What are External Stakeholders? Definition

If you’re new to the business world, you may have come across the term “external stakeholder” and wondered what it meant. In short, external stakeholders are people or organizations that are affected by the decisions and actions of a company but are not directly involved in its day-to-day operations. They can include customers, suppliers, government regulators, and even the community in which the company operates. In this article, we will explore the role of external stakeholders and how they can impact a business.

What are External Stakeholders?

External stakeholders are individuals or groups that are affected by the actions of a business but are not directly involved in its day-to-day operations. They can be either positive or negative in their impact on the company.

The most common examples of external stakeholders are creditors, investors, customers, suppliers, and the community at large. These stakeholders can have a significant influence on a company’s decision-making process and its overall performance.

Creditors are interested in getting their money back that they have loaned to the company plus any interest that is owed. They may be willing to work with the company if they feel it is in financial trouble, but they also have the option of foreclosing on the business if it cannot repay its debts.

Investors want to see a return on their investment, whether it is through dividends or an increase in the value of their shares. They may also be interested in having a say in how the company is run and what direction it takes.

Customers are vital to any business as they are the ones who purchase its products or services. A company needs to ensure that its customers are satisfied with what they receive and that they keep coming back for more.

Suppliers provide the raw materials or other inputs that a company needs to produce its goods or services. They may be willing to offer discounts or extended payment terms if they feel it will help secure their business with the company.

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Examples of External Stakeholders

There are many different types of external stakeholders, but some common examples include:

-Investors: Those who have invested money into the company, either through stocks or bonds. They are interested in seeing the company succeed and grow in value so that they can make a profit on their investment.

-Customers: Those who purchase the company’s products or services. They want to see high-quality products and good customer service from the company.

-Suppliers: Those who provide the raw materials or other supplies that the company needs to produce its products or services. They want to be paid on time and have a good relationship with the company.

-Government regulators: Federal, state, and local government agencies that regulate various aspects of the business. They want to make sure that the company is following all of the rules and regulations.

-The media: Newspapers, television stations, radio stations, and other media outlets that cover the company. They want to get accurate information about the company for their stories.

The Role of External Stakeholders

External stakeholders are individuals or groups that are outside of an organization but can still affect it. They can be customers, suppliers, investors, or even the general public. While they don’t have a direct relationship with the organization, their actions can still impact it.

Organizations need to manage their external stakeholders effectively in order to minimize any negative impacts and take advantage of any positive ones. For example, if a company is trying to launch a new product, they’ll need to make sure their customers are aware of it and will want to buy it. If they don’t do this, then the product launch could fail.

External stakeholders can also have a positive impact on an organization. For example, if there’s a lot of media coverage about a company’s new product, this can generate interest and excitement which could lead to increased sales.

It’s important for organizations to identify who their external stakeholders are and what their interests are. Once this has been done, they can then start to manage them accordingly.

How to Manage External Stakeholders

There are a few key things to keep in mind when it comes to managing external stakeholders:

1. Keep them updated: One of the most important things you can do is keep your external stakeholders updated on what’s going on with your project or organization. This way, they can provide input and feedback as needed, and feel like they’re involved in the process.

2. Get their input: Another important thing to do is get input from your external stakeholders on a regular basis. This helps ensure that they feel like their voices are being heard and that their perspectives are being considered.

3. Be responsive: It’s also important to be responsive to any questions or concerns that your external stakeholders may have. If you’re not able to address their issue immediately, let them know that you’re working on it and provide a timeline for when they can expect a resolution.

4. Be transparent: Lastly, it’s important to be transparent with your external stakeholders. This means being honest about any challenges or setbacks you may be facing, as well as sharing any successes or progress made.

Conclusion

In conclusion, external stakeholders are individuals or groups that are affected by the actions of a business, but are not directly involved in its day-to-day operations. While they may not have a direct say in how the company is run, they can still exert significant influence over its decision-making process. As such, it is important for businesses to identify and manage their external stakeholders effectively in order to minimize potential negative impacts on their operations.