An Overview of the Stakeholder Approach -

Maintaining and Building the Effective Relationship

Management for Value Seeking Strategies

1
Yong-Chi Chang, 2Yu-Cheng Lee, 3Sang-Bing Tsai, 4Shao-Bin Lin
1.3
Department of Technology Management, Chung Hua University, Hsinchu, Taiwan
2
Department of Industrial Engineering and Management, Chung Hua University, Hsinchu, Taiwan, ph.D
4
Joint Credit Information Center, Taipei, Taiwan, ph.D

Abstract—The relationship management for stakeholders can be strategic relationship management with the application of the
extremely complex. Stakeholder analysis can be a key tool to stakeholder approach.
identify stakeholders, specific identification, level of influence
and value seeking for management in relationship management.
II. LITERATURE VEVIEW
Indeed, stakeholders are becoming more and more essential for
analyzing both internal and external corporate environment,
identify secondary and primary stakeholders and their power A. Stakeholder Concept
and influence in management strategies. An overview of The widespread of the concept of the stakeholder
stakeholder concept, approach and matrixes is shown for a management can be found in the research of social
holistic view in the application of strategic relationship responsibility theory to the application of project management.
management. The concept of stakeholder was first originated by the Stanford
Research Institute in 1963 as Elias, Cavana and Jackson (2000)
Keywords-Stakeholder, Stakeholder approach, Stakeholder stated in their research of the stakeholder approach into system
analysis, Relationship Management thinking. However, according to Clarkson (1995), the
stakeholder approach has appeared in the business management
I. INTRODUCTION since the early 1930s. The most well known and widely used
Businesses and firms have changed place attentions from identification of the stakeholder concept was presented by R.
the satisfaction of the shareholders to a more extensive view of Edward Freeman (1984) and his book, Strategic Management:
including all the stakeholders’ perspectives by the gain of A Stakeholder Approach. In his book, Freeman (1984:46)
awareness of management decision making. An increasing defined stakeholder as, “any group or individual who can affect
influence of the international pressure groups and non- or is affected by the achievement of the organization’s
government organizations is undergoing on the global stage. objectives”. Since Freeman (1984) presented the stakeholder
Therefore, there is a set of stakeholders becoming extensively approach, many researchers such as Clarkson (1995) and
important. The relationship management for stakeholders can Mitchell et al. (1997) had defined stakeholder in a more
also be extremely complex. Stakeholder analysis can be a key specific views. Clarkson (1995) classified stakeholders into
tool to identify stakeholders, specific identification, level of primary and secondary stakeholders. In Clarkson’s (1995:106)
influence and value seeking for management in relationship view stakeholder is defined as, “persons or groups that have, or
management. Indeed, stakeholders are becoming more and claim, ownership, rights, or interests in a corporation and its
more essential for analyzing corporate environment. On the activities, past, present, or future”.
other hand, international firms may distribute in many different
countries and the background of multi-culture effects and B. Stakeholder Approach
variety of stakeholders may be involved. There is a need for Freeman (1984) claimed that the stakeholder model can be
business and firms to identify the most important stakeholders, classified into three procedures ‘Rational’, ‘Process’ and
their involved stakes, power and interest as a technique for ‘Transactional’. The application of ‘Rational’ is to define ‘who
managers to examine the quality of relationship management are the stakeholders of the organization’ and ‘what are their
with those key actors. This paper shows an overview of the perceived of stakes’. The stakeholder map is a simple graph
that is used to present the stakeholders whether they are

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 internal or external stakeholders and their mutual relationship stakeholder’ and ‘Definitive stakeholders’. Latent stakeholders
with a goal or objective of the firm. The goal or objective is may further devided into ‘Dormant stakeholder’,
stated in the middle circle and the arrows spread out to other ‘Discretionary stakeholders’ and ‘Demanding stakeholders’
stakeholders present their relationships. The stakeholder chart which they all possess one of the perceived influences as power,
is used for analyzing the perceived of stakes between the legitimacy or urgency by managers. The involvement of these
business or firm and its stakeholders. The specific stakeholder three types of stakeholders are presented:
information is put into the chart for detail analysis. The second
step which Freeman (1984) described as ‘Process’ is to 1. Dormant stakeholders present power to affect the
examine the management of the implicit or explicit relationship strategic management and should be monitored
with each stakeholders, and does those management processes 2. Discretionary stakeholders present legitimacy to support
fit with the stakeholder map analyzed in rational procedure. other participants and should be managed closely
The ‘Transactional’ process is to understand between the firm
and its stakeholders, the set of transaction that the firm has 3. Demanding stakeholders present urgency to interfere and
offered or negotiate underlying each process. Freeman (1984) should be managed with standarized process
illustrated the important steps which managers can follow for The ‘Expectant stakeholders’ can be further divided into
stakeholder identifications. A more specific graph for the ‘Dominant stakeholders’, ‘Dangerous stakeholders’ and
relationship of influence that the manager perceived with the ‘Dependent stakeholder’. The involvement of these three types
stakeholders is presented as the stakeholder typology. of stakeholders are presented:
4. Dominant stakeholders present power and legitimacy to
influence, often seems as governments and should be
III. STAKEHOLDER ANALYSIS manage following the given standards and rules
Based on Freeman (1984) illustrated the power and stake of 5. Dangerous stakeholders present power and urgency that
the stakeholder model, a more specific technique for analyzing are dangerous to the firm or influence strategic
the stakeholders in a dynamic perspective is presented by management and should be managed effectively
Mitchell, Agle and Wood (1997).
6. Dependent stakeholders present legitimacy and urgency
that are important to the strategic management and
A. Stakeholder Typology
should be managed closely
Mitchell, Agle and Wood (1997) had suggested that the
stakeholder’s impact or perception to organization can be The ‘Definitive stakeholders’ includes all three attributes and
categorized by the manager into power, legitimacy and urgency. highly involvement with great influences which is presented:
Furthermore, the time has added into the analysis since the 7. Definitive stakeholders possess all three attributes that
stakeholders may change from time to time, the model can be dominant and hightly involved should be
presented as a dynamic constructed approach. Three circles managed as important key actors
presented separately as power, legitimacy and urgency. Each
circle may be part of overlapping with one another to be further B. Stakeholder Matrix
classified into seven levels of perceived values of the
stakeholders by managers. The stakeholder matrixes are useful for project managers to
identify each stakeholder and its involvement. Most matrixes
show stakeholder’s power, interest and influence which are
mostly presented in two dimensions.

