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1.1

Outline the key internal and external stakeholders in a business and demonstrate their importance in the business environment

Outline / Demonstrate

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OUTLINE The specification defines this as: give the main points; restrict to essential points of information. For stakeholders, a good approach is to name each one, briefly state their role, and note their importance — 2 to 3 points per stakeholder is sufficient.

DEMONSTRATE The specification defines this as: prove or make clear by reasoning or evidence, illustrating with examples or practical application. A good approach is to use real Irish business examples to show why each stakeholder matters in practice.

Internal stakeholders — directly involved in running the business

Stakeholder	Role	Importance	Needs & Wants
Business Owner	Spots the gap, accesses capital, takes personal and financial risk to start the business hoping to earn a profit.	Without them the idea would never become a reality; they provide the initiative to raise investment and drive the business.	Personal and financial success through recognition, achievement, and profit.
Managers	Set goals and strategies based on the owner's objectives, then organise the resources of the business to carry them out.	They control day-to-day operations and long-term planning, translating the owner's vision into action.	Career progression, autonomy, clear goals, and recognition for performance.
Employees	Carry out managers' instructions, contribute ideas, and apply their skills to help the business meet its objectives.	Provide the time, skills, experience, and qualifications needed to produce goods and serve customers.	Fair wages, good working conditions, job security, training, and development opportunities.
Investors	Provide financial support in exchange for ownership (equity) or a return on their investment.	Help the business expand, fund innovation, and often bring valuable experience and networks.	At start-up, they want growth. As the business matures, they seek dividends and may prefer lower risk.

External stakeholders — not directly involved but affected by the business

Stakeholder	Role	Importance	Needs & Wants
Consumers	Purchase goods or services, provide feedback, and can act as advocates on social media.	Drive revenue through sales; influence brand reputation; repeat purchases build long-term income.	Quality products at fair prices, excellent customer service, and increasingly ethical and sustainable practices.
Suppliers	Provide raw materials, products, or services needed by the business.	Reliable suppliers ensure consistent production and service delivery; without them the business cannot operate.	Invoices paid on time, longer-term contracts for their own financial stability. E.g. McDonald's uses 100% Irish beef from Irish farms.
Local Community	The area and people surrounding and interacting with the business.	A supportive community fosters goodwill and provides potential customers and employees.	Local job creation, a necessary good or service, environmental responsibility, and ethical practices. E.g. Lidl created 30 new jobs in Carrigtwohill in 2024.
Government	Regulates and oversees business activities; offers grants and incentives through state agencies.	Can provide mentoring, training, and funding through agencies like Enterprise Ireland and LEOs.	Tax compliance, job creation, environmental responsibility, and adherence to employment law.
Interest Groups	Represent the common viewpoints, objectives, and goals of a group of stakeholders.	Help in negotiating or informing businesses what members want, which can prevent or resolve conflict.	Their members' interests are advanced through lobbying, negotiation, or public campaigns.

1.2

Demonstrate how stakeholders interact and identify potential conflict between stakeholders

Demonstrate / Identify

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DEMONSTRATE The specification defines this as: prove or make clear by reasoning or evidence, illustrating with examples or practical application. A good approach is to name both stakeholders involved in the relationship or conflict, explain how they interact, and use a real example to show it in practice.

Two types of stakeholder relationship

Co-operative Relationship

A win-win situation where both parties work towards a common goal and both benefit from the interaction.

E.g. An employer and employee have a co-operative relationship when the employer invests in training — the employee gains skills and promotion prospects; the employer gains a more productive workforce.

E.g. A supplier and manager who agree on bulk discounts: the supplier increases sales volume while the business reduces its cost per unit.

Competitive Relationship

A win-lose situation where one party benefits at the expense of the other. Conflict arises when the needs and wants of different stakeholders directly clash.

E.g. A supplier wants payment immediately; the business owner wants to delay payment until sales improve. One party's preference prevents the other's need from being met.

Common conflicts between stakeholders

Employees vs Employers

Employees may want higher wages, better working conditions, or shorter hours. Employers may want to keep labour costs low and hours flexible to maximise productivity and profit.

E.g. A dispute over a pay rise where employees want 10% but the employer offers only 2%.

Investors vs Business Owner

Investors may want profits distributed as dividends to get a return on their investment. The business owner may want to reinvest all profits to grow the business further.

E.g. In a business with €100,000 profit, the investor wants a dividend while the owner wants to reinvest. A negotiated 50/50 split may resolve this.

