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All about stake holders and types od organisational strategies


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All about stake holders and types od organisational strategies

  1. 1. BUSINESS STRATEGY - 3  STAKEHOLDERA stakeholder is anybody who has an interest in an organization and who will beaffected by the decisions that the organization makes. By anybody I mean individualpeople or I could mean groups or I could mean organisations. What I mean by interestis that if the organization does well they will benefit positively in some way. And if theorganization does badly or goes bankrupt they will be negatively affected in some way.For example, employees are stakeholders of an organization. They are interested in thebusiness and want the business to do well because if the business does well they willcontinue to work there and get their salaries. If the organization does badly they will losetheir jobs and not get their salaries.  STAKEHOLDER ANALYSISA stakeholder analysis is all about: Finding out who your stakeholders are, the interest they have in the organization the influence they have on what the organization does help you to understand them.InterestSome stakeholders have a little interest in the organization. Some stakeholders have alot of interest in the organization.Influence / PowerSome stakeholders have a little influence in the organization. Some stakeholders havea lot of influence on what the organization does.Example of Interest and Influence / PowerFor example, employees have a lot of interest in the organization because it is theorganization that gives them a job and pays them a salary for doing that job. They alsohave a lot of influence over what the organization does. They can stop doing their jobsand go on strike. This will affect the organization very badly because the work will notget done and the organization will lose money.
  2. 2. STEPS IN THE STAKEHOLDER PROCESSThese are the steps to be followed when doing a stakeholder analysis (Mindtools,2012):Step 1 – Identify Your StakeholdersStep 2 – Prioritize Your StakeholdersStep 3 – Understand Your Key StakeholdersLULU HYPERMARKET’S STAKEHOLDERSThese are the stakeholders of Lulu Hypermarket. This shows Step 1 of the stakeholderanalysis. Owners Employees Suppliers Community Government Sponsor Creditors Customers Their bank/s Potential customers Investors / shareholdersSome of these are internal stakeholders and some are external stakeholders as shownin Table 1.TABLE 1: INTERNAL AND EXTERNAL STAKEHOLDERS OF LULUInternal Stakeholders External StakeholdersEmployees SuppliersShareholders/Owners Potential customersCreditors GovernmentBoard members Community
  3. 3. Sponsor BanksInternal stakeholders are people who are already committed to serving yourorganization . They are all effected by wages and job stability. Managers may getbonuses so they want the business to be very successful. Owners/Shareholders wantthe best for the company so they make more money.And if something happens to thecompany they will be effected.External stakeholders are people who are not directly working within the business butare affected in some way from the decisions of the business. Customers are interestedin prices and quality of the product. Suppliers are intersted in the success and stabilityof the company so they can ensure they will have a customer in the future. TheGovernment is interested as companys (especially large ones) pay taxes and emplypeople.When identifying stakeholders and rating their level of interest and involvement in theproject, it will become important to use some sort of a tool — a rating scale, an influencediagram, or a chart form to identify the level of power, influence, interest, or impact thatthe stakeholder may have on the project.  POWER/INTEREST GRIDAll stakeholders have an influence on the organization and they all have an interest inthe organization. Some of these stakeholders have more influence than others andsome have more interest. This is shown in Figure 1.
  4. 4. Figure 1: Stakeholder Power / Influence and Interest MatrixSource: (Bryson 1995: 71 -5).This diagram shows step 2 of the process of stakeholders analysis and shows thatwhen an organization analyses its stakeholders it will put it stakeholders into one of fourboxes or quadrants according to how much interest and power/influence thesestakeholders have on the organization. Figure 1 also shows who the most importantstakeholders are and who the least important stakeholders are. By putting thestakeholders into these different boxes or quadrants the organization will be able todevelop strategies for their stakeholders in a better way because they will base theirstrategies on how much power each stakeholder has and how much interest they have.Figure 2 shows the strategies that should be used for each group of stakeholders.
