EAD5963
MANAGING FOR STAKEHOLDERS
Session #14
Formulating Strategies for Stakeholders
(Chapter 5) Freeman, R. E. (1984)
Strategies For Assessing a Managing Organizational
Stakeholders – Savage et al (1991)
Formulating Strategies for Stakeholders
Source: Hitt, Ireland,
Hoskinsson (2005)
Formulating Strategies for Stakeholders
Formulating Strategies for Stakeholders
Formulating Strategies for Stakeholders
Source: Porter's Five Forces Source: mmu-strategicmanagement.blogspot.com
Formulating Strategies for Stakeholders
1
Organizationcentric
High
Relative
cooperation
potential
Strategic/
instrumental
Strategic Management: Freeman
(1984)
High
Low
Swing
(Change the rules)
Offensive
(Exploit)
Defensive
(Defend)
Hold
(Hold current position)
Low
Relative competitive threat
Generic Stakeholder Strategy (Freeman, 1984)
1
Organizationcentric
Strategic/
instrumental
Strategic Management: Freeman (1984)
Offensive Strategies


Should be adopted if a
stakeholder group has
relatively high cooperative
potential and relatively low
competitive threat in order to
bring about stakeholder’s
cooperative potential.
Examples: Attempts to change
stakeholder objectives or
perceptions, or to link the
program to others that the
stakeholder views more
favorable.
Defensive Strategies


Should be adopted if a
stakeholder group has a
relatively high competitive
threat and relatively low
cooperative potential to
prevent competitive threat on
the part of these stakeholder.
Example: Reinforcing current
beliefs about the firm,
maintaining existing
programs, letting the
stakeholder drive the
transformation process.
1
Organizationcentric
Strategic/
instrumental
Strategic Management: Freeman (1984)
Swing Strategies


Should be adopted if a
stakeholder group has
relatively high cooperative
potential and competitive
threat.
Examples: Changing some
of the following - the rules,
the decision forum,
transaction process.
Hold Strategies


Should be adopted if a
stakeholder group has a
relatively low competitive
threat and cooperative
potential to continue current
strategic programs and
maintain the current
stakeholder position.
Example: Doing nothing
and monitoring existing
programs
Analytic Stakeholder Theory


All stakeholder theory that is not strictly normative.
Types:
1. 1st: Primarily organization-centric, stakeholder-centric
or focus on organization-stakeholder relation
2. 2nd: Within the above categories, they are
strategic/instrumental or descriptive/positive.
Descriptive
• Stakeholders are defined as to whether they are affected by the firm and/or can
potentially affect the firm.
Instrumental
• Stakeholders are defined by the need of management to take them into
consideration when trying to achieve their goals.
Analytic Stakeholder Theories
Focus along the organization-stakeholder continuum
Focusing on the
organizationstakeholder
relation
Organization -centric
Analytic
Category
•
Strategic/ •
Instrumental •
•
•
•
Freeman (1984)
Savage et al. (1991)
Clarkson (1995)
Jones (1995)
Mitchell, Agle, and
Wood (1997)
Rowley (1997)
Descriptive
/Positive
PART 1
•
Friedman and
Miles (2002)
•
Hill and Jones
(1992)
PART 2
StakeholderCentric
•
•
Frooman (1999)
Rowley and
Moldoveanu
(2003)
PART 3
Analytic Stakeholder Theories
Freeman (1984)
Savage et al. (1991)
Organizationalcentric
Strategic /
Instrumental
Clarkson (1995)
Jones (1995)
Mitchell, Agle & Wood
(1997)
Rowley (1997)
Organization–stakeholder relation, in which the corporation occupies a central
position and has direct connections to all stakeholders
1
Organizationcentric
Strategic/
instrumental
Strategic Management: Freeman
(1984)
Focuses on the relative power of stakeholders and
their potential to cooperate or threaten corporate
strategy.
Suggests that the success of particular strategic
programs can be affected by a stakeholder’s
potential for change and its relative power.
Management can seek strategic guidance by
examining the relative competitive threat and relative
cooperative potential of each stakeholder and
classifying the stakeholder accordingly.
4 strategies are distinguished:
2
Organizationcentric

Strategic/
instrumental
Strategies for Assessing and
Managing Stakeholders: Savage et al.
(1991)
Savage et al. (1991) build on Freeman’s model using the same
constructs: stakeholder capacity and willingness to threaten or
cooperate with the corporation.
High
High
Potential for
cooperation
Low
Potential for threat
Low
Stakeholder Type 4
Mixed blessing
Strategy: Collaborate
Stakeholder Type 1
Supportive
Strategy: involve
Stakeholder Type 3
Non-supportive
Strategy: Defend
Stakeholder Type 2
Marginal
Strategy: Monitor
2
Organizationcentric

Strategic/
instrumental
Strategies for Assessing and
Managing Stakeholders: Savage et al.
(1991)
Type 1 Stakeholders:
Low potential for threat and a high potential for
cooperation.
 Corresponds to Freeman’s ‘offensive’ category and
associated strategy of exploitation.
 Consider ‘supportive’ stakeholders as the ‘ideal type’ and
include the board of trustees, managers, employees, and
parent companies.
 This category can include suppliers, service providers, and
non-profit organizations.
 Both models agree on a strategy of involvement, although
Freeman explicitly states ‘exploitation’, indicating a greater
power distribution in favor of the organization.

