What Is a Stakeholder In Business

What Is a Stakeholder In Business

Are you new in business and wondering what or who a stakeholder is? Not to worry. Briefly, you will learn everything you need to know about stakeholders in businesses.

What Is a Stakeholder? – What Is a Stakeholder in Business

A stakeholder is an individual or group invested and interested in the growth and success of a company or organization.

Often, the investment made by stakeholders is financial, while some might be more than financial investment.

Every action a business takes can affect or can be affected by its stakeholders.

So, companies should consider their decisions, goals, and results from various stakeholder perspectives to ensure that every interest is respected.

Stakeholders can directly influence business success and decisions by:

  • Providing their feedback and suggestions
  • Being constantly loyal and participating in the business processes and operation
  • Decreasing or increasing financial investments
  • Making decisions or taking positions that are against companies’ strategy and goals

In other words, a stakeholder can either make or mar a business.

Therefore, businesses have to be careful in dealing with them.

Types of Stakeholders in Business – What Is a Stakeholder in Business

In business, there are different stakeholders.

These stakeholders are categorized into two groups: internal and external stakeholders.

The different contributors in your business have different and unique needs that business owners have to meet.

Understanding the different stakeholders will help you know how to prioritize them, meet their needs, and achieve your company’s goals.

Internal Stakeholders – What Is a Stakeholder in Business

Internal stakeholders are individuals or groups that are financially or directly part of a company’s operations.

When the business is successful, they gain monetarily.

The following are some of the stakeholders categorized in this group.


These are individuals hired by companies as instrumental assets in performing tasks that will result in the production of services.

Employees are directly involved in the daily activities of a business.

Their investments in a company are their effort and time.

They contribute to the business’s success and growth in exchange for benefits, compensation, personal development, and training.

The company’s success determines the employees’ payment and sustained employment.

So, you can say their stake in a business is their safety and income.

Employees’ satisfaction can influence their productivity and efficiency.

This can, in turn, affect general output, business success, and also other stakeholders’ satisfaction.

So, companies and organizations are advised to ask their employees for feedback about their satisfaction with their roles, work-life balance, work environment, and other factors.

Not only that, but they should also pay attention to dissatisfied employees and endeavour to resolve their dissatisfaction.

Owners – What Is a Stakeholder in Business

Business owners often have full rights over their businesses and their properties.

Therefore, they fully own the services and products.

So, they make strategies and plans that will enable them to achieve and surpass the sales goals of their services and products.

These stakeholders are often directly in charge of their business success.

Their employees take actions based on the owners’ plans to generate results.


Managers are also employees.

However, managers are those employees that are appointed or employed to oversee the other employees in their department.

They are the ones who execute the strategies, tactics, and plans of the owners by delegating tasks to employees under them and supervising them.

Generally, managers ensure that tasks are completed, and employees meet the company’s objectives.

External Stakeholders – What Is a Stakeholder in Business

External stakeholders are individuals or groups that companies recognize.

They also have the power to make decisions that affect companies’ operations.

These stakeholders’ actions directly impact the businesses based on their relationship with the business.

The following are the stakeholders that fall under this category.


Customers are the heart of every business.

They purchase and use the services and products of a company.

Different departments, such as public relations, marketing, and sales, are centred on customers or clients.

Further, customers’ interest is what business capitalizes on to create strategies to make them buy their products and services.

This is because customers’ patronage significantly affects business growth and success.

Therefore, their satisfaction directly influences the satisfaction of internal stakeholders.

Suppliers – What Is a Stakeholder in Business

Vendors and suppliers sell goods or offer services to businesses and depend on that to generate revenue and income.

Apart from seeking their means of generating revenue, suppliers are affected by the operations of the business they are concerned with their safety.

If businesses don’t use their products well, sustaining good credibility for their products can affect their reputation and growth.

Furthermore, suppliers’ actions also directly affect businesses.

For example, if a business is supplied with poor materials for their good production, they will make low-quality products which will affect their credibility.