  5. 5. FIGURE 2: STRATEGIES FOR EACH GROUP OF STAKEHOLDERS Source: Power versus interest grid adapted from Eden and Ackermann (1998: 121-5, 344-6).Figure 2 shows that for each group there will be a different strategy because of thedifferent level of interest and influenceUNDERSTANDING STAKEHOLDERS BETTERTo help the organization understand their stakeholders better, they should askthemselves these questions (Mindtools, 2012): What financial or emotional interest do they have in the outcome of your work? Is it positive or negative? What motivates them most of all? What information do they want from you? How do they want to receive information from you?
  6. 6. What is the best way of communicating your message to them? What is their current opinion of your work? Is it based on good information? Who influences their opinions generally, and who influences their opinion of you? Do some of these influencers therefore become important stakeholders in their own right? If they are not likely to be positive, what will win them around to support your project? If you dont think you will be able to win them around, how will you manage their opposition? Who else might be influenced by their opinions? Do these people become stakeholders in their own right?These questions should be asked in Step 3 of the stakeholder analysis process.It is important that we ask these questions. For example, we can find out more aboutour customers when we ask these questions. These questions will help us to find outthe buying roles in a family. These roles are: Initiator Influencer Decision maker Buyer UserBy knowing who initiates the buying process we will be able to target this person. Byknowing who is the influencer we can target this person. By knowing who is the decisionmaker, we can target this person. By knowing who is the buyer we can target thisperson. By knowing who is the user we can target this person. Each of these personswill receive a different message from us and together all our messages will translate intoa purchase.QUESTION 2This question is about three types of strategies that an organization can follow: Substantive strategy Limited growth strategy Retrenchment strategy
  7. 7.  SUBSTANTIVE GROWTHSubstantive growth strategies are those companies that want to grow quickly and fastand who think that their sales will be high enough to carry or absorb the increase incosts will go for a substantive growth strategy.The following are the strategies in substantive growth: horizontal and vertical integration, related and unrelated diversification.  Horizontal integration and Vertical integration :(Google images ,2012)Source: (2012, 887-9)  Vertical integration is the process in which several steps in the production and/or distribution of a product or service are controlled by a single company or entity, in order to increase that company’s or entity’s power in the marketplace.Example of vertical integration: while you are relaxing on the beach sipping chilled cold drink,the brand that you see on the bottle is the producer of the drink but not necessarily the maker ofthe bottles that carry these drinks. This task of creating bottles is outsourced to someone who cando it better and at a cheaper cost. But once the company achieves significant scale it might planto produce the bottles itself as it might have its own advantages (discussed below). This is what
  8. 8. we call vertical integration. The company tries to get more things under their reign to gain morecontrol over the profits the product / service delivers. Types of Vertical Integrations:There are basically 3 classifications of Vertical Integration namely: 1. Backward integration – The example discussed above where in the company tries to own an input product company. Like a car company owning a company which makes tires. 2. Forward integration – Where the business tries to control the post production areas, namely the distribution network. Like a mobile company opening its own Mobile retail chain. 3. Balanced integration –A mix of the above two. A balanced strategy to take advantages of both the worlds.  Horizontal Integration:Much more common and simpler than vertical integration, Horizontal integration (also known aslateral integration) simply means a strategy to increase your market share by taking over asimilar company. This take over / merger / buyout can be done in the same geography orprobably in other countries to increase your reach.Examples of Horizontal Integration are many and available in plenty. Especially in case of thetechnology industry, where mergers and acquisitions happen in order to increase the reach of anentity.  Related and unrelated diversification:Related diversification is when a business adds or expands its existing product lines ormarkets. For example, a phone company that adds or expands its wireless products andservices by purchasing another wireless company is engaging in related diversification.Un-Related diversification is when a business adds new, or unrelated, product lines ormarkets. For example, the same phone company might decide to go into the televisionbusiness or into the radio business. This is unrelated diversification: there is no direct fitwith the existing business.  LIMITED GROWTHA limited growth strategy is suitable for those organizations that do not want to have toborrow money to grow the company. Limited growth can be achieved for companieswho want to grow through sales. Also, those companies who do not want to givemanagers the chance to focus on managing the business and at the same time beingable to spend time on growing the business.Limited growth strategies are:
  9. 9. Market penetration Product development and Market development.These strategies are shown in Figure 3.FIGURE 3: LIMITED GROWTH STRATEGIESSource: Google Images, 2012Figure 3 shows that: 1. Market penetration - involves selling more established products into existing markets, often by increased promotion or price reductions or better routes to market, for example online. 2. Product development - involves developing new products or services and placing them into existing markets.
