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In this essay, I will look at the importance of stakeholders in todays organisations, taking into consideration the other key factors that organisations have to contemplate when making strategic decisions.

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Introduction

Strategic Management Stakeholders Paul Senior November 2006 Word count 2605 - excluding figures, tables, quotes and bibliography CONTENTS Introduction 3 The Role of Stakeholders in Strategic Management 4 Importance of Stakeholders 8 Management of Stakeholders 12 Conclusions 14 Bibliography & Research List 15 Introduction In today's modern world of business, individuals in management constantly face critical decisions, ethical dilemmas, and other concerns that can affect a business, its employees, its shareholders and other associated stakeholders. Strategic management is an important task for organisations, and concentrates on the preparation for success in both the short and long term. Incorporating planning, implementation, and assessment, it is a comprehensive management process and aims to formulate and implement strategies that are effective to the organisation. Chandler's (1962) definition of strategic management is: An organisation-wide task, it provides new ways of tackling opportunities and challenges presented to the business. Organisations have to consider a number of factors before implementing strategic decisions that will affect people whether they are internal or external to the organisation. Such aspects affecting decisions include corporate governance, business ethics, culture, and stakeholders, who will be the focus of this paper. Organisations have duties towards stakeholders that are directly affected by the practices used. Stakeholders play a key role in the shaping of a companies strategy. Organisations must understand who their stakeholders are, as well as recognising differing requirements of each group. In this essay, I will look at the importance of stakeholders in today's organisations, taking into consideration the other key factors that organisations have to contemplate when making strategic decisions. ...read more.

Middle

This change in thinking has led to the development of the stakeholder theory, advocated by Freeman (1984). This theory argues that there are a number of groups to whom businesses are accountable to when determining strategy and pursuing objective(s). The traditional belief is that only direct links to a business, such as shareholders, customers and employees have an input into organisational decisions. But as previously mentioned, stakeholders are not just internal to the organisation itself. When commenting on the importance of stakeholders, Halal (1996:64) referred to a stakeholder model of the organisation. This model views the organisation as a 'socio-economic system' composing of various equally important groups, a view which links in with Freeman's theory. Halal believes in the theory of the 'nature of the firm'. In this theory, it's stated that managers are dependent on stakeholders and have a need to combine the unique resource each stakeholder contributes, such as investor capital, talents of employees etc. This is a valid viewpoint and builds on the stakeholder theory by identifying the importance of such groups. An organisation that embraces the stakeholder theory is the ING group. In a speech at the Georgetown Business Ethics Institute in 2002, Ewald Krist, the CEO of ING stated: Greater influence is now put on organisations by external stakeholders, such as society itself. Shell fell foul of this in the early 1990's with its Brent Spar plant. The plant, decommissioned in 1991, was due to be dismantled by Shell and disposed of via Deepwater disposal. ...read more.

Conclusion

Well in certain contexts, yes, after all, managers are responsible for the performance of their staff and have a duty to them, their work, and their development. A happy employee is an efficient employee. Likewise, managers handle client and supplier relationships. Stakeholders can be managed by contracts, policies and guidelines, which will define business operations. Key to the management of stakeholders is communication. Conclusions It is evident in my findings that the consideration of stakeholders in strategic management is of paramount importance to organisations. To ignore these pertinent groups could be at great cost, and can be the difference between success and failure. In the world of business, it is crucial that organisations manage stakeholders and understand just how important they are to the progression of the organisation. Managers do have a key role in the management of stakeholders and to do this efficiently, it's important to know more about your stakeholders. How can organisations resolve conflict? Having company-wide policies reduces the complexity of managerial decision-making, and makes it clear that the company will have a strategy consistent with its policies and corresponding with duties to its stakeholders. This takes away the need for management to have overall responsibility for stakeholders, placing this firmly with the organisation itself. An important point to remember is that although stakeholders may be both organisations and people, ultimately you must communicate with people. It is crucial to identify the correct individual stakeholders within a stakeholder organisation and to work with them as much as possible. Efficient and worthwhile communication will assist the business throughout the decision making process and will allow the business to make the correct decisions at all times. ...read more.

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