It can be considered a relationship where one party can lose while the other win or both parties lose or win together.


In every location where a business operates, there is a ruling force: the government.

The government collect taxes from companies’ revenue and even from employees’ income.

Furthermore, it enforces laws and regulations that guide different businesses and labour forces to ensure the safety of employees in companies.

Additionally, it sets laws and regulations on businesses’ financial systems to protect consumers.

More so, businesses are required to abide by local, state, and federal laws and regulations guiding their business processes.

As a result, this makes the government a vital external stakeholder in a company’s success.

Adhering to the regulations and cooperating with government agencies will help to build a good relationship with your government.

It will also help you avoid unnecessary setbacks in your business.

Communities – What Is a Stakeholder in Business

Wherever your business is located, people live around or near there.

These people make up a community and are considered stakeholders in your business.

This is because their opinion of your company’s structure, services, and adherence to government regulations, such as environmental regulation, can influence your company’s operation.

Hence, building good relationships with the communities around your business will ensure the satisfaction of internal and external stakeholders.

Additionally, the type of relationship you have with the community surrounding your business can determine if they patronize your business and contribute to its financial success.

Trade unions

Several organizations and industries work with trade unions that legally represent organisations’ workers with different issues, such as appropriate working conditions and benefits.

The employees pay these unions union dues or fees to get them to represent them.

When changes to companies’ policies or regulations affect the employees negatively, the trade union steps in on their behalf to negotiate better terms.

In a nutshell, trade unions represent employees in different industries.

Hence, their satisfaction or dissatisfaction can significantly impact your business.  

This is why mutual understanding is essential to work effectively with trade unions.

Creditors – What Is a Stakeholder in Business

Creditors of businesses are individual and non-governmental and governmental agencies that loan businesses with service, property, or capital to operate.

They are classified into two categories:

  • Secured creditors: these are organizations that gain legal benefits of collateral when a business fails to pay back
  • Unsecured creditors: these are customers, contractors, or suppliers that lend business with capital without requiring collateral they can gain when the company fails to pay back

Paying back creditors is important in developing positive, strong relationships with them.

When you have a reputation for not paying back, your business will suffer.

Creditors will not be willing to give you a loan when you need it, and you might go into bad debt and see your business go bankrupt.


Shareholders are individuals or groups that own stocks in a company or organization.

Most are external individuals and groups, such as people in communities, customers and investors.

When shareholders have several shares or equity in a business, they have the power to make decisions and take actions for the company.

These decisions can include strategies, staffing, finances, and others.

So, shareholders’ opinions can influence the strategies the owner makes and the audiences the business focuses on.

Thus, building strong relationships with your shareholders will help increase their interest in seeing the growth and success of the business.

Stakeholder versus Shareholder – What Is a Stakeholder in Business

Shareholders are often confused with stakeholders.

However, they are not the same.

The term “shareholder” refers to individuals or groups with stocks in a business.

They are a type of stakeholder.

The following are factors that differentiate a shareholder from a stakeholder.

Different Priorities

Shareholders’ interest in business is to gain returns from their financial investments.

Therefore, their main priority in business is to bolster stock prices and overall revenue.

Meanwhile, stakeholders encompass the different types of people who connect to a business’s operation, growth, and success.

These people or groups have different priorities.

For example, employees’ priorities are to get income, benefits, and employee safety, while owners’ priorities are to grow their businesses and achieve business success.

Customers’ priorities are to get the best services and products from the business they patronize.

Different Timeframe

Another difference between stakeholders and shareholder is their different timeframes for attaining their objectives.

Shareholders are only companies’ part-owners when they have stock in that company.

As a result, their goals in the company are usually short-termed and connected to the company’s share price.

They are not often bothered about the long-term goals or success of the business.

They can decide to sell their stocks in your company and move on to another company to buy shares.

Meanwhile, other stakeholders are interested in the companies’ long-term success and goals.

They want your business to do well generally.

Employees stay in companies that pay well and provide opportunities to improve.