Strategy 1: Involve the Supportive Stakeholder


By involving supportive stakeholders in relevant
issues, executives can maximally encourage
cooperative potential.
By implementing participative management
techniques, decentralizing authority to middle
managers, or increasing decision-making
participation of these stakeholders
2
Organizationcentric

Strategic/
instrumental
Strategies for Assessing and
Managing Stakeholders: Savage et al.
(1991)
Type 2 stakeholders:
Low potential for threat and a low potential for
cooperation.
 Are marginal: They are unconcerned about their stake in the
business as they have a low potential for threat or
cooperation.
 This corresponds to Freeman’s ‘hold’ quadrant.
 Examples: Consumer interest groups, professional
associations for employees, and shareholders.
 Both models suggest a monitoring strategy as certain issues
could cause these stakeholders to change category,
increasing their potential threat.

Strategy 2: Monitor the Marginal Stakeholder



Monitoring helps manage marginal stakeholders whose
potential for both threat and cooperation is low.
By recognizing that these stakeholders’ interests are
narrow and issue specific, executives can minimize the
organization’s expenditure of resource.
Only if the issues involved in the decisions are likely to
be salient to those stakeholders should the organization
act to increase their support or to deflect their
opposition.
2
Organizationcentric

Strategic/
instrumental
Strategies for Assessing and
Managing Stakeholders: Savage et al.
(1991)
Type 3 stakeholders:
Non-supportive, with a high potential for threat and a low
potential for cooperation.
 These stakeholders are the most distressing for corporations,
such as competitors, unions, the media, and government.

Strategy 3: Defend against the Nonsupportive
Stakeholder



The defense strategy tries to reduce the
dependence that forms the basic for the
stakeholders’ interest in the organization
The connection of stakeholder management to
broader strategic management is very clear,
involving many traditional marketing and strategic
notions for handling competitors.
Executives should always try to find ways to change
the status of key stakeholders.
2
Organizationcentric

Strategic/
instrumental
Strategies for Assessing and
Managing Stakeholders: Savage et al.
(1991)
Type 4 stakeholders:
Mixed blessing, with high potential for threat and high
potential for cooperation.
 This includes employees in short supply, clients, and
organizations with complimentary products and services.
 Both models suggest a defensive strategy.
 However, the strategic advice differs:
 Savage et al. suggest collaboration whereas Freeman
suggests changing the rules
 Both approaches have the same end in sight:
 To enhance the potential for cooperation and reduce the
potential for threat.

Strategy 4: Collaborate with the Mixed Blessing
Stakeholder



If business executives maximize the stakeholders’
cooperation, potentially threatening stakeholders will
find it more difficult to oppose the organization.
Effective collaboration may well determine the longterm stakeholder-organization relationship.
If this type of stakeholder is not properly managed
through using a collaborative strategy, it can easily
become a nonsupportive stakeholder.
2
Organizationcentric



Strategic/
instrumental
Strategies for Assessing and
Managing Stakeholders: Savage et al.
(1991)
The power of threat is determined by resource dependence,
the stakeholder’s ability to form coalitions, and relevance of
the threat to a particular issue.
Examining the quality and durability of the organization–
stakeholder relationship can help in assessing the potential for
threat.
The potential to cooperate is partially determined by the
stakeholder’s capacity to expand its interdependence with the
organization: the greater the dependence, the greater the
willingness to cooperate.
2
Organizationcentric



Strategic/
instrumental
Strategies for Assessing and
Managing Stakeholders: Savage et al.
(1991)
Willingness to cooperate can also be affected by the business
environment.
Managers need to continually assess stakeholder interests,
capabilities and needs, as stakeholder engagement tends to
be issue-specific.
Consequently, managers cannot expect a previously supportive
stakeholder to be cooperative on future issues.
Clarifying Management’s Stake in
Stakeholder Management
①
②
③
④
⑤
⑥
Analyzing stakeholders’ stakes and power
Identifying stakeholders’ critical dimensions
Finding ways to facilitate managers’ abilities to
challenge their own assumptions
Examining how managers may effectively negotiate
with stakeholders
Handling conflicting demands from equally powerful
key stakeholders
Creating and assessing strategies to enhance
cooperation with stakeholders
Case Study: From Conflict to Co-Operation
2
Organizationcentric
Strategic/
instrumental
Strategies for Assessing and
Managing Stakeholders: Savage et al.
(1991)
Low
Involve the Supportive
Stakeholder
Defend against the
Nonsupportive Stakeholder
Monitor the Marginal
Stakeholder
High
Collaborate with the Mixed
Blessing Stakeholder
Low
Potential for cooperation
High
Potential for threat
END