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The audiences who can affect or can be affected by the achievement of a company’s objectives are called stakeholders.
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Stakeholders can be divided into two groups: internal stakeholders and external stakeholders.
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Internal stakeholders are stockholders, board of directors, executive officers, other managers, and employees.
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External stakeholders are all other individuals and groups that have some claim on the company. This group includes customers, suppliers, alliance partners, creditors, local and national governments, unions, local communities, media, and the public.
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Although stakeholder is a relatively old term, the development of the stakeholder approach was set in motion in the beginning of 1980s.
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Stakeholder approach asserts that treating stakeholders well and managing their interests helps a company achieve a higher performance.
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The first step of a strategic management process is analysis.
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Managers start the analysis stage by evaluating the existing vision, mission, and values statements of companies. The business environment is dynamic; thus strategic elements are subject to be modified under the impact of environmental changes. Second, they conduct an external analysis which is composed of the analyses of market and industry structures. Third, managers analyze internal variables including resources, capabilities, core competencies, and value chain activities. Fourth, managers conduct a SWOT analysis to generate insights from the whole analysis and their strategic implications. Finally, if it is necessary, they will rewrite vision, mission, and value statements.
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A vision is a statement about where the company wants to be in the future. It is composed of the desired achievements of the company. A clearly phrased vision communicates management’s aspirations to stakeholders about “where we are going” and helps channel the energies of company personnel in a common direction.
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There are two types of vision statements which are product-oriented vision and customer-oriented vision.
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A product-oriented vision defines a company in terms of a product provided (e.g. to be the best company in the mobile phone business). Product-oriented visions tend to force managers to take a more myopic view of the competitive landscape.
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A customer-oriented vision defines a company in terms of providing solutions for customer needs. Companies with customer-oriented visions can more easily adapt to changing environments.
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Customer-oriented visions let companies adapt to changing environments more easily while productoriented visions can make companies less flexible and more likely to fail.
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Mission is a statement about the reason for the existence of a company. Mission describes what a company actually does (the products it plans to provide and the markets in which it will compete).
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A vision defines what an organization wants to accomplish ultimately, a mission describes what an organization does actually.
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Values state what is desirable, proper, and appropriate in the organizational context. Values show what is right, what is wrong, what is fair, what is unfair, what is acceptable, what is unacceptable. They guide how managers and employees should conduct themselves, how they should do business, and what kind of organization they should build to help a company achieve its mission.
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The external analysis comprises the analyses of the market structure and industry structure. The products (goods and services) are bought and sold in the market. Each market includes at least one industry, which is a group of companies offering products to satisfy the same customer needs. Moreover, a group of closely related industries form a sector.
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We observe different behavior patterns by producers across markets to a great degree. In some markets, producers are highly competitive; in others, they seem in some ways to coordinate their actions to avoid competing with one another; and, in some markets, there is no competition at all.
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Models of market structure refer to the ideal types which were developed by economists for understanding markets and explaining the behaviors in them.
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For understanding markets and explaining the behaviors in them, economists have developed four principal models of market structure which are based on four dimensions: • the number of producers in the market, • the companies’ degree of pricing power, • whether the products offered are undifferentiated or differentiated (products that are different but viewed substitutable by customers), and • the market is consolidated or fragmented (market share for the leading four firms is equal to or less than 40% of total industry sales).
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Monopolies have just one producer who sells an undifferentiated product with a considerable pricing power in a consolidated market.
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Oligopolies have a couple of producers which sell a differentiated or an undifferentiated product with some pricing power in a consolidated market.
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Monopolistic competition markets have many producers each sell a differentiated product with some pricing power in a consolidated or fragmented market. When a company can greatly differentiate its product, it creates a niche in the market in which it has some degree of temporary monopolistic power over pricing, thus the name “monopolistic competition”.
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Perfect competition markets have many producers which sell an undifferentiated product with a little or no pricing power in a fragmented market.
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It is about identifying opportunities and threats facing a specific company in an industrial context.
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