Strategic Management of Stakeholders Relationship

Introduction

Today’s corporate world is very competitive; so, there is the need for business organizations to develop policies to manage different stakeholders of the company. Various stakeholders are handled in diverse ways because they do not have similar needs and priorities (Freeman, Harrison, Wicks, Parmar, & Colle, 2010). Therefore, strategic management aims to identify these relationships and develop strategies to control each of them, depending on their potential or threat. The stockholders, the consumers, the government, the community, the employees, and the suppliers are some of the most important stakeholder groups in any organization. Some of these stakeholders are internal, while others are external; however, they all influence the overall success of the company (Bourne, 2012). Therefore, the essay presents the methods that strategic managers utilize to identify, manage, and maintain good relationships with these groups. In addition, the enterprises must observe business ethics as well as be socially responsible to all the stakeholders.

Customers

The customers are the single most important group of stakeholders in all organizations, whether private or public. It has become very hard to handle the customers in the modern world because of many factors such as market awareness and globalization. As such, the management has to understand all the concerns of its consumers in order to engage with them efficiently. According to Buttle and Maklan (2015), if a company intends to have a competitive advantage over its rivals, the best way to do so is by creating strong relationships with the consumers. Therefore, businesses have adopted varying policies of enhancing customer relationships. Collecting information from the market about the requirements of the customers through methods like surveys and questionnaires is the first strategy. The information will then assist in production as well as marketing of the company’s products and services. By doing so, the organization will not only satisfy the customers, but it may also increase its sales (Bourne, 2012). Moreover, the customers always want to feel that they are the company’s first priority. The firm can fulfill that by making their experiences memorable.

However, even if all organizations are engaged in business operations to earn profits, business ethics must be observed. For example, according to business ethics, customers expect to receive true information from the organizations that they deal with at all times. Secondly, the products should be of high quality and serve the purposes that the firm claims it does. Brink and Berndt (2008) observed that most businesses misled the consumers, especially through the salespeople and advertisements. Such unethical practices destroy the bond between organizations and their customers in the end. In addition, if the products sold ever happen to be faulty; it is ethical for the organization involved to take the responsibility for the mistake. Due to stiff competition and the need to protect a firm’s reputation, most corporations recall defective items. An example is the Toyota Motor Corporation which has recalled many cars in the past (Ferrell & Ferrell, 2014). The final ethical concern when dealing with clients has to do with firms respecting the terms of contracts.

Employees

The second group of stakeholders that is equally significant to a business just like the customers is the workforce. Sometimes, firms are so much focused on the consumers that they neglect their engagements with the employees. Dissatisfied members of staff can become the reason for the business failure as they are a major determinant of a company’s performance. The only way to build strong bonds with the staff is through the creation of a favorable working environment. Obviously, quality interactions with the labor force will be transmitted to the enterprise clients (Hartline & Bejou, 2012). One method of boosting employee satisfaction is through a transparent recruitment procedure. The process should also include the induction system as a worker’s experiences during the first few months in a new job are vital. As Ferrell and Ferrell (2014) suggest, firms should practice business ethics when hiring the staff. In order to be ethical, hiring should be based on merit as opposed to other factors such as nepotism and other favors. Any organization with ethical standards is also keen on gender and race equality. People should not be denied their rights to join a certain firm because of their gender, race, or religion. Nonetheless, a business may have to consider hiring some people from its location as part of its social responsibility to the society (Lee & Kotler, 2013).

In addition, an enterprise will definitely have a better relationship with the workforce if the compensation and benefits package is fair and competitive. A characteristic of such a package guarantees equity of pay both in and outside the firm. Workers receiving a salary comparable to what others in the similar jobs earn have high morale. Additionally, standardizing salaries in the company for similar job groups reduces conflicts and complaints. Nevertheless, the earnings need to reflect the level of education, experience, and other skills possessed by the workers. Some employers assume that a high pay only will keep their employees satisfied. In this decade, members of staff expect more than just a monetary compensation from their jobs. Adding various benefits like sick leave, insurance plans, pension plans among others will fulfill such exectations (Tafoya, 2010).

