Stakeholder Approach

Discuss about the Strategic Management In Stakeholder Approach.

The report aims at providing at insight into strategic management in the context of various approaches. This involves the implementation and formulation of the primary initiatives and goals undertaken by the top management of the company on behalf of the owners and depends on considering the resources and the assessment of the external and internal environment where organization undergoes competition. Strategic management involves the concepts of strategic thinking and strategic planning. Strategic planning is more analytical and refers to the formalization procedures for producing analysis and data used as the inputs for the process of strategic thinking that synthesizes data resulting in strategy. Strategic planning also refers to the control mechanism used for the implementation of the determined strategy. In other words, strategic planning revolves around strategic thinking and the activities for making strategy. Strategic management however involves two key processes that include implementation and formulation of a strategy. The report discusses about the three approaches of strategic management that includes the stakeholder approach, dynamic capabilities and the sustainable approach. The Stakeholder Approach put forward suggestion that the managers should implement and formulate processes that satisfies the needs of the stakeholders for ensuring the firm’s long-term success. Dynamic Capabilities refers to the ability of the firm in building, integrating and reconfiguring the external and internal competencies for addressing the environment that undergoes rapid change. The Sustainability Approach refers to the renewal of the industry for providing sustainable and superior solutions. This is achieved with the help of active engagement of the suppliers and customers in the society in contributing to sustainable future.

The Stakeholder Approach puts forward the assertion that the organization should take into consideration the groups and the individuals that influences the activities of decision-making and achievement of the organizational goals (Cooper 2017). The Stakeholder Approach helps in recognizing the complex and dynamic relationship between the stakeholders and the organizations with emphasis on the management of such relationships. Therefore, this approach helps in playing a vital role in the understanding of the influence of the stakeholder on the organization and the response of the organizations towards such influences. In other words, if one goes by the definition of the stakeholder approach, it refers to an individual or group influenced by the objectives of the organization. As per the definition, the stakeholders possess the potential of both benefitting and harming the organization (Ayuso et al. 2014). Therefore, the concerns of the stakeholder need addressing and recognition by organization for ensuring survival and the successful accomplishment of the goals. Application of the stakeholder approach to a business helps in gaining benefits like goodwill and cooperation of the designated stakeholders for addressing the different needs. However, the beginning point of the Stakeholder Approach lies in the assumption that business requires values and it is the shared sense of value created that helps in drawing the stakeholders of the business together. According to Freeman et al. (2014), this propels the firm in moving forward and allowing it in generating outstanding performance.

Understanding the Stakeholder Approach

The Stakeholder Approach helps in determining the people key to a project and the way adopted for their management. De Brucker et al. (2013) put forward an observation that the stakeholders approach helps in the categorization of the people conducting the analysis and making the distinction between the secondary or primary or the influential or the important. Moreover, the stakeholders of projects undergo continuous changes on a constant basis that makes it difficult for them in labeling.

The application of the Stakeholder Approach in the Information System is particularly useful for understanding the e-services although it lacks in the adaptation of the needs, preferences, capabilities and project resources including the qualifications and staff supply. There has been an evolution of the stakeholder preferences along with a change in stakes depending on the issues applicable at particular time. According to Harrison and Wicks (2013), the approach helps in the successful management of the stakeholders involves learning since the interest and characteristics of stakeholders change overtime.

The implementation issues lies in the fact that the organizations have broader range of the stakeholders who hold different interest and it is not possible for addressing the concerns and issues of all the stakeholders (Dobele et al. 2014). Hence, the identification of the stakeholders becomes essential since they impact the actions of the organization. In absence of the identification of the stakeholder, the effectiveness of the engagement of the stakeholder becomes not only questionable but also doubtful. The primary criteria for the identification of the stakeholder include the attributes of the power, urgency and legitimacy and the ability of the stakeholder in influencing the action of the organization.

The Stakeholder Approach also has its own limitations as it challenges the business managers in the portrayal of clear thinking about the relationship and business methods that requires forging with the company stakeholders in effectively delivering the final product. These relationships are crucial as the help in determining the long-term success and failure of company.

The rules of the Stakeholder Approach are not only impractical and vague and often fail in clarifying the specific stakeholders for the particular case (Hauck et al. 2013). The approach does not clearly define the rewards that the stakeholders bring to the organization. In addition, there is also difficulty in determining the allocated benefits of each of the shareholders. The approach does not put forward any test with the help of which the claims of the stakeholders rejected or accepted.

Application of the Stakeholder Approach

According to Helfat and Peteraf (2015), Dynamic capabilities puts forward a resource based view of the firm. These resources used by the firms in the execution of strategies of value creations that would help in sustaining the competitive advantage. In other words, the dynamic capabilities help the firms in identification of the emerging opportunities, renew, and develop its competencies in dynamic business ambience. Dynamic capabilities are essential for determining the competitive advantage of the firms. The concept of the dynamic capability is applied into strategic position in the field of the e-commerce. According to Rashidirad et al (2014), in e-commerce, the application of the approach helps in the recreation of the options for innovation used as dynamic tool for maintaining and obtaining competitive advantages due to the business process supported high speed and computing network. The domain for e-commerce has a rare application of the dynamic capabilities. It is found that the dynamic capability that leads to the generation of the strategic responsibility is regarded as the prerequisite for the E-commerce companies that are found competing in a dynamic e-commerce environment.

