By Comparison with the Other Factors, Evaluate How Important Stakeholders Are in Strategic Management.

Topics: Management, Strategic management, Organization Pages: 9 (2690 words) Published: March 3, 2006
The first intention of this paper is to give a clear understanding of key terms used throughout, helping illustrate their meanings and importance.

Strategy: Johnson et al (2005, p9) argues, "Strategy is the direction and scope of an organisation over the long term, which achieves an advantage in a changing environment through its configuration or resources and competences with the aim of fulfilling stakeholder expectations."

I feel that this gives a clear understanding to the term, as it involves the four key areas every organisation needs to manage; firstly, what areas the business wishes to operate within, i.e. that markets and its activities. Secondly, creating the advantage, the selling point, while recognising the environment it operates within is constantly changing. R Lynch (2006, p7) concurs with time being an important feature of strategy, while developing a competitive advantage. Thirdly, the reliance on resources to create the advantage combined with the skills and knowledge to apply them. However, while I agree that the aim of strategy is to fulfil stakeholder expectations, I do not believe this is applicable for all stakeholders, this is confirmed by A Crane and D Matten (2004, p50) who state that a stakeholder "is harmed by, or benefits, from the corporation". This demonstrates that a strategy can adversely affect stakeholders, even if they have no prior awareness or expectation of an organisations strategy.

This definition of stakeholders is generated by A Crane and D Matten (2004, p50) from using Freeman's (1984) original definition and applying Evan and Freeman's (1993) suggestion of principle of corporate rights and principle of corporate effect. This adapted definition will apply to this paper as it makes clear that for even the same company; the range of stakeholders can differ when undertaking different projects or tasks.

My applied definition of Strategic management is also provided by Johnson et al (2005, p16), as it brings together three key concepts, strategic position, strategic choices, and how to turn strategy in to action, which all interlink. This is important as I believe there is no set route when implementing strategic management in practice, so the ability for the strategic management process to be represented as free flowing, is essential.

Initially we shall examine the factors of strategy, as identified in the definition and highlight the relative importance of each. A case study, sourced from R Lynch (2006) will be used as a contextual illustration. The long term direction and scope of the organisation, is a key factor for sustained success. For example, Apple made a shift in 2001 from the relatively safe market of innovative, premium priced computers, into the fiercely competitive consumer electronics market. This change in strategy not only affected Apples' broadening of its product range, it identified them as making a significant, long term commitment as they would have an awareness of the new depth taken on in the consumer electronics market. The question must be asked why would Apple add a new direction and change the scope of their strategy.

Apple recognised the environment which it operated was changing, but importantly, they would have also analysed their key resources and identified these as the principal source of their successful corporate strategy. This can be identified as a resource based strategy. Drucker (1967) emphasises that it is important to ‘…build on strength…to look for opportunities rather than for problems.' Apples' strengths were its exceptional resources. Chaharbaghi and Lynch (1999) recognize that there is a ‘hierarchy of resources' and Apple certainly had ‘breakthrough resources' using these resources they were able to bring a major strategic shift in the market.

By looking at their unique resources, Apple was able to create a sustainable competitive advantage, another factor in strategic management. Lynch (2006) has suggested that there...

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K Chaharbaghi and R Lynch, 1999, Sustainable Competitive Advantage: towards a dynamic resource based strategy ', Management Decision, 37(1), pp45-50
A Crane and D Matten, 2004, Business Ethics, Oxford University Press, 1st Edition
Druker, 1967, O.p cit., Ch9
W.M Evan and R.E Freeman, 1993, ‘a Stakeholder Theory of Modern Corporation: Kantian Capitalism '
R.E Freeman, 1984, Strategic Management: A Stakeholder Approach. Boston: Pitman
G Johnson, K S Scholes and R Whittington, 2005, Exploring Corporate Strategy, Prentice Hall, 7th Edition
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R Lynch, 2006, Corporate Strategy, Prentice Hall, 4th Edition
A H. Maslow, 1968, Toward a psychology of being, Van Nostrand Reinhold, 2nd edition
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