STAKEHOLDER AND THE PRODUCT MARKET

Stakeholder and the product market



Stakeholder and the product market

Main stakeholders

Stakeholders are the individuals and groups who can affect and are affected by the strategic outcomes achieved and who have enforceable claims on a company's performance.

The stakeholder concept reflects that individuals and groups have a "stake" in the strategic outcomes of the company because they can be either positively or negatively affected by those outcomes and because achieving the strategic outcomes may be dependent upon the support or active participation of certain stakeholder groups(Booth, 2005).

Figure above provides a definition of a stakeholder and illustrates the three general classifications and members of each primary stakeholder group:

Capital market stakeholders

Product market stakeholders

Organisational stakeholders

Secondary stakeholders

Beyond these primary stakeholders there are other secondary stakeholders as well and include entities like the community at large, environmental groups, government, etc.

Each type of stakeholders has different expectations or demands.  This leads to potential conflicts between these stakeholders leading to friction(Black, 2002).  The primary expectations of each group are summarised in Table below.

When we review the primary expectations or demands of each stakeholder group, it becomes obvious that a potential for conflict exists.  For instance, shareholders generally invest for wealth-maximisation purposes and are therefore interested in a company's maximising its return on investment or ROI.  However, if a company increases its ROI by making short-term decisions, the company can negatively affect employee or customer stakeholders.

If the company is strategically competitive and earns above average returns, it can afford to simultaneously satisfy all stakeholders.  When earning average or below-average returns, tradeoffs must be made.  At the level of average returns, companies must minimally satisfy all stakeholders(Bergadaá, 1990).

Mechanisms for connection of Stakeholders and product market

The stakeholder analysis process is appropriate for products that can be perceived as risky since it enables developers to address key issues of concern prior to new product introduction, mitigating market acceptance risk. It uses a stakeholder model that facilitates dialogue to understand market risks and guide the assessment process. This article includes a case study describing a successful application of introducing biopharmaceutical products, as well as some of the key findings to demonstrate usefulness.

Introducing new products brings technical, commercial, and market acceptance risks. The market environment changes at an accelerating rate, so the need for real-time market information is greater than at any time in the past. This calls for methods to understand the needs, wants, and concerns of customers in a timelier basis. This article deals with stakeholder analysis, which is a management tool designed to acquire market information to mitigate some of the market acceptance risks. Stakeholder analysis can also provide insights to address critical technical and commercial risks, helping to identify product characteristics that provide increased confidence, while avoiding properties that amplify risk perception. Additionally, these insights can identify costly investments not valued by the marketplace. Early realization can avoid unnecessary expenditures and accelerate product development(Ansoff, 1998).

Stakeholder analysis can also recognize market concerns that might derail market acceptance. If the major concerns are not addressed early in their ...