Figure 1: Stakeholder typology (Mitchell, Agle and Wood,

1997:874) Figure 2: Power/Dynamism Matrix (Gardner et al. 1986)
The stakeholder are being separated into three types of
stakholders including ‘Latent stakeholders’, ‘Expectent

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 The Power/Dynamism Matrix can be used when forming 2. Their interest in the project or
new strategies, the power of the stakeholders are low are the pragramme as measured by the extent to
easiest to deal with, they are in ‘Fewer Problem’ and which they will be active or passive.
‘Unpredictable but Manageable’ because their power can
hardly affect the firm management strategies or decision 3. Their attitude to the project or
making. When the stakeholders in ‘Powerful but predictable’, programme as measure by the extent to
their power are high but in low dynamism, they are easy to which they will ‘back’ (support) or’
predict, easy to manage and can be simple to satisfy or meet block’ (resist).
their needs. Managers should focus or be aware of the From the evidence of many researchers the empirical work
stakeholders that are in ‘Greatest danger or Opportunities’ has conducted according to the stakeholder approach to
which the stakeholders’ power and dynamism are high and relationship management. Stakeholders may also become
difficult to predict. They are the ones that can influence the resources for strategy seeking for businesses and firms.
firm greatly in decision making and new strategies developing.
C. Stakeholder and Strategic Management
There is evidence in increasing businesses and firms seek
relationships as value in cooperation with other organizations.
Relational value can be formed according to Halal (2001 in
Lozano, 2005:69) concluded elements such as ‘conflict
resolution’, ‘equitable treatment’, ‘market competition’,
‘political bargaining’ and ‘collaborative problem-solving’.
Therefore, variety of stakeholders can be identified and many
useful techniques can be undertaken for strategic management
also Ezekiel Chinyio and Paul Olomolaiye (2010) in their
book, Construction Stakeholder Management. Many
researchers had presented the extent of management methods
based on the stakeholder approach. Moreover, a new
constructed stakeholder model is described to present the social
movement and mobilization can be affected by the interests
and membership actions of the multi-stakeholders (Rowley and
Figure 3: Power/Interest Grid (Eden and Ackermann, 1998 in Moldoveanu, 2003). Furthermore, researchers such as
Bryson, 2004:30) Katsoulakos and Katsoulacos (2007), they had classified the
traditional strategic management adopting stakeholder
approach, organization environmental and resource based
theories. The value of the organization is formed by its market
The Power/Interest Grid has given the managers a more
position and core resources. The knowledge management
specific technique on the level of influence and the actions they
strategies which can be integrated in resource based theories
can take to manage the relationship with stakeholders.
for combining resources and create greater competitive
Stakeholders in high power and high interest are ‘players’ that
strategies with the brought together resources within the
should be managed closely with efforts and greatest
networking of an individual firm. The stakeholders combined
satisfaction perceived by the stakeholders. Stakeholders in high
as the network may be complex and hard to organize and also
power but low interest are ‘context setters’ should continually
hard for an individual organization to satisfy all the actors or
engage and maintain relationship with those people to keep
stakeholders in the network. Therefore, a systemized and useful
those people satisfy. Stakeholders in low power and high
technique for analyzing valuable actors may be crucial to
interest are ‘subjects’ should be managed constantly for their
maintain and building relationship for value seeking and
support. Stakeholders in low power and low interest are
knowledge based management. Also according to Mendoza
‘crowd’ which suppose to be monitored over a period of time
and Prabhu (2009), they had evaluated the impact on project
for the power and interest of the stakeholders may change.
amongst multi-stakeholders and their perception of value in the
However, according to Murray-Webster and Simon (2006) the
case of Zimbabwean community forest. They had adopted
power/interest model does not present a holistic view for
value tree (VT) in the first step along with value-focused think
manager in analyzing the value perceived by the stakeholders.
with cognitive mapping to evaluate the most important key
Therefore, a three dimension model of evaluation had
stakeholders and objectives. In the second phase they had used
mentioned according to Murray-Webster and Simon (2006:1):
analytic hierarchy process AHP to evaluate the voting system
1. Their power or ability to influence in the they had undertaken to differentiate levels of relationship and
organization. This may be their potential weights association with the elements in the project. Therefore,
to influence derived from their positional a generalized version which developed from AHP is adopted to
or resource power in the organization, find the relationship value. This research show the relationship,
or may be their actual influence derived objectives and levels of association with the stakeholder
from their credibility as a leader or involved in a project management show a strategic relationship
expert. management involved in a project. Which the key players or

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