According to Hillebrand (2010), the working conditions which involve day-to-day interactions with the workers play a significant role in managing them. Some issues such as the daily flow of information from the leaders to the subordinates affect the company’s performance. Besides, employees prefer to work with managers who can interact with them, especially through regular meetings. How problems are handled in the company also matters a lot to the staff. The management can also perform surveys at least once a year to learn the level of staff satisfaction and ways of improving it.

Stockholders

Unlike the other groups of stakeholders, the owners (stockholders) of the organization are only interested in the short-term profitability of the company. Therefore, conflicts between the corporation and its shareholders may develop whenever it is unable to achieve this goal. The differences are often referred to as the agency problem (Hill & Jones, 2011). The leadership acts as an agent of the shareholders as they run the firm on their behalf. Consequently, the management has to learn ways of maintaining good relationships with the stakeholders but still mind the welfare of the other groups. For example, during the general meetings, it is imperative to inform the stockholders of the problems that the business faces. Most enterprises share only financial data with the shareholders, thus keeping them in the dark about the reality (Hill & Jones, 2011). The stockholders have the authority to remove the management from power if their relationship continues to strain. Such action may reduce the performance of the firm, thus giving more reason to the management to strategically handle the healthy relationship.

Since the stockholders prefer profits in the short term, the management may compromise company’s ethical standards in trying to satisfy them. Some managers are known to provide shareholders with the financial statements that are manipulated. Such financial accounts inflate the profits of the organization. Yet others may produce low quality products to earn profits easily. Bourne (2012) noted that the solution to such organizational malpractices depends on the long-term objectives. While it is crucial to meet the shareholders’ expectations, it is also necessary to ensure that the company achieves long-term prosperity. It can boost efficiency, offer quality goods, and services as well as observe corporate social responsibility (Ferrell & Ferrell, 2014).

Suppliers

Around the 1980s, most organizations were not concerned about their relationships with suppliers. However, over time they discovered that having stable bonds with the suppliers was crucial in the business performance. They borrowed this knowledge from Japanese firms, which benefited a lot from the relationship with the procurement players (Hillebrand, 2010). Nowadays, all organizations all around the world have realized the importance of paying special attention to the procurement system. This has been facilitated by the competitive business world and an advanced technology amongst other growing trends. Therefore, the time for treating suppliers as just an extra party to a company has long been gone (Hill & Jones, 2011).

The first approach to the supplier-business relationship is engaging with the suppliers from the beginning of the product generation. This facilitates a close working relationship between the two parties, and the company will gain from quality supplies. Moreover, it can also get better negotiation terms in the form of fair costs. Secondly, making payments for the provisions delivered in time should be the first priority for the company. Furthermore, it is good to share some information about the firm with the suppliers to keep them conversant. Information about the launching of new products, new clients as well as promotions may build a better relationship. Lastly, suppliers expect their customers to notify them on their lead time to assist in timely delivery of supplies. Other details related to the lead time such as unexpected changes are also significant (Tafoya, 2010).

On the other hand, there are ethical standards to uphold when interacting with the suppliers. The examples of unethical behavior include bribery and other forms of corruption. Some companies are known to accept gifts from potential suppliers in order to favor them over others in a procurement procedure. A firm may also try to get preferential prices by giving gifts to a supplier. During the period of doing business with the suppliers, there is an exchange of confidential information which a company should never release to third parties. The confidentiality rule of business secrets is applicable even if the relationship with the supplier is over. The company should also be socially responsible by following all laws, even the environmental regulations (Freeman, Harrison, Wicks, Parmar, & Colle, 2010).

