Advanced Strategic Management: Stakeholders

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Questions and Answers

What are stakeholders primarily dependent on an organization for?

Monetary benefits

Market competition

Fulfillment of their own goals (correct)

Regulatory compliance

What characterizes the arms-length approach to managing stakeholder relationships?

Long-term relationship building

Collaboration and open dialogue

Use of secrecy and information asymmetries (correct)

Creating informal agreements

Which of the following practices is associated with an integrative approach to stakeholder management?

Excessive use of contracts

Maintaining secrecy in negotiations

Negotiating through adversarial tactics

Open exchange of relevant information (correct)

What is one strategic drawback of over-investment in stakeholder relationships?

Increased relational inertia Signup and view all the answers

Which of the following statements best describes stakeholders?

They include individuals and groups that depend on the organization. Signup and view all the answers

What is a key feature of both arms-length and integrative approaches to stakeholder management?

They can employ economic and legal sanctions. Signup and view all the answers

What does the term 'relational inertia' refer to?

A tendency to maintain established stakeholder connections Signup and view all the answers

What outcome can firms support by effectively managing stakeholder relationships?

Implementation of long-term strategies Signup and view all the answers

What is the primary objective of publicly-quoted companies?

Making a financial return for owners Signup and view all the answers

Which type of enterprise is typically managed by professional managers but remains under the control of a family?

Family businesses Signup and view all the answers

What is a significant governance issue in principal-agent theory?

Knowledge imbalances Signup and view all the answers

Why are state-owned enterprises considered important in developing economies?

They often support government policy objectives. Signup and view all the answers

What can happen if shareholders of a publicly-quoted company are unsatisfied?

They will seek to sell their shares or remove managers. Signup and view all the answers

What is a common issue related to corporate governance?

Difficulty in aligning shareholders' interests with management actions Signup and view all the answers

What is one reason family businesses may avoid high-risk strategies?

Need to retain family control Signup and view all the answers

What complicates the efficiency of monitoring in the principal-agent relationship?

Split attention of principals across many investments Signup and view all the answers

What is a potential downside of prioritizing short-term profits?

It can distract from necessary long-term investments. Signup and view all the answers

According to the content, what may require additional funding in growth strategies?

Investments through share issues or loans. Signup and view all the answers

Which framework can help identify key stakeholders?

Power, Legitimacy, Urgency framework. Signup and view all the answers

What is a key characteristic of entrepreneurial businesses?

They are often controlled by their founders. Signup and view all the answers

What factor is involved in the role and involvement of owners as stakeholders?

Modes of management and purpose. Signup and view all the answers

Why is evidence regarding focusing on specific stakeholder categories considered mixed?

Research on stakeholder management is still evolving. Signup and view all the answers

What can result from conflicting expectations among stakeholders?

Challenges in decision-making and resource allocation. Signup and view all the answers

What is a consequence of investing in specialized services within public services?

It diverts resources from standard services. Signup and view all the answers

Study Notes

Advanced Strategic Management: Stakeholder and Governance

Stakeholder governance is a crucial aspect of strategic management, influencing firm strategies
Internal resources and capabilities shape strategies, alongside the competitive environment (customers, suppliers, competitors)
Government policies (e.g., price hikes, smoking restrictions) significantly impact firm strategies

Examples of Stakeholder influences

France's new smoking restrictions and price hikes in 2027.
Increased prices on tobacco.
New Zealand's tobacco ban.
Marijuana legalization bills proposed in Kentucky and Minnesota.
Altria relinquishing ownership stake in a cannabis company.
Global shareholder activism (e.g., Petrus, Teleios, and Aareal)

Shareholder Activism

Record number of European campaigns in 2019.
Pressure on Aareal leading to CEO change and potential sale to PE firms (advent international, centerbridge).
Shareholders approved removal of supervisory board members in some cases.

Stakeholder Management

Stakeholders are individuals or groups depending on an organization. They also form the foundation of the organization itself.
Every firm is connected with stakeholders through a network of relationships.
Stakeholder management approaches differ, with each firm adopting a suitable method.
Two approaches to stakeholder management exist: 'Arms-length approaches'(which utilizes secrecy and asymmetry) and 'integrative approaches' (which values open communication).

Implications for Firms

Overinvestment in stakeholder relationships can lead to relational inertia.
Managing multiplicity of different issues and signals can create complexity.
Conflicting stakeholder expectations can necessitate complex decisions on resource allocation.
Conflicting expectations often exist between short-term and long-term goals, demanding intricate solutions.

Desirable and Undesirable Outcomes of Stakeholder Management

Desired outcomes include support, establishing long-term strategies and early warning for issues becoming mainstream along with conflict mitigation.
Undesirable outcomes include overinvestment, relational inertia, managing multiplicity, and conflicting input.

Conflicting Expectations

Short-term profits often counter long-term investments.
Financial security can conflict with investing in growth.
Excellence in specialized services (e.g., heart transplants) might strain resources from broader services (e.g., preventative dentistry), creating resource allocation issues.

Solutions to Conflicting Expectations and Stakeholders Management

Prioritize stakeholders based on their influence.
Identifying key blockers and facilitators of strategy.
Forecast stakeholder reactions to issues/strategies.
Determine whose expectations should be prioritized.

Mixed Evidence on Stakeholder Management

Evidence on focusing attention on certain stakeholder categories is mixed—some studies indicate different importance depending on the context.
Several researchers in the field offer a detailed analysis. (Laplume et al., Bettinazzi & Zollo, Bridoux & Vishwanathan, Romito, Vurro & Russo)

Owners as Key Stakeholders

Owners vary in their involvement according to management style and purpose.
Four main ownership archetypes exist (professional, personal, profit-focused exclusive, mixed)
Family businesses often retain control but face pressure to adapt to growing business needs.
State-owned enterprises might prioritize government policy in their decision-making.
Publicly quoted companies, with widespread ownership, focus on financial return

Corporate Governance

Corporate governance structures and systems are crucial to make sure accountability to stakeholders.
Connecting stakeholders' interest to management actions effectively is a critical aspect of successful strategy.
Issues can emerge from knowledge imbalance, monitoring limitations, and misaligned incentives between owners and managers.
Governance chain of large listed firms (showing roles, relationships, and different stakeholder groups) must exist.

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Description

Explore the intricate relationship between stakeholder governance and strategic management. This quiz covers the impact of internal resources, government policies, and shareholder activism on firm strategies. Examine real-world examples to understand these concepts in depth.