Benefits of Stakeholders Approach
Strategic management is the process that helps an organisation in achieving its objectives and goals. The process of strategic management involves analysing the internal environment of the organisation, analysing the competitive environment, setting objectives, strategies evaluation and ensuring management roles across the organisation (Meyer, Neck and Meeks, 2017). Strategic management is the heart of every organisation it involves a process that will identify how an organisation stacks up in comparison to its competitors and identifying the threats and opportunities of an organisation. Introduction of new and advanced technologies, innovation and customer expectations evolve the concept of strategic management and it will help the organisation in thinking and making decisions strategically to remain successful (Vogel and Guttel, 2013). The designing and planning of strategies involve a risk and resources assessment. Strategic management is the process that has the ability that can make and break the organisation.
The aim behind the development of this report is to understand in deep three approaches of strategic management. The three approaches that are been selected for this report are stakeholder approach, dynamic capabilities and sustainable approach. The main aim of the stakeholder approach is to help the manager in knowing the best process with the help of which the organisation can satisfy the wants of the stakeholders of the organisation (Carmeli, Friedman and Tishler, 2013). The dynamic capabilities help the manager in assessing the new, innovative changes are taking place in the market, and it also helps the managers in knowing what changes are to be adopted and which are not in the process. And the third approach sustainable approach helps the manager as well as business in knowing the best way or process with the help of which the organisation can provide the least impact on the natural resources.
The concept of stakeholder approach is developed to suggest managers that they should make and implement such process that will satisfy the need and wants of stakeholders in long run. To ensure the stakeholders and to create valuable opportunities the organisation can take advantage of market imperfection to Benefits. The Stakeholder Approach gives emphasis to the promotion of shared interests, relationships and active management at the workplace (Bettis, et.al. 2016). The approach of stakeholders is based on the theory of stakeholder that work equally to understand business and to satisfy shareholder’s needs, which they expect from the organisation. The implementation of Stakeholders approach will enhance the value of the business and create a competitive advantage.
Implementation issues
- Helps in creating value through innovation: the organisation that implements the approach of stakeholder are more able to attract the high-quality workforce. Job satisfaction of employees provides their impact on the ability to foster innovation. The employees who are happy in their work and are satisfied with their respective jobs are more likely to engage in developing new and effective ideas and in long-term thinking (Wellens and Jegers, 2014). The organisation can use approach to generate new ways of satisfying demands of stakeholders. The key aspect of this approach is providing benefits to the stakeholders by revealing information about their utility functions.
- Generates Competitive Advantage: The stakeholder approach has the ability to generate competitive advantage because it builds a link between the firm and stakeholders. The organisation will have required information about the stakeholder in order to treat them well. By doing this the value, reputation, and loyalty of the organisation will be armoured among its stakeholders like its customers, suppliers, shareholders etc. The stakeholder approach will help the organisation in building a strong brand image and will increase trust among people (Wellens and Jegers, 2014). The organisation who adopts the Stakeholder Approach will get the information that is required by them to satisfy the needs of the stakeholder. That information will help the firm in creating core competencies.
The Stakeholder approach to strategic management involves issues during implementation are stakeholder accounting challenge, the public policy challenge, the ethical theory challenge, and behavioural stakeholder theory challenge. In stakeholder accounting challenge the organisation try to understand the total performance of a business. In ethical theory challenge once the organisation, consider stakeholder, as a person then the idea of ethics were automatically applicable (Ayuso, Rodriguez, Garcia-Castro and Arino, 2014). The public policy challenge includes the entire global financial crisis. At the end at behavioural stakeholder theory of challenge, the business will get filled with models of investor and manager behaviours.
- Overvaluing Stakeholders: it is been evaluated that the information which is obtained from the utility function of the stakeholders may include huge production cost that can be more than the benefits. Hence, this approach is best only for those organisation whose utility function is limited and according they can estimate the production cost as if making an investment or huge investment in an activity that generates less benefit for the organisation is not worthy. It is been also noticed in the approach that the power among stakeholders are not equal and the powerful actors get many benefits and rest get less (Ayuso, Rodriguez, Garcia-Castro and Arino, 2014). The Approach did not offer maximum returns to the stakeholders.
- Conflicting interests: the implementation of the stakeholder approach in the organisation will produce the divergent views of the stakeholders that it difficult to reach to the consent. Every stakeholder will provide more emphasis on self-interest and personal benefits. Hence it becomes difficult for the organisation to satisfy the demands of a large number of stakeholders and will also make governance of the company complicated (Ayuso, Rodriguez, Garcia-Castro and Arino, 2014). The process under which the Stakeholder Approach takes place considered to be much time to consume, as it involves so many parties in it.
The term dynamic capability first used in 1997 by Shuen, Pisano and Teece, they define the term, as ‘Dynamic capabilities are the ability of a firm, company or organisation that reconfigure, build and integrate the external as well as internal competencies to address rapidly changing the environment. The concept was developed from RBV that is the resource-based view approach that provides its focus more on the internal environment of the organisation rather than the external environment.
