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Chapter 1: INTRODUCTION

Instructor: L.T.T. Xuan 1

Learning objectives
1. Understand sustainable development and
competitive strategies as foundations for ethics
and CSR
2. Understand and prioritize stakeholders
(stakeholder management)
3. Understand firm’s functions and groups of
stakeholders

Instructor: L.T.T. Xuan 2

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Sustainable development and

competitive strategies
1. What is sustainable development?
2. What is competitive strategy?

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Instructor: L.T.T. Xuan

Sustainable development and

competitive strategies
The resources perspectives:
- An internal view
- Identifying unique resources and capabilities
=> CORE COMPETENCIES

1. Ignore much the external environment

2. Deliberate and rational description of
the firm

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Sustainable development and

competitive strategies
The industry perspectives:
- Focusing on the firm’s operation environment
(industry structure: supplier, buyer, new entrant,
substitute, industry rivalry)
- The most importance determinant of competitive
advantage
1. It is a zero-sum game of survival (take
advantage over stakeholders)
2. Only three stakeholders identified and
analysed (supplier, buyer, competitor)
3. No differences in characteristics among
firms
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Stakeholder and stakeholder management

1. Different views of firm

Source: Freeman, 1984

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Stakeholder and stakeholder management

1. Different views of firm

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Source: Freeman, 1984 Instructor: L.T.T. Xuan

Stakeholder and stakeholder management

1. Different views of firm

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Source: Freeman, 1984 Instructor: L.T.T. Xuan

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Stakeholder and stakeholder management

1. Different views of firm
What is (are) stakeholder(s)?
1. Stakeholders comprise individuals, or groups, with
similar interest in a particular organisation.
2. It is often meaningful to separate groups of
stakeholders intro sub-categories with similar, but not
identical, interests
3. Individuals and groups may have multiple interests in
an organisation and therefore belong to various
stakeholder clusters.
• Any group or individual who can affect or is affected
by the achievement of the firm's objectives
(Freeman, 1984)
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Stakeholder and stakeholder management

1. Different views of firm
What is (are) stakeholder(s)?

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Stakeholder and stakeholder management

1. Different views of firm

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Source: Freeman, 1984 Instructor: L.T.T. Xuan

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Stakeholder and stakeholder management

1. Different views of firm

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Stakeholder and stakeholder management

2. Conflicting interests and stakeholder importance
Often companies have to prioritize different stakeholder needs because
of resources limitations
Two criteria for prioritising
stakeholders

Primary vs. • Power

secondary
• Legitimacy
stakeholders
• Urgency

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Stakeholder and stakeholder management

2. Conflicting interests and stakeholder importance
Primary stakeholders are stakeholders without
whose participation an organization would cease to
exist
Secondary stakeholder are individuals or groups that
are not essential fir a firm’s survival, but may still be
in a position to interfere with and damage a
company’s business.
The distinction between primary and
secondary stakeholders, however,
provides little basis for prioritization
as the interests of stakeholders
belonging to the same main group
can conflict.
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Stakeholder and stakeholder management

2. Conflicting interests and stakeholder importance

• Power of a stakeholder
to influence an
organisation.
• Legitimacy of the
stakeholder’s
relationship with the
company.
• Urgency of the
stakeholder’s claim on
the company.

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Stakeholder and stakeholder management

3. Stakeholder theory
Ø Stakeholder theory posits the company has a hub of
relationships between diverse actors.
Ø The company is regarded has a part of a stakeholder network
in which its position in the centre of the net is not taken for
granted
Ø Stakeholder theory is more normative than predictive. There
is no guarantee that managers will consider the interests of
other than those of critical stakeholders.

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Stakeholder and stakeholder management

3. Stakeholder theory
STAKEHOLDER THEORY HAS AN ALTERNATIVE THEORY OF THE FIRM
In stakeholder theory, companies are presented as organizations
through which a diversity of actors accomplish multiple and
sometimes conflicting purposes.
Approach to strategic management: Stakeholder theory explicitly
take into account the strategic threats and opportunities that arise
from the claims and expectations placed on the company by
various social and political actors.
Framework of corporate social responsibility: Stakeholder theory
provides a way to frame and assess society’s values and
expectations of business. Managers also seem to understand the
concept of stakeholder management better than the concept of
corporate social responsibility. 17
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Stakeholder and stakeholder management

4. Stakeholder management

THEORETICAL MODELS OF STAKEHOLDER MANAGEMENT

Stakeholder management involves the process by which managers
reconcile the objectives of a company with the claims and
expectations of various stakeholder groups.

Three theoretical models:

Ø Focus on the generic approach towards a stakeholder.
Ø Focus on the relationship.
Ø Focus on the stakeholder network.

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Stakeholder and stakeholder management

4. Stakeholder management
Focus on the generic approach towards a stakeholder
Strategies for managing stakeholders should be based on:
1. The stakeholder potential to threaten the organisation.
2. The stakeholder's potential to cooperate with the organisation.

Instructor: L.T.T. Xuan 19

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Stakeholder and stakeholder management

4. Stakeholder management
Focus on the relationship
Strategies for managing stakeholders should be based on:
1. The comparability of the business and the stakeholders interest
2. The nature of the connection between the business and the
stakeholder.

Instructor: L.T.T. Xuan 20

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Stakeholder and stakeholder management

4. Stakeholder management
Focus on stakeholder network
Strategies for managing stakeholders should be based on:
1. The centrality of the company in the stakeholder network.
2. The density of this network surrounding the organisation.

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Stakeholder and stakeholder management

4. Stakeholder management in practice
a. Identification of stakeholder groups including
those that are in a position to affect the
company and those that are affected by the
1. Stakeholder company’s operations.
mapping b. Classification of stakeholders into categories
with 3 steps and sub-categories that are likely to share
interests and characteristics
c. Naming of specific stakeholder groups and
analysis company’s relationship to them

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Stakeholder and stakeholder management

4. Stakeholder management in practice

• Survey stakeholders interest, concerns, views, opinions

on a particular issue, or company, through focus
2. Stakeholder groups and questionnaires.
surveys and • Engage in a dialogue with stakeholders to explore their
dialogue concerns and exchange views over relevant issues.

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Stakeholder and stakeholder management

4. Stakeholder management in practice
3. Partnership project:
Projects where the parties work together to carry out specific
tasks or to address an issue of concern.
Process-orientated partnerships where non-governmental
organizations become part of activities within the companies
Project-orientated partnerships where the parties collaborate to carry
out a task outside the company
Product-orientated partnership focus on the development of a
specific product or its endorsement.

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FIRM FUNCTIONS AND STAKEHOLDERS

a. What are functions of a firm?

b. Who relate to each function?

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DISCUSSION

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