Government vs Business Owner

The government may want businesses to pay more tax, follow stricter environmental regulations, or improve employee conditions. Business owners may see these requirements as increasing costs and reducing profitability.

E.g. A business resists a new environmental regulation that requires expensive equipment upgrades.

Consumers vs Business Owner

Consumers want the highest quality at the lowest possible price. Business owners want to maximise profit margins, which may mean keeping prices high or reducing quality to cut costs.

E.g. A concert promoter increasing ticket prices significantly for a high-demand event, frustrating loyal fans.

1.3

Suggest appropriate ways of avoiding and resolving conflict between stakeholders

Suggest

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SUGGEST The specification defines this as: propose solution(s), hypothesis, or other possible answer(s). A good approach is to name the method, explain how it works, and clearly link it to a stakeholder or scenario. Giving a real example strengthens the answer by showing the method in practice.

Three ways to avoid conflict

Regular and Honest Communication

Open lines of dialogue help businesses understand stakeholder concerns and expectations before they become disputes. Listening and responding promptly prevents issues from escalating.

E.g. A business promises on its website to respond to all consumer complaints within 24 hours, showing it takes feedback seriously.

Good Corporate Social Responsibility (CSR)

Adopting ethical practices that balance profitability with societal benefits reduces the risk of conflict with employees, consumers, and the community. A business that acts responsibly builds trust.

E.g. A business paying fair wages and maintaining good working conditions is less likely to face disputes with staff.

Stakeholder Engagement Plans

Developing plans to actively involve stakeholders in decision-making gives them a voice and reduces the likelihood of opposition or conflict after decisions are made.

E.g. A construction company consults the local community before submitting a planning application, addressing concerns in advance.

Five ways to resolve conflict

Meet & Talk

The parties meet directly to discuss, clarify, and communicate the issues. E.g. A shop steward meets management to discuss a grievance.

Negotiation

Both parties bargain and make counter-offers, each giving something up to reach a compromise. E.g. A pay dispute settled at 5% when one party wanted 10% and the other offered 2%.

Mediation

An unbiased third party facilitates discussion but does NOT offer solutions or impose a decision — the parties must reach their own agreement. Focus is on communication.

Conciliation

Similar to mediation, but the conciliator may suggest possible options to guide the parties. The parties still decide the outcome themselves voluntarily.

Arbitration

An independent third party hears both sides and issues a formal recommendation. This can be binding (agreed in advance to accept) or non-binding.

1.4

Conduct stakeholder mapping and explain the importance of prioritising different stakeholder interests

Conduct / Explain

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CONDUCT The specification defines this as: perform an activity. A good approach is to place stakeholders correctly on the power-interest grid and explain why each one belongs in that quadrant by identifying their level of power and interest in the scenario.

The Power-Interest Grid

↑ Power / Influence

High Power, Low Interest

Keep Satisfied

E.g. Local government (can grant planning permission but not deeply invested in day-to-day decisions)

High Power, High Interest

Manage Closely

E.g. Investors (provide funding and their return depends on business performance)

Low Power, Low Interest

Monitor

E.g. General public or employees not directly affected by a specific decision

Low Power, High Interest

Keep Informed

E.g. Consumers / Employees whose jobs or buying habits are affected but who cannot reverse the decision

Low Interest

→ Interest

High Interest

Steps in stakeholder mapping

Step 1: Brainstorm to Identify Stakeholders

Sit down and list all individuals and groups affected by the business or decision — both internal and external. Think broadly: who has an interest or could be impacted?

Step 2: Assess Power and Interest

For each stakeholder, determine their ability to influence the business (power) and how much they care about the outcome (interest). This reveals who needs the most attention and who can be monitored.

Step 3: Map Stakeholders to the Grid

Place each stakeholder in the correct quadrant of the power-interest grid based on the assessment. This visual map guides how the business communicates with and manages each group.

Step 4: Allocate Resources Accordingly

Focus time, staff, and communication on the stakeholders with the most significant influence. Create engagement strategies for each group — how often to communicate, how to seek feedback, and how to satisfy their interests.

Why stakeholder mapping matters

Helps Allocate Resources Effectively

A business can put its staff, time, and money into keeping the most important stakeholders satisfied. This is a more efficient use of resources than treating all stakeholders the same — stakeholders with high interest will be communicated with more frequently, building stronger relationships.

Encourages Proactive Conflict Resolution

By engaging with key stakeholders early, seeking their feedback, and communicating openly, a business builds positive relationships that reduce the chances of future conflict.

E.g. A new business engaging with the local community around a planning application can address concerns before they become formal objections.

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Choose a learning outcome to quiz yourself on, or quiz all four at once.

Chapter 1 appeared in three of the four sample papers. LO 1.1 was examined at OL Paper 2 (list stakeholders of PJ's business) and HL Paper 1 (outline Gráinne's relationship with her suppliers). LOs 1.2 and 1.3 were not directly examined in isolation but underpin many other exam questions. LO 1.4 was examined at HL Paper 2 (conduct stakeholder mapping for John and Mark's plant-based menu decision).

1.1 List three stakeholders impacted by the recent growth of PJ's business OL Paper 2 · Q1(a) ▼

Question asked

List three stakeholders that may be impacted by the recent growth of PJ's business.

Context: PJ Maher expanded his electrical contracting business to act as a wholesaler, building a new showroom and warehouse, hiring a delivery person, and applying for grants through his Local Enterprise Office.

Suggested solution

The following is a suggested approach based on the specification verb and the scenario. It is offered as a study aid, not as a definitive answer. For “conduct” questions, a good approach is to state each stakeholder's quadrant and clearly explain their power and interest levels.

Investors → Manage Closely (High Power, High Interest): They provide essential funding and can influence major business decisions. Their interest is high because their financial return depends directly on the business's performance and the success of the new menu.

Employees → Keep Informed (Low Power, High Interest): Their jobs and daily work are directly affected by the new menu options. However, they typically do not have the power to reverse a corporate decision, so they have high interest but low power to change the outcome.

Consumers → Keep Informed (Low Power, High Interest): They care deeply about buying from an ethical business and the new plant-based menu directly affects their experience. However, with many customers, individual buyers have little power to alter business decisions on their own.

Local Community → Monitor (Low Power, Low Interest): They may notice or support changes to the business but are not deeply or directly affected by a plant-based menu addition. They also lack significant influence over internal business decisions.

📌 Know all nine stakeholders by name and type

Internal: Business Owner, Managers, Employees, Investors. External: Consumers, Suppliers, Local Community, Government, Interest Groups. Questions at OL have asked students simply to list stakeholders impacted by a scenario. Any from this list that fits the context is acceptable. Do not confuse investors (internal) with government (external) — investors are inside the business ownership structure.

📌 Co-operative vs competitive — win-win vs win-lose

The key distinction is simple: co-operative = both parties benefit (win-win); competitive = one benefits at the other's expense (win-lose). If a question gives you a scenario and asks what type of relationship it is, look for whether both stakeholders are getting what they want or whether one is gaining at the other's cost. A supplier who wants payment now but the business wants to delay — that is competitive, because the supplier's need blocks the business's preference.

📌 Mediation vs conciliation vs arbitration — the key differences

This is the most commonly confused area. Mediation: the third party facilitates discussion only — they do NOT suggest solutions. Conciliation: the third party may suggest possible options to help the parties reach their own agreement. Arbitration: the third party listens to both sides and issues a formal recommendation, which can be binding or non-binding. The progression is: mediation (no suggestions) → conciliation (suggestions allowed) → arbitration (formal decision issued).

📌 For stakeholder mapping: always justify power AND interest

The HL Paper 2 question required students to place four stakeholders on a power-interest grid. A good approach is to name the quadrant (e.g. “Manage Closely”) and then explain both the power level AND the interest level for each stakeholder separately, using the scenario details. E.g. “Investors: High Power — they provide essential funding and can influence major decisions. High Interest — their return depends directly on business performance.” Both dimensions must be explained, not just one.

📌 The four quadrant labels — know them exactly

High Power + High Interest = Manage Closely. High Power + Low Interest = Keep Satisfied. Low Power + High Interest = Keep Informed. Low Power + Low Interest = Monitor. Students often mix up “Keep Satisfied” and “Keep Informed” — the difference is that satisfied stakeholders have power (they can cause problems if unhappy) even though they are not very interested; informed stakeholders are interested but lack power to change decisions.

📌 LO 1.4 — the Students Learn About column is examinable too

The specification's Students Learn About column for this chapter includes “the needs and wants of different stakeholders at different stages of business development.” This means a question could ask how stakeholder needs change as a business grows from start-up to maturity. E.g. investors at start-up want growth; at maturity they want dividends. Employees at start-up may accept lower pay for equity; later they expect career progression. Be aware this angle is explicitly in the specification.