The Dynamic Capabilities approach of strategic management helps the senior manager in developing strategies for the development of the organisation. The strategies will help the organisation in addressing changes taken place in the organisation, in addition, the dynamic capability also help in maintaining minimum capability standards (Helfat and Peteraf, 2015).
For example: There is one industry that is working with the traditional technology and if new technology arrives in the market, it is not possible for the industry to change their traditional technology completely overnight. For change, the managers of the company have to make a detailed change management plan and accordingly they will make changes in only those areas where change is required.
- The Dynamic capabilities will provide external benefits to an organisation when they want to start or enter into a new business or want to extend a current business by using various modes such as joint venture, acquisition, mergers, and alliance (Schilke, 2014). This approach will help the company in knowing the required external changes in an organisation and also helps in selecting a suitable mode.
- The dynamic capabilities will help the organisation internally by creating unique and new products and services that will satisfy the needs of the customers when the time of change has emerged. This help in growing new market or extending the new market for the company, so it can serve its consumer with new innovative way.
The unbalanced dynamic capabilities are the major obstacles to organisational efficiency. Both the internal and external environment of the organisation keeps on changes to the new and innovative technologies and methods were introduced in the market. Every time when a company think of introducing any new technology the market is ready with its updated version. This is the main issue that arises at the time of implementation of the Dynamic capability approach. Dynamic Capability is not that type of capabilities that is fits in every stage of the environment (Kor and Mesko, 2013). The concept of Dynamic Capability is a breakdown in three levels these are regenerative, renewing and incremental dynamic capabilities. The actual resource based is used with the stable environment. The company for minor or small changes in a dynamic environment uses the incremental capabilities, under hyper environment renewing is used because it is a dominant dynamic capability, the regenerative is exerted type.
- Depends on the size of company: The concept of dynamic capabilities fully depends on the size of the company if the size of the company is small, the dynamic capabilities will not take much time in providing a solution for the issues. However, if the company is of large size it will consume more time and efforts.
- The performance of the Dynamic capabilities is based on the competitors, market demand and technical fitness.
- To address the issues of changes there is a basic requirement that is the manager should have a new level of skills when they are dealing with changes ((Kor and Mesko, 2013).
Limitation
The sustainable approach is the strategic management approach that is been developed with the purpose of helping the manager in meeting the organisational goals and at the same time, they will manage the sustainability of the natural resources and ecosystem on which the society and economy depend. The approach of sustainability is developed to shift the focus of managers on environmental protection, social development and economic development for the future generation. The term sustainable development can be used in various ways but the main crux of the approach is using the resources that are available in the environment effectively and efficiently and save them for the future generation (Singh, Guldhe, Rawat and Bux, 2014). The sustainable approach in business also known as the green approach. Sustainable business is those organisation that are providing very less amount of impact on the global, economy, society, community and local environment. The sustainable businesses always have human rights policies and progressive environment. A sustainable business is those organizations that involves the or participates in the green activities or environment-friendly activities to make sure that all the activities of the organisation such as manufacturing, products and processes have adequately addressed the current environment while maintaining profits.
- If the organisation or firm adopt the sustainable approach in their work or business, it will help them in improving their brand image and in achieving competitive advantage. In present business conditions, customers are giving priorities to the products that are showing a positive impact on the social, personal and environmental values.
- The sustainable approach helps the business in increasing their productivity and in addition, it helps in reducing the cost of the products.
- For each industry, the government has made some regulation that the companies have to follow. If the company is adopting the sustainable approach for their business the regulations will automatically be followed.
- The sustainable approach helps the companies in reducing the waste of material as well as natural resources.
- Not only sustainable approach reduces down the cost of the product but it also helps in maximising the profits. When the profits of the company get increase the shareholder start showing interest in their business.
In the current environmental situation, it is more important to be sustainable rather than formulating a sustainable strategy. It is been evolved that companies are aware of the positive effects of the sustainable approach but companies are still struggling with finding an appropriate approach to implement the sustainability (Carosio, Fontaine, Alongi, and Bourbigot, 2015). Understanding the concept of sustainability is the key of the implementation process. It is important that every person who is related to the organisation should understand the concept of sustainability
- One of the main limitations that the organisations are facing while applying sustainable approach is that a sustainable approach finds itself in the dualism that exists between the need for solution and strategies that surpass borders.
- Governance itself faces the constant uncertainty.
- Global patterns of consumption and production go in the opposite direction that required by the sustainable approach.
Conclusion
This report is developed to explain the various approaches that are generated through the strategic management process. It is must for the small sole proprietor to large global companies to implement the process and various approaches to strategic management in their working. The approaches of strategic management are very useful for the success of the business. The approaches of the strategic management help the organisation in combining resources and energies that are utilised by the organisation. In this report selectively three approaches of strategic management are been discussed these are stakeholder approach, dynamic capabilities, and sustainable approach. To conclude all the three approaches of the strategic management will help any organisation that are going to implement these approaches in their business. The stakeholder approach will help the organisation in knowing their needs and wants of stakeholders and that will help the organisation in bridging the gap between them. The sustainable approach will help the company in using resources effectively as the resources are limited and also help in saving the environment. The dynamic capabilities can be used by the organisation when they feel that new and innovative changes are taking place in the industry.
References
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