  10. 10. 3. Market development - entails taking existing products or services and selling them in new markets. 4. Diversification - involves developing new products and putting them into new markets at the same time. Diversification is considered the most risky strategy. This is because the business is expanding into areas outside its core activities and experience as well as targeting a new audience. It also has to bear the costs of new product development.  RETRENCHMENTThis strategy is the right one for organizations who are facing tough economic times.The organization will cut down on its activities and so will not do so many activities.They will sell assets, discontinue unsuccessful product lines, dismiss employees,restructure debt and maybe even liquidate the organization. all this will save themmoney and allow them to be prepared to grow when things change and the situationimproves. .Retrenchment strategies are: Divestment cost reduction, turnaround, bankruptcy or liquidation. DivestmentDivestment is a form of retrenchment strategy used by businesses when they downsizethe scope of their business activities. Divestment usually involves eliminating a portionof a business. Firms may elect to sell, close, or spin-off a strategic business unit, majoroperating division, or product line. This move often is the final decision to eliminateunrelated, unprofitable, or unmanageable operations. Cost reduction―Cost reduction is to be understood as the achievement of real and permanentreductions in the unit cost of the goods manufactured or services rendered withoutimpassing their suitability for the use that is intended‖- ICWA London.
  11. 11. In other words the process of identifying and eliminating unnecessary costs to improve the profitability of a business is a cost reduction program. It may be implemented when a company is having financial problems and must "tighten its belt." In some cases, the firm is initiating a policy to eliminate waste and inefficiency. Turnaround The concept or meaning of turnaround strategy covers following points:1. Turnaround strategy means to convert, change or transform a loss-making company into a profit-making company.2. It means to make the company profitable again.3. The main purpose of implementing a turnaround strategy is to turn the company from a negative point to a positive one.4. If a turnaround strategy is not applied to a sick company, it will close down.5. It is a remedy for curing industrial sickness.6. Turnaround is a restructuring strategy. Here, a loss-bearing company is transformed into a profit-earning company, by making systematic efforts.7. It tries to remove all weaknesses to help a sick company once again become strong, stable and a profit-making institution. Bankruptcy / liquidation: Bankruptcy is a legal status of an insolvent person or an organization, that is, one who cannot repay the debts they owe to creditors. And when a business or firm is terminated or bankrupt, its assets are sold and the proceeds pay creditors. Any leftovers are distributed to shareholders. Hence Creditors liquidate assets to try and get as much of the money owed to them as possible. They have first priority to whatever is sold off. QUESTION 3 BACKGROUND This question is about the strategy that American Airlines has chosen.  AMERICAN AIRLINES: Founded in 1930, American Airlines, formerly American Airways, Inc. began trading on the New York Stock Exchange on June 10, 1939. Originally headquartered in New York City, where it continues to maintain a strong presence, American moved its headquarters to Fort Worth, Texas, in 1979 and has since become one of the largest airlines in the world, contributing nearly $100 billion to the U.S. and
  12. 12. international economies. It has helped create more than 900,000 jobs worldwide, and supportedapproximately 1,400 non-profit organizations worldwide.The combined network fleet numbers almost 900 aircraft. In 2009, American carried approximately 85.7million passengers, about equal to one-third of the U.S. population.On an average day, American Airlines alone will… Fly about 275,000 passengers Receive more than 239,000 reservations calls. Handle more than 300,000 pieces of luggage. Fly about 3,400 flights.STRATEGIC OBJECTIVESThese are their strategic objectives, that is, what they want to achieve.Growth Achieve $1 billion in annual revenues with $60 million in profits by 2011 Maintain a net profit rate equal to or better than the best world class companies in our industry by 2011 Have investment policies and fiscal procedures to foster aggressive growth and profitability by 2001 Have a comprehensive business development plan 2001 Have 6 projects in 3 countries 2001Management Have a management team capable of meeting our strategic objectives. Have a complete management team.Safety Have an injury free workforce.