The ability of achieving the newer forms of the competitive advantage represents the dynamic capabilities. Both the terms, dynamic and capabilities requires deeper understanding of the competitive advantage. The ability of renovating the competences for accomplishing the transformation of the business environment is known as dynamic. The benefits of being dynamic include (Wilden et al. 2013):

• It leads to the definite innovation in response to the situation involving the right time for entering the market
• It involves the vitality of timing in such cases
• When there involves swift changes in the technological field and the character of the competition and there is difficulty in asserting the dynamic nature, the dynamic capability approach becomes necessary for sustenance of the competitive advantage.

The vital function of the strategic management lies in the reconstitution, incorporation and modification of the internal and external organizational resources, skills and financial competencies for corresponding with the transformed environment based on term capabilities. Thus, the benefits of the dynamic capabilities lie in addressing the rapid environment of change. The approach also suggests the capacity of the organization in accomplishing innovative and newer forms of the competitive advantage. 

According to Kindstrom et al.(2013), the issues related to the implementation problem includes the underestimation of the time necessary for the implementation, the surfacing of major problems which is not anticipated and the controllable factors in external environment that is having an adverse impact. Strategy implementation involves the management and allocation of the sufficient resources which includes technology support, time, personnel and financial. There is a number of activities involved that includes the establishment of the chain of the command or the existence of an alternative structure, assigning the responsibilities of the specific process or tasks to the specific groups or individuals and the management of the processes. This requires monitoring of the results in comparison to the best practices and benchmarks, evaluation of the efficiency and the efficacy of the process, control of the variances and necessary adjustments of the required processes. Implementation of the specific programs involves acquiring requisite resources, development of the training, process testing, process, integration and documentation with the legacy processes (Beske, Land and Seuring  2014).

Limitations of Stakeholder Approach

The vital thing in implementation of a strategy lies in the commitment of the management towards the strategic direction (Blome, Schoenherr and Rexhausen 2013). This is a pre requisite for the implementation of the strategy. Therefore, it is necessary for the top managers in demonstrating the willingness in giving loyalty and energy towards the process of implementation. This also acts as a positive signal for all the effected organizational members. Thus, for successfully improving overall probability for determining the intended  way for implementing a strategy it is vital for the senior executives  in abandoning the idea that the managers belonging to the lower level possess the same level of perception of strategy and implementation, the level of urgency and the underlying rationale(Wilden and Gudergan 2015).

The sustainability approach is viable in building the trust of the employees. Sustainable companies depend on four essential elements in building the trust of the employees. These includes, respect for the individuals, transparency, engagement and empowerment and team building (Scherer, Palazzo and Seidl 2013). The sustainable approach views each of the individual employees as a whole person instead of the impersonal factor of the production. This approach also allows the management in demonstrating the respect for the individuals through encouraging the employees in participation of the decision making, irrespective of the rank. The companies also share process and financial information with all the employees and in cultivating an uncommonly sense of participation of the team. Companies following a sustainable approach empower the employees for challenging the processes and do the required things for pleasing the customers. In other words, for companies following the sustainable approach inclusion and diversity remains stated value. The inclusion and diversity efforts contribute to the empowerment, team building and respect. In addition, it also helps in achieving the three components of the engagement that includes flexibility, inquiry and creativity.

The benefits of the sustainability approach lies in the fact that it ensures a balance between all groups of the stakeholders which includes customers, partners, employees, shareholders and communities (Etienne 2013). The approach helps in aligning the interest in a manner so that no group of stakeholder experience gains over the others. Organizations following a sustainable approach operate and creates based on the engagement of the employees. The approach also helps in the creation of shareholder creation of value on a long term basis so that the companies invest in the employees for the creation of the greater returns for the company. Companies engaging in a newer and different trust relationship successfully emerge from the financial crisis (Kramar 2014).

Dynamic Capabilities

The sustainable approach usually faces issues when applied in the procurement function. The primary barrier in the initiation of responsible procurement lies in the need for justifying the activity and the cost portrayed to the board of the directors on the basis of the profit of the company(Angeon and Bates 2015). The additional cost involved in the procurement function acts as one of the barriers for incorporation of the sustainable approach. The procurement process also has other internal barriers due to the lack of the information and training about the ethical and social environmental principles and the process of the supply chain. A barrier in the procurement process that prevents the application of the sustainable approach includes the lack of commitment of the top management and the lack of the legislation. Barriers can also come in the form of the difficulties in imposing changes

To apply the approach it is necessary for harnessing the tool, staffs and techniques of the organizational diversity and the infrastructure of inclusion for the creation of sustainable culture which might not be possible always and act as a limitation (Farrington and Lewis 2014). An engaged workforce with sustainable employee practices is in a better position for addressing the needs of the stakeholders of the company that includes customers, suppliers, community and investors. The proven path for a sustainable organization lies in the balanced view of the needs of the stakeholders that helps in creation of the long term value of the shareholder that can survive even the most brutal climate of the economy.

