MGT 4090 - Week 2 Session 1: Stakeholders

Welcome to MGT 4090 Management Policy & Strategy: Week 2 Session 1

  • Date: Tue, 13 Jan 2026

Agenda

  • Discussion Points:

    • Who stakeholders are

    • Why firms should care about stakeholders

    • How to manage stakeholders

    • Introduction to Capsim 2.0

Learning Outcomes

  1. Critically appraise the role of stakeholders in a firm's quest for survival and growth.

  2. Implement strategies to manage the expectations of different stakeholders.

Recap

  • Inquiry: How many ways can a firm achieve competitive advantage?

  • Inquiry: How do firms create value in society?

Key Reflection Quote

  • Muhammad Ali: "Service to others is the rent you pay for your room here on earth."

Stakeholders Defined

  • Definition of Stakeholders: Organizations, groups, and individuals that:

    • Can affect or can be affected by a firm’s actions

    • Have a vested interest or claim in the performance and/or survival of the firm

  • Types of Stakeholders:

    • Internal Stakeholders: Stockholders, employees (executives, managers, and workers), board members.

    • External Stakeholders: Customers, suppliers, alliance partners, creditors, unions, communities, media, and governments.

Stakeholder Strategy

  • Stakeholder Strategy: An integrative approach to managing a diverse set of stakeholders to gain and sustain competitive advantage.

    • Benefits of Stakeholder Management:

    • Information Revelation: Satisfied stakeholders provide important information to the firm.

    • Trust: Increased trust leads to lower business transaction costs.

    • Adaptability: Greater flexibility and adaptability to changing environments.

    • Stability: More predictable and stable returns.

    • Reputation: Stronger reputation in the market.

Stakeholder Impact Analysis

  • A decision-making tool that helps recognize, prioritize, and address stakeholder needs.

  • Three Important Stakeholder Attributes:

    • Power: The ability of the stakeholder to influence the firm’s actions (i.e., get the company to do something it would not otherwise do).

    • Legitimate Claims: Stakeholders whose claims are perceived as legally valid or otherwise appropriate.

    • Urgent Claims: Stakeholders requiring immediate attention and response from the firm.

Steps in Stakeholder Impact Analysis

  1. Identify Stakeholders:

    • Key Stakeholders: Most powerful are stockholders and investors for public companies. If they are dissatisfied, they may sell stock, resulting in devaluation or a hostile takeover.

    • Other stakeholders include customers, suppliers, and unions, as their support is critical for smooth operations and performance.

  2. Identify Their Interests:

    • Use the Power-Legitimacy-Urgency (PLU) framework to evaluate stakeholder claims.

    • Shareholders and, at times, employees have the most legitimate claims.

    • Examples of pressure:

      • Takeover of Dell Computer.

      • Pepsi had to spin-off Frito-Lay brand.

      • Yahoo was compelled to sell to Verizon.

      • Carl Icahn urged Apple to buy back its stock.

  3. Identify Opportunities and Threats:

    • Potential threats to performance include:

      • Employee strikes

      • Consumer boycotts

      • Activist movements.

    • Case Study: The discontinuation of Concord due to:

      • Community complaints.

      • Customer service issues (exemplified by British Airways and Air France).

      • Activism related to environmental concerns (regarding fuel and speed).

  4. Identify Corporate Social Responsibilities (CSRs):

    • Reference: Exhibit 1.3 adapted from Carroll, A. B. (1991). The pyramid of corporate social responsibility emphasizes the moral management of organizational stakeholders.

  5. Address Stakeholder Concerns:

    • Utilize the PLU framework to effectively balance stakeholder expectations.

    • Aim to align stakeholder expectations (related to stakeholder theory as discussed by Prof. Freeman).

Individual Exercise: Who Are Your Stakeholders?

  • Activity Overview:

    • Consider different viewpoints and levels of impact:

    • Internal Stakeholders: Family, close friends.

    • External Stakeholders: Neighbors, peers, funding sources, managers.

    • List personal goals and evaluate stakeholder support:

    • Which stakeholders support these goals?

    • Which stakeholders might oppose these goals?

    • Determine how to address key stakeholder concerns.

    • Identify a pathway in stakeholder analysis to build support for key goals.

Summary

  • Key Aspects Understood:

    • Importance of stakeholders

    • Necessity of managing stakeholders

    • Strategies for stakeholder management

  • Learned about stakeholder theory.

Next Session

  • Date: Thursday, Jan 15, 2025

  • Upcoming Topic: External analysis

  • Reading Assignment: Chapter 3

Closing

  • Thank You!