  13. 13. Administrative Have standardized cost management and financial systems. Have standard operating procedures.Employees Have a comprehensive career development program. Achieve an employee turnover rate less than 5%. Define and communicate organizational roles, responsibilities, and expectations for all employees.Physical plant Have all digital equipment. Have a replacement equipment financing plan. Have a technology development and implementation plan.Quality Complete the ISO 9000 certification of all projects. Achieve zero errors and omissions claims. Achieve compliance with federal, state and local environmental mandates.STRATEGYGiven the analysis from Ansoff matrix, there are two main strategies SW will focus on: Penetration strategy: Continue to penetrate US market Market development: To venture into international route in VietnamRESOURCE REQUIREMENTSTo implement this new strategy, SW needs the following resources:
  14. 14. Physical Resources: Aircrafts - For both US and VN market New distribution outlets in US Local VN officePeople Resource: VN office staff VN air crews Director in charge of VN operation Director in charge of US operationInitial Start-Up Cost: Operations and procurement of airport service Launch of new office PromotionsPRIORITYBecause the VN is a new operation, it is important that HQ of SW to set priority byhaving a Director who has the right experience and who understands the VN cultureand who has worked in VN and understands how people work and think there. Heneeds to have this experience so that he can make sure that he has the right people inthe office with the right experience so that the office can be a success. He will knowwhat knowledge, skills and competencies the staff need to make the office a success.He will send them on training courses to acquire the right knowledge, skills andcompetencies.
  15. 15. TABLE 1: ACTION PLANS This table outlines the action plans, person responsible and start and end dates for each strategic objective.Objective Objective Due Responsibility Impact on List of Actions Start date End Date SuccessCode Date Revenue IndicatorsA1 Achieve $1 Dec Marketing Sales of Monthly ticket Jan 2013 Dec 2013 Meeting monthly billion in 2013 Director $120m sales $10m targets annual revenues with Operate on a $60 million in 60% gross profit profits by 2013 marginA2 Maintain a net Dec Finance Director EBIT of Operate on a Jan 2013 Dec 2013 Meeting monthly profit rate 2013 $40 billion operating profit targets equal to or margin of 40% better than the best world class companies in our industry by December 2013A3 Have Dec Finance Director Sales of Revise Jan 2013 March Weekly monthly investment 2013 $120m; GP Investment 2013 targets policies and of $60m; Policies and fiscal EBIT of Fiscal Procedures procedures to $40m foster Manual aggressive growth and profitability by 2013A4 Have a Jan 2013 Marketing Achieveme Make sure BDM’s Dec 2012 Dec 2012 Weekly progress comprehensive Director nt of have monthly reports from business $120m in targets for 2013 BDM’s showing development sales by sales for the plan for 2013 year end week and Make sure BDM’s with $60m potential sales gross profit know their for the next and $40m monthly targets week and EBIT variances on targetsA5 Have 6 Dec Marketing Get the projects in 3 2013 Director $120b in Identify the 6 countries Dec 2012 Dec 2012 Weekly report countries in sales by back meetings to 2013 Finance year end monitor progress 2012 Director
  16. 16. Operations Set up the Jan 2013 Feb 2013 Director infrastructure Human Resources Director Start generating March Dec 2013 income 2013A6 Have a Dec Human Achieveme Determine people Oct 2012 Oct 2012 Daily progress management 2012 Resources nt of sales resource reports team capable Director and profit requirements for of meeting our objectiveds each functional strategic objectives areaA7 Have a Dec Human Achieveme Recruit, select Oct 2012 Nov 2012 Weekly progress complete 2012 Resources nt of sales and train report management Director and profit management team objectives team Construct an Organisation Chart showing all