Stakeholder analysis

FeedbackContents

1 Stakeholder analysis
1.1 Classification of stakeholders

1.1.1 Internal stakeholders

1.1.2 Connected stakeholders

1.1.3 External stakeholders

1.2 Stakeholder conflicts

1.2.1 Examples of conflict

1.2.2 Resolving conflict

Stakeholder analysis is a key part of formulating an organisation's strategy.

A stakeholder is a group or individual, who has an interest in what the organisation does, or an expectation
of the organisation. It is important that an organisation understands the needs of the different stakeholders.
An important part of the strategic manager's job is to understand the contribution that relationships with
stakeholders can make to the well-being of the organisation. Assessing the expectations of stakeholders
enables an organisation to gauge whether its objectives will provide the means of satisfying the demands of
the various stakeholders.

Classification of stakeholders
Stakeholders can be broadly categorised into three groups:

internal, e.g. employees;

connected, e.g. shareholders;

external, e.g.government.

Internal stakeholders
Internal stakeholders are intimately connected to the organisation, and their objectives are likely to have a
strong influence on how it is run.
Internal stakeholders include:

Connected stakeholders
Connected stakeholders can be viewed as having a contractual relationship with the organisation.
The objective of satisfying shareholders is taken as the prime objective which the management of the
organisation will need to fulfil, however, customer and financiers objectives must be met if the company is to
succeed.

External stakeholders
External stakeholders include the government, local authority etc. This group will have quite diverse
objectives and have varying ability to ensure that the organisation meets their objectives

Stakeholder conflicts
Examples of conflict
The needs / expectations of the different stakeholders may conflict. Some of the typical conflicts are shown
below;

One problem with analysing stakeholders is that they tend to belong to more than one group and will change
their groupings depending on the issue in hand, e.g. marketing and production departments could be united
against dropping a certain product but be in opposition regarding plans to buy a new product for the range.

Your FeedbackWe value your feedback on the topics or anything else you have found on our
site, so we can make it even better.Give Feedback

Resolving conflict
There are a number of ways of resolving stakeholder conflict, including the following:
Cyert and March
Cyert and March suggest four ways to resolve conflicting stakeholder objectives.

Satisficing involves negotiations between key stakeholders to arrive at an acceptable

compromise.
Sequential attention is when management focus on stakeholder needs in turn. For example, staff
may receive a pay rise with the clear implication that it will not be their turn again for a few years
and so they should not expect any further increases.

Side payments are where a stakeholders primary objectives cannot be met so they are
compensated in some other way. For example, a local community may object to a new factory
being built on a site that will cause pollution, noise and extra traffic. The firm concerned may
continue to build the factory but try to appease the community by also building local sports
facilities.

Exercise of power is when a deadlock is resolved by a senior figure forcing through a decision
simply based on the power they possess.

Mendelow
Mendelow developed a matrix to help managers classify stakeholders according to their power and interest
with recommendtaion show to mange different groups.

Mission statements
The mission statement is a statement in writing that should describe the basic purpose of an organisation,
that is, what it is trying to accomplish. It outlines the broad direction that an organisation will follow and
summarises the reasoning and values that underlie that organisation. As such it should help to resolve some
conflicts by communicating priorities to stakeholders.
Corporate Governance
One perspective on governance is that it is essentially about ensuring that directors do not put their own
interests before those of the shareholders they are supposed to be representing.
Corporate ethics
One way of viewing ethical dilemmas is as stakeholder conflicts - for example, pollution concerns could be
expressed as the conflict between trying to make more money for shareholders (e.g. by not spending money
to reduce pollution) verses the impact on the wider community. Guidance on ethics and drives to
improve corporate social responsibility will help resolve such ethical conflicts.
Corporate ethics is discussed in more detail here.