Stakeholder Analysis of the business firm

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Stakeholder Analysis

Trevor Sofield

Professor of Tourism

University of Tasmania

Australia.

Consultant : ITC



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Definition of Stakeholders

“Any group or individual who can affect or is affected by

the achievement of an organisation’s objectives.” (Freeman, R.E. (1984) Strategic Management: A Stakeholder Approach,

Boston: Pitman.)

Developers, businesses, neighbours, communities,government ministries, non-governmental agencies,

etc and etc.

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Narrow definitions of who

is a stakeholder look atdirect relevance to the

activity’s core economic

interest, whereas -

broad definitions are based

on the premise that

companies and businesses

can be affected by, or can

affect almost anyone.

• Mitchell, R.K., Agle, B.R. and Wood, D.J.(1997) “Toward a theory of stakeholder

identification and salience: Defining the

principle of who and what really counts,”

Academy of Management Review 22 (4),

853-886.



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Is now a widely accepted part of the code of corporate ethics

• The concept hinges upon thenotion of fairness

“Stakeholder management requires, as its key attribute,

simultaneous attention to thelegitimate interests of all appropriate stakeholders,Minorities included, both inthe establishment of organizational structures and general policy and case-by-case decision making.”

(Donaldson, T. and Preston, L.E. (1995)“The Stakeholder Theory of theCorporation: Concepts, Evidence andImplications,” Academy of Management

Review 20 (1), 65-91).

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outline their mandate

A diagnostic tool to -

Stakeholder analysis is a continuous process

identify key stakeholders

clarify their interests

comprehend their perception of the problem specify their resources (supportive and destructive)



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Levels of importance of stakeholders

• Primary stakeholder : one who without continuing participation thebusiness cannot survive or the development/intervention succeed.

• Secondary stakeholders: ones who influence, affect or are

influenced by or affected by the business/development initiative but who

are not engaged in transactions with the business/development initiative

and are not essential for its survival • i.e. Those that affect vs those that are affected by.

• Act ive versus passive stakeholders (eg farmers versus absentee

landlord)



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Helpful stakeholders to enlist: –

• ADVOCATES – Idea creators, designers• CHAMPIONS - to lead the change

• SUPPORTERS - “critical mass”

•DECISION MAKERS (to approve theactivation of critical change enablers – policies, funds, people)

• OPINION LEADERS - decision-swayers, special interest groups that sustain people’sawareness of the need for change (lobbygroups, NGOs, media)



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Functions of Stakeholder Theory (Donaldson and Preston (1994); Jones (1995)

Stakeholder theory can also deal with conflicts andtrade-offs. These tend to increase when development

and population growth occurs, which makes resources

more scarce and therefore more highly valued.

• This links into sustainable tourism which recognisesthat multiple interests must be addressed and that

balances or tradeoffs must occur.

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Problems with the Concept of Stakeholder Theory

• Where does tourism begin and end?

• Involving every stakeholder in discussionsand negotiations can be an expensive task.

• The broad definition:-

“any group or individual who can affect or is affected by the achievement of anorganisations objectives” –

presents problems as boundariesbecome imprecise: a NGO in one countrymay claim stakeholder status in another country

• It doesn’t always address power relations

• Subjectivity of deciding who is a stakeholder

• Bringing stakeholders to the same table mayresult in more not less conflict.



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Benefits of Stakeholder Analysis

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1. Can improve quality, efficacy and evaluation of policies and

projects

2. Can improve assessment of social and political impacts of

policies and projects

3. Allows for differences in opinions to be identified

4. Doesn’t differentiate between those who own versus those with

interest in tourism so does not automatically exclude non-owners

5. Makes managers responsible for more than profit maximisation

(the triple bottom line)

6. Its relevance for identifying multiple objectives and concerns (e.g

between economic, social and environmental viewpoints andbetween different interests of different stakeholders)

7. A way in which the need and interests of people who are under-

represented politically and economically can be highlighted.



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A Model for Stakeholder Analysis(Hardy 2001)

any boundary

(indicative diagram only. There could be

many more arrows representing many more relationships)

N=x

GROUP 2

GROUP 3

GROUP 4

GROUP 1

N=x N=x

N=x

A general model for

Stakeholder Analysis,

applicable at any scale.

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Mul tiple arrows represent

interactions, reactions and

feedback between

stakeholder groups.

‘N’ represents the number

of dif ferent stakeholders

that may exist within any

stakeholder group.

The outer circle

represents any boundary -

regional, local or state.



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A Model for Stakeholder Analysis(Hardy 2001)

What do we mean when we say a stakeholder group is mixed?

N=8

GROUP 1; Accommodation

Sector

GROUP 3

COMMUNITY

N=5

Suppose Group 3 represents the community sector, there may

be farmers, landless peasants, smal l stal lholders, and home-

stay lodge owners. As with other groups of stakeholders,

within this group there wil l be dif ferent interests and

objectives. Note that the home stay lodge owners can be

located in two different groups, and their interests within the

two groups may not be identical!

Suppose Group 1 represents the accommodation sector, there

may be two 4-5 star hotels, an eco-lodge, a backpacker lodge,

an airpor t transit motel, a tented safar i camp, and 2

community home-stay lodges (N=8).

Some of their objectives and interests wil l be VERY different and they may exper ience greater diff icul ty agreeing among

one another than with representatives from other groups of

stakeholders.



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Strategic Analysis of Stakeholders

Assess:

Interests, aspirations (share the vision?)

Problem perception (each one sees different aspects of

the same problem –

which aspect?)Resources (capable and motivated to participate and

contribute?)

Roles. Ways to enlist participation in the project (How to

involve them in the project so that envisionedchanges can happen?)



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Summary

• Stakeholder analysis assists understanding of tourism as a

system encompassing different interests such as

environmental, financial, community and touristssatisfaction interests.

• It is therefore an appropriate tourism planning method to

identify multiple objectives as it presumes no one stake

predominates.• However it raises the issue of: Where do stakeholders start

and end?

• Stakeholder management is a methodology within which

sustainable tourism development can be delivered.• It is an essential component of Value Chain Analysis

where stakeholders and their interests must be identified,

and partnerships between them forged to maximize

poverty alleviation.




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Stakeholder Table: Public Transport example

Stakeholder Interests Problem

Perception

Resources Role /

Mandate

Passengers Safe,

reliable, andreasonable

public

transport

Many delays

Frequent busbreakdowns

Frequent

accidents

Impolite drivers

Dangerous

driving

Willingness

to pay for improved

services

Not

applicable

Private Car

owners

No traffic

jams and

safe roads

Too many

accidents

caused by

buses

May consider

use of public

transport if

reliable and

safe

Not

applicable

Mayor of Port

Rarorialofa

Reliable,low-cost

public

transport

system

Citizencomplaints

about public

transport system

Increased traffic

jams

Veto power in Council

Commands

popular

support

To manageCity of Port

Rarorialofa

Bicycle Power

For the Future

Reducing pollution

for healthy livingCar emissions,

obese people 5,000 members

To lobby Mayor

and changepublic opinion




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Groups Interests Problem

Perception

Resources Role /

Mandate

1.

2.

3.

4.

EXERCISE

Identify 4 stakeholders involved in the

Kokoda Track tour

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Stakeholder Analysis of the business firm