positions and incumbentsA8 Have an injury Dec Health & Safety Achieveme HSE Awareness Jan 2013 Dec 2013 Monthly free workforce 2013 Director nt of sales campaigns awareness and profit campaigns and objectives report backs on progressA9 Have Feb 2013 Finance Achieveme Streamline June 2012 Feb 2013 Monthly standardized Director nt of sales finance systems progress reports cost and profit management Information objectives and financial Systems systems DirectorA10 Have standard Dec Marketing Achieveme Draw up June 2012 Dec 2012 Monthly operating 2012 Director nt of Sales operation progress reports procedures and profit procedure manual Finance objecgtives Director Operations Director Human Resources Director
  17. 17. Information Systems DirectorA11 Have A Dec Human Achieveme Succession Plan June 2012 Dec 2012 Monthly Comprehensiv 2012 Resources nt Of Progress e Career Director Monthly Talent Reports Development Sales And Management Plan Programme Profit Line Figures Managers Career Plan For Each IndividualA12 Achieve An Dec Human Achieveme Profit Sharing For June 2012 Dec 2013 Monthly Employee 2013 Resources nt Of Employees Progress Report Turnover Rate Director Monthly Less Than 5% Sales And Bonuses Based Profit Line On Performance Figures Manager Salaries Higher Than Industry NormA13 Define and Dec Human Achieveme Job descriptions June 2012 Dec 2012 Monthly review communicate 2012 Resources nt of for all staff meetings organisational Director monthly June 2012 Ongoing roles, sales and Performance responsibilities profit Line feedback , and targets expectation for Managers sessions for all Jan 2013 Ongoing all employees staff each month Coaching scheme introducedA14 Have all digital June Finance Achieveme Digitalise June 2012 June Monthly review equipment 2013 Director nt of everything 2013 meetings monthly Information sales and profit Systems figures DirectorA15 Have a Dec Finance Achieveme Draw up the plan June 2012 Dec 2012 Monthly replacement 2012 Director nt of progress equipment monthly meetings financing plan Department sales and profit Heads figures
  18. 18. A16 Have a Dec Information Achieveme Draw up the plan June 2012 Dec 2012 Monthly technology 2012 Systems nt of progress development Director monthly meetings and sales and implementation profit Finance plan figures DirectorA17 Complete the Dec All Achieveme Complete the June 2012 June Monthly ISO 2013 Department nt of documentation 2013 progress certification Heads monthly and submit for meetings sales and approval profit targetsA18 Achieve zero Dec All Achieve Systems in place June 2012 Dec 2012 Monthly errors and 2013 department monthly to ensure no progress omissions heads sales and errors and meetings claims profit omissions targetsA19 Achieve Ongoing Finance Achieve Systems in place June 2012 Dec 2012 Monthly compliance Director monthly to comply with progress with federal, sales and mandates meetings state and local All profit environmental targets department mandates heads  CONCLUSION : This assignment focused on stakeholders analysis, strategies and action plans. 1. It’s in my opinion that knowing your stakeholders are important because they generate an initial list of people that are interested and will be affected with the happenings in the business and because Stakeholders can greatly influence the intended outcome and success of a project. Knowing and identifying your stakeholders better and dividing them into categories like important, less important and very important will give you an understanding of who can enable or block a decision. For example the media may be a potential stakeholder but their involvement has to be treated with caution particularly in high conflict situations. I believe that you can then use the opinions of the most powerful stakeholders to shape your projects at an early stage. Not only does this make it more likely that they will support you, their input can also improve the quality of your project By acknowledging them, you can anticipate what their reaction to your project may be, and build into your plan the actions that will win their support.
