Freeman in 1984 (Freeman, 2010) first introduced the concept of stakeholders by posing that the sole goal for a company lies in the creation of value for those with vested interests in it. He further argued that for the firm to flourish, the benefits of customers, employees, service providers, investors and the community must be upheld by the top management and executed by staff through given strategies.
Stakeholder expectation refers to the representation of opinions of entities located both on-site at a company, as well as those away, but with vested interests in the specified organisation. Stakeholders' grip on operational activities has been on the rise in the past few decades. The consistency of this grip puts the management in a position within which they have to seek to understand their stakeholders and strategically manage them to meet their expectations.
Stakeholder Impact on the Company
Uniquely, company stakeholders map into governance, customers, employees, business partners and the community at large (Johnson et al., 2014). Each of them has specific impacts on the business at different levels of engagement.
Governance and Social Responsibility
The firm’s management or administration defines its purpose. In short, the government oversees the mission and vision, and this has been focussed on profitability for a long time until the emergence of legal obligations for companies to not only be successful but also to be socially responsible. The result of the aforementioned is that due to social pressure, firms engage in further activities other than their initial core business. The indulgence is sometimes profiting but not for all companies.
The human resource impacts on businesses such that they have to be treated well, given benefits and health schemes that to a greater extent hurt profits. Engaging in staff welfare policies is a requirement by law and the expenses incurred therein affect the business. Also, based on the treatment of employees, returns seem to be directly proportional to positive and respectful engagement.
The players who enhance the business processes through providing services and input products make the partners. The influence they have on the firm solely depends on how best the management handles them. The rapport and understanding built by the company towards them are vital for business continuity. Failure to adhere to agreements with partners always leads to challenges that in turn affect the businesses negatively.
The mentioned partners often have conflicts with the business. There are times when the arising disputes may be detrimental to the store, and at times the cases are resolved and build on an even better relationship that is beneficial based on the strategic position of the company. One of the best strategic locations of stakeholder management is a win-win approach to conflict (Lynch, 2015). Disagreements can be political and seek to test who has the power between the company management and given stakeholders. For instance, Ocado is a merchandise selling company whose key stakeholders are employees, customers and business partners. In cases where there are conflicts, the firm may map its stakeholders efficiently using Mendelow's Model.
Mendelow's model came to be in 1986 and is built on the dimension of power weighed against the level of interest that is mutual between Ocado and its key stakeholders. Below are the mapping analysis and its critical evaluation.
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Figure 1. Mendelow's Matrix
Ocado shall apply the matrix in assessing if given strategies can be tampered with by specific conflicts from particular stakeholders or not. Also, the firm shall establish which policies to apply to ease the resolution with those stakeholders. Based on the matrix and discovery of the knowledge of given entities and by the organisational culture, the business faces the least resistance from stakeholders grouped at A with low interest in given decisions, as well as small influential power (Bjugn & Casati, 2012). The fiercest critics lie at D with the group having the great interest in the company and with very high potential to influence (McGee et al., 2010). Thus, depending on the above, the company can know the most sensitive shareholders and how best to deal with each category.
In cases where Ocado, or say PayPal is unable to handle the changes that come with stakeholders, then their initial strategies are overpowered by the powerful entities, and they end up adopting policies that are different from their initial ones. The phenomenon arising from that is called the Strategic Drift.
An example of Strategic drift can be attributed to PayPal's split from eBay. The company's top management kept the strategy that the two partnerships would stay put, regardless of challenges. However, with the campaign of key investors, the administration was forced to give in based on a strategy that they initially had discarded. The investors that pushed the split can be classified at point D in the matrix, having both power and interest.
Strategic purpose and Stakeholder mapping are a vital part of management. Combination of the two enables study the threats and opportunities to the company and establish ways that can be implemented to tackle the same. Stakeholder conflicts are a common phenomenon in the operations of the firm, and as such, mapping methods such as Mendelow's matrix are essential in knowing how best to tackle which category of stakeholder. With the help of the pattern, companies such as Ocado and PayPal have handled different situations and have learned what to consider from the expectations of their stakeholders. Thus, mapping of interested parties in business is a worthwhile decision to steer company strategies.
Whittington, R., Johnson, G., Angwin, D., &Regner, P. (2014). Exploring Strategy: Text and Cases. London: Pearson Education Limited.
Lynch, R. (2015). Strategic Management. London. Pearson Publishers.
McGee, J., Wilson, D.,&Thomas, H. (2010). Strategy, Analysis and Practice. London. McGraw-Hill Educational Publishers.
Bjugn, R., & Casatti, B. (2012). Stakeholder Analysis: A Useful Tool for Biobank Planning. Biopreservation and biobanking. Pp. 239-244.
Freeman, R. E. (2010). Strategic management: A stakeholder’s approach. Cambridge: Cambridge university press.