Community

In this century, apart from the consumers, a company must also build meaningful interactions with the society. The nature of the local community determines the impact that it has on the business enterprise. This group of stakeholder is more concerned with the company’s ability to honor its corporate social responsibility than any other group (Schwartz, 2011). For that reason, most firms, especially the multinationals, have realized that their corporate social responsibility efforts can make a big difference in building a popular brand. Different tools are available for organizations to utilize in reaching out to the community.

The first and most common form of working together with the local society is conforming to the international as well as the local environmental guidelines. The community expects the business to conduct its operations without damaging the environment through pollution. It is necessary to reduce or eliminate wherever possible all kinds of contamination such as water, air, and soil pollution. According to Weiss (2014), some corporations like Coca-Cola have engaged in conflicts with the local communities because of their ways of conducting business. For example, there was a time when Coca-Cola was highly criticized for using a lot of water in some dry parts of India without considering the locals’ needs. Adopting ways of environmental sustainability is also part of the firm engaging with the local people. Organizations should aim to reduce the wastage of energy, water, raw materials, and even the office resources. Most companies try to recycle as many resources as possible.

Lee and Kotler (2013) also identified supporting the community through sponsorship of sports and charities as a strategic way of earning its respect. The activities may range from sports and health issues to efforts to alleviate poverty in the neighborhood. After much backlash from the global community, the Coca-Cola Company embarked on campaigns supporting physical exercises among children. Equally, Unilever supports poor women in India by empowering then with entrepreneurial skills while encouraging healthy practices like hand-washing after toilet in African countries (Weiss, 2014). While corporations improve the living standards of these communities, they also benefit from the growth of customer base and creation of a valuable brand.

Government

It is interesting to note that the majority of businesses ignore their relationship with the government. When this association is strained, the government can restrict the company’s operations. The government’s economic value to the business is only second to that of the customers (Hill & Jones, 2011). In this relationship, the government has the greatest power, but the organization can always implement some measures to improve it.

Weiss (2014) discussed various situations when the government and the business clash over ethical standards. They include labor laws, product quality, investor protection, and environmental issues among others. By having clear ethical standards in place, companies can eliminate these conflicts. They can do so by complying with government regulations of taxation, employment laws, and any other law in the country of operation. Indeed, the government is only concerned with enforcing the law and protecting the other stakeholders to the businesses. Consequently, corporations only need to be responsible for sustainable coexistence with the government agencies (Freeman, Harrison, Wicks, Parmar, & Colle, 2010).

The business organizations will certainly achieve a lot having a good relationship with the government. Various bodies of the government usually assist businesses with financial support. In addition, the firms enjoy operating in an environment that supports economic growth. As a political party, the government is responsible for providing its citizens with favorable conditions to advance their economic goals (Buchholtz & Carroll, 2014). In the same way, the government will reduce natural monopolies, eliminate negative externalities, manage excessive competition and profits while still accomplishing social objectives (Tafoya, 2010).

Conclusion

The above mentioned aspects are not the only stakeholders’ relationships, but they are the most significant to the survival of an enterprise. It is worth noting how different interests of various stakeholders get complex in the current corporate world. Therefore, corporations practice strategic management to try to deal with all the relationships while still achieving general goals. In order to facilitate this, it is fundamental to find ways of managing the current relationships by assessing them regularly for opportunities and threats. The organizations with a high possibility of surviving in the future are those committed to satisfying the needs of their current as well as prospective stakeholders. It is not enough for a company to just make profits; it also involves all the interest groups in its operations. One of the roles of strategic management is that it empowers the managers to prioritize and focus on every stakeholder. The essay has confirmed the consequences of ignoring some stakeholders like the community and the government. Strategic management does not guarantee business leaders smooth engagement with the stakeholders, but it aids in handling the challenges. Employees will still strike; consumers will complain; and suppliers may end their relationships with a company. However, firms will not overlook the management of the stakeholders’ engagement to achieve efficiency in their operations.