  19. 19. 2. In my opinion Small projects typically dont have to worry about understanding and managing the stakeholder community. You usually have to deal with a sponsor (the person that requested the work) and thats about it. But if you have a large and diverse stakeholder community then it does make sense to perform a stakeholder analysis. Performing a stakeholder Analysis is a good idea because it helps you identify and understand your key stakeholders and win their support. Familiarizing yourself with the stakeholders need s will initially make your job a lot easier and performing a stakeholder analysis during the planning stage can greatly influence the development of an effective project strategy. A Stakeholder analysis goes through a process which will help you determine the various stakeholder groups, their needs, and how you will satisfy their needs which are all equally important for a good stakeholder management. It will also give you a look at each stakeholder and determine how important he or she is to the success of your project so the business can make decisions accordingly. 3. The steps I have identified may not be complete but are enough to know and analyze your stakeholders better. For a briefed analysis a step can be added which is to profile each identified stakeholder. Though the provided approach is efficient and provides a quick review of all stakeholders, completing a more detailed, narrative profile is strongly encouraged. This will allow for a greater understanding of each stakeholder and how to get each stakeholder involved. A detailed stakeholder profile can include, but is not limited to, the following types of information : Types of Information Collected in a Detailed Stakeholder ProfileIdentified RoleMotivation for Being in the ProjectHow will the project benefit them?Perceived Expectations and Goals in Relation to the ProjectDo the stakeholder’s goals and expectations support or conflict with theproject goals?Level of Importance for the Success of ProjectWhat resources might the stakeholder bring to the project? What is thestakeholder willing to organize for the project?
  20. 20. Potential Negative Impact on the Project§ What can the stakeholder prevent from happening? Are there any stakeholder interests that conflict with project goals? Level of Influence over the Project for Decision-Making What is the stakeholder’s power and status in relation to the project? Does the stakeholder control key resources? Does the stakeholder have informal influence or personal connections that will affect the project? What power does the stakeholder have over implementation of the project or over other stakeholders? Intention to Participate According to the Project Design Does the stakeholder want to be involved or merely need to be informed about the project and its process? How much does the stakeholder need to participate to make the project a success? Intended Use of the Project or the Project Results How will the stakeholder directly benefit from the project and how will this affect the stakeholder’s motivation? Or even a LADDER OR PARTCIPATION step can be used for further analysis and to know how each one of them is contributing to the project. I I I I I
  21. 21. 4. I believe it is equally important for a deeper understanding to draw up a powermatrix plotting the power the stakeholder has over setting the rules for your businessagainst the operational power (resources, funding, people).Power interest grid classifies stakeholders in relation to their power and the extent towhich they are likely to show interest in the actions of the organisation. And it can beused to indicate the nature of the relationship which should be adopted with eachgroup, which are basically the strategies to follow.5. In my opinion asking question to your stakeholders does help you better engagewith them.If you need to know more about your key stakeholders, If you need to know howthey are likely to feel about and react to your project, if you also need to know howbest make them participate in your project and how best to communicate with them.Just asking questions will give you answers to all these needs.The phrase “keep your friends close and your enemies closer” comes to mind here.Someone who is a strong supporter you will want to keep that way so keeping theminformed as progress is made and ensuring you know what they expect as timemoves on is essential with this type of stakeholder.6. I believe knowing about the three types of strategies will guide you towards theright strategy to choose in a right way.However I cannot right away buy an oil company therefore I have to horizontallyintegrate my way through it.These are the ways with which one can decide which step to take next.Or even if a strategy calls it retrenchment as a whole. It still works to either turnaround a business unit, to divest or simply cut-off a particular unit. Henceforth givingyou a direction of how a business can be profitable.7. I feel we should draw up an action plan because it is a process which will helpyou to focus your ideas and to decide what steps you need to take to achieveparticular goals that you may have. It is a statement of what you want to achieveover a given period of time. Preparing an action plan is a good way to help you toreach your objectives : dont worry about the future, start planning for it!
  22. 22. SOURCES: