Business Strategies
Partnering with External Stakeholders
Written by Gregory Steffens for Gaebler Ventures
Because organizations face increasingly complex and competitive markets, the relations with their external stakeholders become vital. This is part one of a two part series of articles addressing each of the most common stakeholders and how to maximize their satisfaction with the company.
Company stakeholders have the ability to influence the performance of the firm.
Three aspects determine the capability of a stakeholder to influence firm performance and strategy.
Persons or groups can impact the company economically, politically, or strategically.
Economically, stakeholders such as customers and suppliers have the power to increase or decrease the firm's profit margins.
Politically, stakeholders like activist groups and lobbyists can influence the laws and regulations that govern the firm's operations.
Finally, some persons or groups can impact the company strategically. They possess valuable resources vital to the company's future success. Gaining access to their physical and intellectual resources can dramatically impact the strategic position of the firm.
Identifying Company Stakeholders
Companies must identify these stakeholders and find ways to mutually benefit both parties. In this two-part article, we take a look at the various stakeholder groups, including customers, suppliers, competitors, governments/communities and activist groups.
Customers
The first stakeholder group includes the consumers of the firm's products. By listening to customers' contributions, organizations adapt their products to better meet the desires of their clients.
Traditionally, firms have accomplished this by conducting market research and developing products based on this information. Subsequently, the company launches an advertising campaign to highlight the benefits and uses for the product. Any complaints or suggestions regarding the product goes through a customer service department and may or may not be transferred to other departments.
However, many companies are attempting to increase consumer involvement throughout the product development process by including them on design teams and in product testing. By involving end users, companies discover ways to improve their products from the people who will ultimately be using them.
The goal is to enhance timely communications between the company and its customers, and, through this process, both parties benefit. Consumers receive a product that encompasses their specifications while the company earns the profit and brand equity from having a high-quality product. In theory, most problems or concerns with the product will be discovered during the development phase which is preferable to augmenting the product after its original release to consumers.
Suppliers
One of the major stakeholders for most firms includes the organizations supplying their resources.
Companies strive to find suppliers that will offer high quality resources for low prices and usually have to trade-off between the two. To accomplish this, they create and encourage competition between potential suppliers. If one supplier stands out from the herd, the firm agrees to a contract that will stipulate the price and set quality benchmarks for the resources.
However, companies need to go beyond simple purchasing contracts to fully exploit the benefits of these relationships. Just like customers, suppliers should be involved with the product designing process.
Due to their expertise or knowledge regarding the supplied resource, suppliers may provide suggestions about improving a product's design and characteristics. Eventually, this cooperation could give rise to joint developments of new products that can benefit both companies.
In addition, many companies and their suppliers have found that sharing information systems can be efficient and profitable. Having a uniform computing platform between the two firms creates many advantages including lower costs, less complexity throughout the organizations, increased ease of communication, increased efficiency in operations, and better customer service.
A single platform allows managers and employees of the companies to have an open dialogue regarding their operations. By enhancing the communication between departments and organizations, the firms attempt to minimize confusion and maximize cooperation.
In our next article on company stakeholders, we will take a look at competitors, governments/communities and activist groups.
Gregory Steffens is a talented writer with a strong interest in business strategy and strategic management. He is currently completing his MBA degree, with an emphasis in finance, at the University of Missouri.
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