Management Of Stakeholders

There are many factors which have an effect over corporate strategy other than the organisations stakeholders which can influence the management decision process and the corporations strategy. The most influential external factors which will effect the organisations strategy are those included within the PESTEL framework and ethical issues within the marketplace, internal factors will mainly include the organisations history and culture.

When discussing strategy there are generally 3 different ways in which it can be looked at, known as the strategy lenses which classify a corporations strategy into 3 types; Design, Experience and Ideas.

A Design strategy is one which requires managers to be rational decision makers , each decision aiding the companies economic interests. This approach allows managers to assess complex decisions with the aid of analytical and evaluative tools, these types of organisation may look to Porters 5 forces, PESTEL, SWOT analysis and the Ansoff matrix for formulating strategy. This approach is often encouraged by stakeholders with a financial interest in the company such as banks, financial analysts, shareholders and employees. Managers may find that if they regard these financial stakeholders as the most influential they will be forced into developing a strategy which becomes more and more focused towards a Design lens style. This could possibly result in the loss of innovation within the organisation as the management become caught up in the use of analytical tools which should only be used to aid decisions not make them.

The Experience lens differs from Design as this approach leads to strategy developing from within and not just from the top management. This is due to the organisation taking advantage of individuals experiences. The main driving force behind the development of this type of strategy would be the culture of its employees and those of its stakeholders, this would give more power to internal stakeholders such as employees and management as they are in control of the direction that the organisations strategy will take.

The final lens, the Idea lens sees strategy as a way of being innovative and using the range of skills within the organisations workforce to create new ideas. It is therefore hoped that the culture and behaviour of an organisation is one which encourages questioning and the challenging of the consensus. This type of strategy will reduce the influence that external factors such as those included in PESTEL, as employees will be able to create innovative solutions to external factors, meaning that they are in control of the corporations strategy.

The categories within the PESTEL framework, have an influential impact on strategic management. No matter which strategic lens an organisations strategy focuses on, it is only the managers different strategies for dealing with the PESTEL factors, which will change the effect made on the organisations future strategy. For example political influences which may come from branches of the government or legal infrastructure which are likely to have a limited amount of interest in the organisation can cause changes in the corporations strategy and indirectly effect a managers decision making ability. This could mean that a branch of the government introduces laws which do not effect the organisation but instead effect their suppliers causing prices to rise or for the availability of the resource to be restricted.

Economic factors can also effect strategic management as unemployment levels may rise reducing the disposable income of potential customers, the performance of the stock market, high rates of interest or inflation and changes in the exchange rate can all lead to a loss of revenue for the company.

The organisation will then need to look at a change in strategy which may involve the reduction in their workforce or they may look to new markets, home and abroad to cover their losses. The social influence will include factors such as changing demographics of the consumer, which will require the organisation to rethink its strategy. Managers should consider the Ansoff matrix in order to plan changes in strategic direction.

Technological aspects which will effect organisational strategy include new product developments by themselves or their competitors. The management will then need to plan when to release new products into the market and whether or not the consumer needs or wants these products. The organisation may even need to educate its consumer to create demand.

Environmental factors are becoming increasingly influential in a company's strategy, especially since EU legislation has been put into place, which requires stricter guidelines on environmental sustainability. The organisations management will therefore need to make sure that their strategy does not conflict with environmental law, surrounding waste disposal and energy consumption. They may also find that it is not just political pressure which forces changes in environmental strategy. Private environmental groups can also have a huge influence over strategy as they have the power to damage an organisations image and change the perception its customers have of the company's products.

The final factor that will effect strategic management are legal factors. These laws have been brought in to create a fair trading place. For organisations to compete, legislation may include competition law, employment law and health and safety regulations.

This shows that stakeholders are not the only factor which management must consider when devising their organisational strategy and that some of the consequences for not formulating your strategy with the PESTEL frame work in mind can lead to penalties for breaking laws, crossing political boundaries and misunderstanding of social requirements or expectations, all of which will have a negative impact on the future of the business.

An organisation must consider its stakeholders when making strategic decisions. An instrumental approach is recommended where organisations seek to "Maximise shareholder value over an uncertain time frame, by having their managers pay attention to key stakeholder relationships" (adapted from Berman, Wicks, Kotha and Jones 1999). It is therefore important for organisations to manage their environment correctly, as an "organisations stakeholders can control resources which facilitate or enhance the implementation of corporate decisions" (Pfeifer and Salancik 1978).If a stakeholder is displeased they may decide to withdraw support restricting the organisations access to resources which are needed to complete its core business tasks.

There are two variations of instrumental