Final answer:
External stakeholders are individuals or groups outside of a firm that are affected by its operations, including individual people, businesses, utility companies, and governments, among others. The concept relates to externalities, or spillover effects, in market exchanges.
Step-by-step explanation:
The term external stakeholders refers to individuals or groups outside a firm that may be affected by its activities. This range includes individual people, businesses, utility companies, schools and universities, and governments at local, state, and national levels.
Essentially, any third party with an interest in or who may experience the positive or negative outcomes from a company's actions is an external stakeholder. An externality is a market exchange affecting these third parties external to the exchange, also known as a "spillover."
For example, stakeholders for a new automobile design might encompass a variety of such groups: the customers who buy it, the mechanics who service it, environmental agencies monitoring its impact, and even the energy companies supplying its fuel.