Conclusion:

Thus  to conclude, one can say that  the strategic management defined in terms of prescriptive approach helps in outlining the development of  thee strategies while the descriptive approach focuses  on how the strategies actually put to the practice. The approaches differ on the note whether the development of the strategies is through analytic process where there is an account for all the threats and the opportunities. The report here vividly identifies three strategic management approach namely, the stakeholder approach, dynamic capabilities and the sustainable approach. There is also discussion about the viability, benefits, implementation issues and limitation of each approach. Business culture, organizational structure, competencies and employee skills refers to some of the key factors that influence an organization in the achievement of the stated objectives.

References:

Angeon, V. and Bates, S., 2015. Reviewing composite vulnerability and resilience indexes: a sustainable approach and application. World Development, 72, pp.140-162.

Understanding Dynamic Capabilities

Ayuso, S., Rodríguez, M.A., García-Castro, R. and Ariño, M.A., 2014. Maximizing stakeholders’ interests: An empirical analysis of the stakeholder approach to corporate governance. Business & society, 53(3), pp.414-439.

Beske, P., Land, A. and Seuring, S., 2014. Sustainable supply chain management practices and dynamic capabilities in the food industry: A critical analysis of the literature. International Journal of Production Economics, 152, pp.131-143.

Blome, C., Schoenherr, T. and Rexhausen, D., 2013. Antecedents and enablers of supply chain agility and its effect on performance: a dynamic capabilities perspective. International Journal of Production Research, 51(4), pp.1295-1318.

Carayannis, E.G., Sindakis, S. and Walter, C., 2015. Business model innovation as lever of organizational sustainability. The Journal of Technology Transfer, 40(1), pp.85-104.

Cooper, S., 2017. Corporate social performance: A stakeholder approach. Taylor & Francis.

De Brucker, K., Macharis, C. and Verbeke, A., 2013. Multi-criteria analysis and the resolution of sustainable development dilemmas: A stakeholder management approach. European journal of operational research, 224(1), pp.122-131.

Dobele, A.R., Westberg, K., Steel, M. and Flowers, K., 2014. An examination of corporate social responsibility implementation and stakeholder engagement: A case study in the Australian mining industry. Business Strategy and the Environment, 23(3), pp.145-159.

Étienne, M. ed., 2013. Companion modelling: a participatory approach to support sustainable development. Springer Science & Business Media.

Farrington, J. and Lewis, D.J. eds., 2014. Non-governmental organizations and the state in Asia: Rethinking roles in sustainable agricultural development. Routledge.

Harrison, J.S. and Wicks, A.C., 2013. Stakeholder theory, value, and firm performance. Business ethics quarterly, 23(1), pp.97

Hauck, J., Görg, C., Varjopuro, R., Ratamäki, O. and Jax, K., 2013. Benefits and limitations of the ecosystem services concept in environmental policy and decision making: some stakeholder perspectives. Environmental Science & Policy, 25, pp.13-21.

Helfat, C.E. and Peteraf, M.A., 2015. Managerial cognitive capabilities and the microfoundations of dynamic capabilities. Strategic Management Journal, 36(6), pp.831-850.

Hörisch, J., Freeman, R.E. and Schaltegger, S., 2014. Applying stakeholder theory in sustainability management: Links, similarities, dissimilarities, and a conceptual framework. Organization & Environment, 27(4), pp.328-346.

Kindström, D., Kowalkowski, C. and Sandberg, E., 2013. Enabling service innovation: A dynamic capabilities approach. Journal of business research, 66(8), pp.1063-1073.

Kramar, R., 2014. Beyond strategic human resource management: is sustainable human resource management the next approach?. The International Journal of Human Resource Management, 25(8), pp.1069-1089.

Rashidirad, M., Soltani, E. and Salimian, H., 2014. Do contextual factors matter? A missing link between competitive strategies–dynamic capabilities alignment and e?business value. Strategic Change, 23(1?2), pp.81-92.

Scherer, A.G., Palazzo, G. and Seidl, D., 2013. Managing legitimacy in complex and heterogeneous environments: Sustainable development in a globalized world. Journal of Management Studies, 50(2), pp.259-284.

Wilden, R. and Gudergan, S.P., 2015. The impact of dynamic capabilities on operational marketing and technological capabilities: investigating the role of environmental turbulence. Journal of the Academy of Marketing Science, 43(2), pp.181-199.

Wilden, R., Gudergan, S.P., Nielsen, B.B. and Lings, I., 2013. Dynamic capabilities and performance: strategy, structure and environment. Long Range Planning, 46(1-2), pp.72-96.