareholders push for higher returns
Owners and shareholders
Owners want the business to be profitable and to grow in value over time
Shareholders (in limited companies) typically want regular dividends as a return on their investment and rising share prices that increase the value of their investment
Both groups expect the business to be managed honestly and in their long-term interests
Case Study
Internal stakeholders at Thornfield Bakeries
Thornfield Bakeries is a fast-growing chain of twelve artisan bakeries based in Yorkshire. After a strong year of sales, its founder and sole shareholder, Petra Thornfield, announces she wants to reinvest all profits into opening five new sites rather than paying bonuses to staff.
This decision reveals the very different interests of the business's internal stakeholders
Petra, the owner, wants rapid growth and a more valuable business. She sees reinvestment as the only logical use of profits
Store managers have driven sales all year and expected performance bonuses. They feel undervalued and are considering their options elsewhere
Employees are worried that expansion will bring longer hours and greater pressure with no increase in pay
Petra's plan may be good for long-term growth, but it risks losing the very people who made that growth possible.
External stakeholders
External stakeholders are individuals and groups outside the business who are affected by its decisions and activities
They are important because their actions and attitudes can significantly influence a business's success
Customers choose whether to buy
Suppliers choose whether to trade
Governments choose whether to regulate
Customers
Customers want good-quality products and services at fair, competitive prices
They expect honest marketing, clear product information and reliable after-sales service
They may take their custom elsewhere if a business behaves unethically or repeatedly disappoints
Suppliers
Suppliers want prompt payment and long-term, stable contracts that give them financial security
They need the business to remain financially healthy so that orders continue to come in regularly
Other creditors
Creditors such as banks and lenders want loan repayments and interest to be paid in full and on time
They are at financial risk if the business performs poorly or becomes insolvent
The local community
Local communities want businesses that operate nearby to provide employment and contribute positively to the local economy
They want businesses to minimise negative impacts such as noise, pollution, traffic and environmental damage
Government
The government wants businesses to pay taxes honestly and comply with employment, health and safety and environmental laws
It wants businesses to create jobs and drive economic growth
A range of regulatory bodies - such as the Competition and Markets Authority and the Environment Agency - oversee specific areas of business activity
Case Study
External stakeholders at Harwick Foods Ltd
Harwick Foods Ltd is a ready meal manufacturer based in Lincolnshire
When it announced plans to build a large new production facility on the outskirts of town, its external stakeholders reacted very differently
Customers were pleased that greater capacity would bring lower prices and a wider product range on supermarket shelves
Suppliers were excited about larger, more regular ingredient orders and the prospect of long-term contracts
The local community was concerned about increased lorry traffic, noise during construction and the impact on local air quality
The local council was broadly supportive, as the new site would create around 200 jobs and generate significant business rates income
Its bank, its major creditor, was cautious - it agreed a £3m loan but wanted reassurance that rising sales would cover repayments
Harwick Foods Ltd needed to manage each group carefully - a decision that satisfies one stakeholder could easily come at the expense of another
Business activity and stakeholders
Business decisions rarely benefit all stakeholders equally
Different groups frequently have conflicting interests
Examples of stakeholder conflict
Shareholders vs employees
Cutting wages increases profit for shareholders but reduces the income of employees
Business vs community
Expanding production may create local jobs but also increase noise and pollution
Owners vs suppliers
Delaying payment improves the business's cash flow but causes financial difficulties for the supplier
Shareholders vs customers
Raising prices improves profit margins but makes products less affordable for customers
Businesses must try to consider and balance competing stakeholder interests when they make plans
In practice, some groups have more power and influence than others
Ethics and stakeholders
A business's ethical responsibilities go beyond simply following the law
They reflect the values and principles it actively chooses to uphold
Key responsibilities to stakeholder groups
Employees
Paying fair wages
Maintaining safe working conditions
Respecting equality and diversity
Customers
Providing safe products
Avoiding misleading advertising
Protecting customer data
Suppliers
Negotiating fair contract terms
Paying invoices promptly
Community
Minimising environmental harm
Supporting local initiatives
Government
Paying the correct amount of tax
Complying fully with regulations
Businesses that act ethically tend to build stronger reputations, attract loyal customers and find it easier to recruit and keep talented staff
However, acting ethically can increase costs and may reduce profit in the short term
This creates a tension between ethical behaviour and financial objectives
Case Study
Clearbrook Water is a bottled water company based in the Lake District
Under pressure to cut costs and compete with cheaper rivals, the business has chosen to build its reputation on ethical principles instead
Employees
All staff, including seasonal workers, are paid above the Living Wage and have access to mental health support
Customers
Clearbrook uses only biodegradable packaging and avoids health claims in its advertising that it cannot substantiate
Suppliers
Water rights are leased on fair, long-term contracts and all invoices are paid within 14 days
Community
The company funds local conservation projects and voluntarily offsets its carbon emissions
Government
Clearbrook pays its full tax liability and publicly discloses its tax contribution each year
The outcome
Clearbrook has a loyal customer base and a strong brand reputation
However, profit margins remain tight as cheaper rivals continue to undercut its prices
For the owners, doing the right thing comes at a very real financial cost
Examiner Tips and Tricks
When answering questions about business ethics, avoid stating that a business "has to" act ethically - ethical behaviour goes beyond legal requirements and is a choice the business makes. In evaluation questions, you can score highly by weighing the long-term benefits of ethical behaviour (stronger reputation, customer loyalty, easier recruitment) against the short-term costs (higher expenses, lower profit margins).
Always apply your answer to the specific business in the case study - consider which stakeholder groups are most affected and whether the business is likely to prioritise ethics over profit, given its size, objectives and financial position
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