When your company can do that, they work effortlessly for its general growth and success.

Customers will keep patronizing businesses that effectively serve and satisfy them, and suppliers will build and sustain good relationships with companies and continue profiting from them for a long time.

So, although shareholder is a type of stakeholder, they are not the same.

Importance of Stakeholders in Business – What Is a Stakeholder in Business

You cannot run your business or do any project without stakeholders.

As a business owner, you are a stakeholder.

However, you alone cannot do everything needed to run a business.

You need employees and managers to oversee the affairs of your business and work towards your business’s success and goals.

Even if you have employees, you cannot achieve anything in your business if you don’t have customers or clients.

You also need suppliers, shareholders, and government agencies; even if you might not think so, you need trade unions and communities.

Every stakeholder has a stake in your business’s success.

So, every one of them is essential.

Building a good relationship and engaging them will help you get the best out of them.

What Is Stakeholder Engagement? – What Is a Stakeholder in Business

Stakeholder engagement is the process companies can follow to effectively listen to, inform, or collaborate (or all three) with their stakeholders.

To effectively decide on the best strategy to engage your stakeholders, you will need to identify, map and prioritize your stakeholder.

This process helps companies to know their stakeholder better.

Benefits of Engaging Stakeholders – What Is a Stakeholder in Business

 If you practice stakeholder engagement, you will practically consider the desires and needs of all your stakeholders.

When you effectively practice stakeholder engagement, here are some benefits you will enjoy:

Better Relationship

When your stakeholders are engaged, they will know about relevant things, and you will meet their needs.

This will show them that you have their best interest in mind.

As a result, it will help to foster a trusting relationship, better connection, and confidence in your business processes and operations.

Good relationships with your stakeholders are very important as they will make you win them over to contribute their best to your business’s growth and success.

Competitive Advantage 

One aspect of engaging your stakeholders is that you get to communicate with them directly.

Doing this will help you learn and know their perspectives and ideas, which you can use creatively to improve your business.

For example, getting valuable customer feedback will help you know where and how to better your services and products.

You can also get new insights to help you gain achieve business success.

Risk Management

When effectively done, stakeholder engagement will help you mitigate potential conflicts and risks, such as dissatisfaction, misalignment, and uncertainty with your different stakeholder groups.

Your shareholders will be willing to contribute as best as they can when engaged.

As a result, some of them will help you point out potential risks that could threaten your project, operation, or business success.

This will help save your resources and wasted time trying to resolve those risk issues.

Improved Decision-making – What Is a Stakeholder in Business

Information gathered helps in making the finest decision.

With your stakeholders engaged, they will provide you with their unbiased opinions, views, and information.

So, whenever you want to make decisions, you can easily get information from the relevant stakeholders and avoid making costly mistakes.

In other words, engaging your stakeholder will help to improve your decision-making.

Financial Support

Stakeholders can provide you with financial support while protecting your company’s interest.

For example, your shareholders can utilize their influence, such as wealth or connection, to stop things that can negatively impact your business.

Your stakeholders can also help you financially when you cannot afford something.

For instance, if you don’t have money to purchase the goods you need, your supplier can agree to give you without making payment and receive their payment later.

You can only enjoy this benefit when you engage your stakeholders and build good relationships with them.

Cost Saving – What Is a Stakeholder in Business

Another benefit of engaging your stakeholders is that you will save more money and time.

This is because your stakeholders will be on board with everything you do and contribute their best.

They will save you from potential risks, provide financial support, and give constructive feedback.

As a result, you will find it easier to finish your projects on budget and on time.

Conclusion on What Is a Stakeholder in Business

In sum, a stakeholder in a business is an individual or group interested in your business’s growth and success for personal reasons.

They include you as a business owner, your employees, customers, shareholders, distributors, communities, government, and trade unions.

Without these individuals or groups, your business will not exist.

They have the power to either make or mar your business.

So, you need to ensure that you win them over to your side.

To do this, you have to foster good relationships with them, understand them, and keep them engaged in your business.