Stakeholder Influences And Organizations Responses

Introduction

The history of stakeholder takes its roots in the middle of the 60’s when the Stanford Research Institute developed the idea of "those groups without whose support the organization would cease to exist" To a certain extent, this new idea was a counter movement to the domination of the stockholders legitimacy who had all the power in the corporations. Some years later in 1984, Freeman submitted a definition in his publication “Strategic Management: A Stakeholder Approach” admitting that “Any group or individual who can affect or is affected by the achievement of the firm’s objectives” is a stakeholder. The concept of a stakeholder was born and many theorists worked – and still working – on it in order to improve definitions and theories.

In this assignment, we would like to take both, stakeholders and organizations, point of views in order to discuss about how stakeholders could affect an organization and how this organization could try to understand and control them.

The aim of our project is to show, through examples and theories, that both of the parts have something to win from each other and even if this idea is young, a lot of cases tend to prove its veracity on today’s corporation business world.

To help us to complete our work, we decided to divide it in two main parts. First of all, we will discuss about the tools that stakeholders have in their hands to affect an organization. Therefore, it is important to discuss about the current definitions but also explain though cases and examples what they want and how they can manage to get it. Secondly and lastly, we will try, from an organization point of view, to perceive how they can identify, understand and control stakeholders to make them become an opportunity instead of a threat.

I/How stakeholders could affect an organization

Before going deeply into the question that we set in the introduction, we reckon that it is important to clearly define the concept of stakeholder in order to fully understand the subject. First of all, the stakeholder can be, and this is the most important point, anyone. Indeed, as Freeman said:” Any group or individual who can affect or is affected by the achievement of the firm’s objectives “ is a possible stakeholder. Authors disagree on the range of stakeholders you should care about. Indeed, most of them think that you cannot please every group. Freeman gave two different definitions of the stakeholder idea in this book: The broad and narrow definition. The first one takes the stakeholders as large as it can: “any identifiable group or individual who can affect the achievement of an organization's objectives or who is affected by the achievement of an organization's objectives” while the second one use a restricted definition:” any identifiable group or individual on which the organization is dependent for its continued survival".

Later on, based on Freeman definition, plenty of authors worked on this concept over the years and enriched it with different ideas. Indeed, some authors divided stakeholders in categories such as primary stakeholder v secondary stakeholders , internal v external stakeholders, claimant v influencers, descriptive v normative view or some others also described that stakeholders “refers to groups of constituents who have a legitimate claim on the firm" . They are numerous definitions existing and it will be meaningless to mention and describe them all, you can find a brief recap of the most influent ones until 1995 in the appendix: Chronology of stakeholder definition.

Now that we defined the concept of stakeholders, it is important to know what they are looking for. Stakeholders are different in their approach and their interests and requests can vary. Indeed, some will have more/less interests and more/less power than others. Employees are going to be different from governments, stockholders different from communities, managers different from suppliers, unions different from customers etc.

The question that we can ask is: Do stakeholders can make a difference on a company policy?

We can assume that every company has a different approach on stakeholder opinions and they can decide to take it into account or not. Nevertheless, we can find examples where stakeholders received what they wanted.

The first example that we have is Carrefour. The French brand is convinced since 1996 that consumers have the right to choose what they eat. Since more than 10 years, Carrefour is fighting against the GMO and according to a survey made by the European Union: French care about their food . The intention of Carrefour was to meet their clients wish and propose them food without GMO.

As a second example, Greenpeace makes everything against companies that are not respecting the environment. In 2010, they launched a social media attack against Nestlé parodying the famous slogan of Nestlé “Have a break: Have a Kitktat” in a video that we can find on Youtube . Their action was to fight against Nestlé from using palm oil from an unsustainable Indonesian company. The first reaction of the company was to withdraw the video from the famous videos website but this led to a huge wave of criticism from customers on Social media websites. Nestlé needed to change their approach on this problem and finally cut relations with the Indonesian company. Later on they made radical changes and joined the Roundtable for sustainable oil and have the goal of using only sustainable palm oil by 2015.

Such examples are numerous and prove that stakeholder actions can have strong influence over a company.

Frooman in 1999 in his text “Stakeholder influence strategies” describes the influence of stakeholders and try to regroup them according to some criteria. Indeed, before his work, the lack of empirical studies limited the application of the Stakeholder Theory. As he said in his report:” nowhere has anyone attempted to go beyond the listing and discussion of particular influence strategies to construct a model of those strategies.”

Frooman tries to regroup them into clear categories, to do so, he says if a stakeholder has resources that the firm needs, he will have the control on them. From that point, Frooman defines two ways of resource control: Withholding strategy and Usage strategy.

On one hand, the withholding strategy is when a stakeholder decides to stop to provide resource to a company in order to make the firm changes its actions. For example, the current strikes in Indonesia for the pay rise of industrial employees.

On the other hand, the usage strategy is when a stakeholder continues to provide resources but with strings attached.

Frooman also goes further and uses the term of “pathway of influence”.

...