Connections between Stakeholder Claims and the Product Market

Stakeholders form an integral part of an organisation. This vital component of a company is responsible for company decisions. Company decision-making organs base their deliberations and subsequent decisions on the needs of these important individuals (Denison 2000). Most successful companies have been able to relate well with their stakeholders. Different stakeholders influence company decision making differently. The magnitude of individual stakeholder impact on a company is based on the occupancy position and relevance to the firm. Management of different organisations formulate policies that nurture a cordial relationship between the firm and stakeholders. Several scholars have advanced different definitions of a stakeholder. According to Lings (2004, p. 405), “stakeholders are private individuals or firms that relate with an organisation in divergent ways.” These company relationships are mutual, and the company only relates with firms that add value to her activities. The term stakeholder is made up of two parts: stake and holders. Stake is a term used to mean being a part of something. On the other hand, holders imply those individual that guard the interests of an establishment. In totality, stakeholders can be defined further as a group of interest groups that affect the operations of a firm in a way or the other (Keller 2005). Businesses are dependent entities. They depend on stakeholders to achieve their set goals and objectives. The day-to-day operations of a business are dependent on the input of stakeholders.

Stakeholders’ claims concept is based on the assumption that each stakeholder has an interest on the firm. Their relationship with the firm earns them returns or satisfies a given interest. The continuation of stakeholder–firm relationship depends on the satisfaction of a given stakeholder interest. To influence company decisions, stakeholders should be central to its operations. For example, shareholders are the important financiers of the firm. Their claims are dividends (Ind and Watt 2004). To satisfy shareholders, organisations strive to increase their profitability. Dividend allocation is based on the amount the firm earns from business. Customers demand quality and cheaply priced goods and services from the firm. In addition, the satisfaction of consumer demand is paramount if a firm is to attract and retain clients. On the other hand, employees’ satisfaction is based on the level of salary and remuneration earned. Financial institutions, i.e., banks are responsible for organisational capital. Their claim is interest rates on the loans they lend to the company (Ind and Watt 2004). The aforementioned are some of the stakeholder expectations and returns from the firm. More elaborated stakeholder examples will be advanced at the course of the discussion. Each stakeholder has a right to affect the operations of a company. However, shareholders that directly pump their financial fortune to a business have the right to influence company decisions and subsequent activities. Several scholars have posed several arguments in relation to consumers and suppliers and their rightful positions in a company. Consumers of 21^st century are bosses. This implies that company decisions are based on their needs and wants. Most company decisions are developed in a manner that ensures consumer needs and wants are fully satisfied. However, scholars argue that consumers have the freedom to seek for greener pastures from other companies (Gainer and Padanyi 2005). Suppliers’ influence on company decisions is also limited as they are prone to exit a firm for other firms that pay more for a quantity of their supply.

Demands and claims by various stakeholders affect the operations of both a company and the product market (Thomson and Hecker 2000). Product market is often associated with the consumers. However, consumers are just part of this market that comprises other stakeholders. Three major stakeholders affect the product market. The diagram below will guide us in the discussion to ascertain their influence level.

Classes of stakeholders	Composition
Product market stakeholders	Customers, suppliers, trade unions, and host communities
Capital market stakeholders	Shareholders, banks, and major suppliers of company capital
Organisation stakeholders	Employees (managerial and subordinate)

Diagram 1: Classifications of stakeholders (Source: Rentz 2005, p. 7)

The three classes of stakeholders are unique in several aspects. However, they all strive to see that company decision makers have their interests at heart. Considering that the firm is dealing with different interests of different groups, trade-offs during decision making are paramount. From the diagram, shareholders and other major financiers hold a special place in a firm. They are the individuals who invest their fortune in the firm with an expectation that it earns a return. In addition, most countries have formulated statutes that govern their relationships with a firm (Rentz 2005). As stakeholders agitate for increased returns to their investments, consumers strive for a reduction. Consumers tend to be satisfied when they purchase basic commodities at cheaper prices. Despite agitating for improved product quality and improved availability of basic commodities, consumers are not willing to pay an extra coin. The two divergent interests between the two stakeholders call for sound management and decisions. To address the plight of each stakeholder, firms have to do a feasible analysis. The feasible analysis helps in the prioritisation of stakeholders according to their importance and contribution to a firm. The initial criterion considers the financial influence of a stakeholder. On the other hand, the time limit in satisfaction of a stakeholder interest is paramount to ensure that those that demand urgency are ranked top in the priority rating (Muniz and O'Guinn 2001).

