Stakeholder Influence
stakeholders - interests and power
Common and conflicting interests of stakeholders
The different stakeholder groups have different interests some in common with other stakeholders and some in conflict.
Examples of common interests:
* Shareholders and employees have a common interest in the success of the organisation. * High profits which not only lead to high dividends but also job security. * Suppliers have an interest in the growth and prosperity of the firm.
Examples of conflicting interests
* Wage rises might be at the expense of dividend. * Managers have an interest in organisational growth but this might be at the expense of short term profits. * Growth of the organisation might be at the expense of the local community and the environment.
Thinking about stakeholder power
The study of stakeholders should not be limited to a description of the way in which the organisation impacts upon the stakeholders.
In the context of strategy, what is more important is the power and influence that a stakeholder has over the organisation and its objectives.
Stakeholder influence:
Current and future strategies of the organisation are affected by:
* External pressure from the market place, including competitors, customers, suppliers, shareholders, pressure groups threatening a boycott, the government (through taxation and spending). * Internal pressures from existing commitments, managers, employees and their trade unions. * The personal ethical and moral perspectives of senior managers
(adapted from Newbould and Luffman, Successful Business Policies 1979).
The importance of profit maximisation
Traditional economic theory is based on the assumption that firms seek to maximise profits.
It must be appreciated that this does not mean “any old level of profits” or even a certain target level of profits but it means squeezing the last penny of profits out of the firm’s operations.
This assumption
Common and conflicting interests of stakeholders
The different stakeholder groups have different interests some in common with other stakeholders and some in conflict.
Examples of common interests:
* Shareholders and employees have a common interest in the success of the organisation. * High profits which not only lead to high dividends but also job security. * Suppliers have an interest in the growth and prosperity of the firm.
Examples of conflicting interests
* Wage rises might be at the expense of dividend. * Managers have an interest in organisational growth but this might be at the expense of short term profits. * Growth of the organisation might be at the expense of the local community and the environment.
Thinking about stakeholder power
The study of stakeholders should not be limited to a description of the way in which the organisation impacts upon the stakeholders.
In the context of strategy, what is more important is the power and influence that a stakeholder has over the organisation and its objectives.
Stakeholder influence:
Current and future strategies of the organisation are affected by:
* External pressure from the market place, including competitors, customers, suppliers, shareholders, pressure groups threatening a boycott, the government (through taxation and spending). * Internal pressures from existing commitments, managers, employees and their trade unions. * The personal ethical and moral perspectives of senior managers
(adapted from Newbould and Luffman, Successful Business Policies 1979).
The importance of profit maximisation
Traditional economic theory is based on the assumption that firms seek to maximise profits.
It must be appreciated that this does not mean “any old level of profits” or even a certain target level of profits but it means squeezing the last penny of profits out of the firm’s operations.
This assumption