Firm profitability is the primary objective of any business establishment. According to Ind and Bjerke (2007), when the revenue of a firm is high, the management level is able to address the divergent interests of stakeholders with ease. However, with below average revenues, a firm will strain in satisfying the claims of her shareholders. In addition, during such a period of dilemma in the decision-making organs, firms check stakeholders’ contributions to the firm. For example, trade unions that agitate for employees rights are less important than employees who provide market information to the firm. Below average returns curtails the maximum satisfaction of each stakeholder. Different parties may receive managerial decisions differently. Management has a challenge of ensuring that mass exit of unsatisfied stakeholders is minimised. The positioning of the stakeholders in the diagram above also depends on societal values. Below is a detailed explanation of the various classes of stakeholders and how their dissemination of services is guided by cultural differences.

1. Product Market Stakeholders

Customers, suppliers, trade unions, and host communities make up product market stakeholders (Muniz and O'Guinn 2001). The claim of each stakeholder varies, but all are beneficiaries of product market competition. For example, competition lowers commodity prices while ensuring the production of quality and readily available commodities. The aforementioned is an advantage to consumers as they are able to choose from a wide variety of products. On the other hand, supplies are attracted to companies that offer better pay for their goods and services.

1. Capital Market Stakeholders

Shareholders and other financial institutions are responsible for the survival of a business. Shareholders tend to diversify risks. For those who want to earn a higher return, they invest on high-risk investments, while those expecting a lower return invest on low-risk investments (Kee-hung and Cheng 2005). A firm is always sensitive to the plight of shareholders as slide dissatisfaction could lead to an exit from investment. Dissatisfied financiers may charge high rates for a loan, hence jeopardizing firms’ survival. Therefore, it is up to the company management to formulate policies that will increase returns on investment (Rentz 2005).

1. Organisational Stakeholders

Organisational stakeholders are responsible for the day-to-day operations of an organisation. The success of an organisation lies on these individuals. The important need of the employee is an excellent working environment that ensures the taking care of his health and welfare. In addition, they should be incorporated in the decision-making process. Organisational culture of a company is important to develop employee relations with the customers and the organisation. Due to the rampant competition, organisations need to treat their employees well to prevent exodus to other companies. In addition, Conducting workshops and training is important for a firm to develop her staff. Employee expertise in consumer relations helps nature consumer connection on a personalised level that attracts consumers to a firm. Moreover, employees seek to develop their skills to remain relevant in the field. A firm that addresses employees’ issues successfully remains competitive in the market (Thomson and Hecker 2000).

In conclusion, from the aforementioned categories of stakeholders, it is apparent that a competitive product market is responsible for maximum claim satisfaction. In addition, stakeholders are satisfied when a firm’s revenue margin is reflected in their claim.

References

Denison, D., 2000. Organizational Culture: Can It Be a Key Lever for Driving Organizational Change? London: John Wiley and Sons.

Gainer, B. and Padanyi, P., 2005. The Relationship between Market-Oriented Activities and Market-Oriented Culture. Journal of Business Research, 58(6), pp. 854–862.

Ind, N. and Bjerke, R., 2007. Branding Governance: A Participatory Approach to the Brand Building Process. Chichester: Wiley and Sons.

Ind, N. and Watt, C., 2004. Inspiration: Capturing the Creative Potential of Your Organisation, Hampshire: Palgrave.

Kee-hung, L. and Cheng, E., 2005. Effects of Quality Management and Marketing on Organizational Performance. Journal of Business Research, 58(4), pp.446–456.

Keller, K., 2005. Branding Shortcuts. Marketing Management, 14(5), pp. 18–23.

Lings, I., 2004. Internal Market Orientation: Construct and Consequences. Journal of Business Research, 57(4), p.405.

Muniz, M. and O'Guinn, T., 2001. Brand Community. Journal of Consumer Research, 27(4), pp.412–432.

Rentz, J., 2005. 'A Conceptual and Empirical Comparison of Three Market Orientation Scales. Journal of Business Research, 58, pp.1–8.

Thomson, K. and Hecker, L., 2000. The Business Value of Buy-In: How Staff Understanding and Commitment Impact on Brand and Business Performance. London: Routledge.

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