NAME: FUNGAYI JOHANE MAJURIRA

STUDENT ID: 21981559

COURSE: STRATEGIC DECISION MAKING

COURSE CODE: BBAC 411

PROGRAM: BACHELOR OF BUSINESS IN ACCOUNTING

LECTURER MR. ANGELO SALASINI

DATE: 5 DECEMBER 2022

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FINAL EXAM : DEC 2022
SECTION A

QUESTION 1

Describe with examples decision making in Zambia’s political land scope and
how it’s important to development.

The writer will start by definition of terms followed by the detailed characterization of
decision making in Zambia’s political land scope. The writer will conclude by giving a
summary of the above descriptions.
Decision making is the process of making choices by identifying a decision, gathering
information, and assessing alternative resolutions. It is a course of action purposely
chosen from a set of alternatives to achieve certain objectives or goals. Political
decision making is a decision made by an elected official or elected body of a policy
nature and which has general application and for which the accountability is to the
electorate.

An effective political decision-making framework in response to a crisis is often a

balancing act between opposing interests. It needs to be small enough to be able to
make decisions quickly, but large enough to include different perspectives and sources
of information. It needs to be hierarchical and have a clear division of responsibilities,
but also be flat and vertical, ensuring that criticism is not suppressed, groupthink is
avoided and decision-making power is not overly centralized. And it needs to act
decisively and swift, while ensuring that those decisions are well-informed and based on
facts and expert opinion.

Decision making is central to the execution and implementation of the identified course
of action. Most decisions use the vertical top to bottom model of communication.
Decisions once made are rarely reversible unless it has been proven to be unpopular
and anti social. These decisions are usually done for the betterment of the constituency
that they are targeted at. They may be targeted at a company, a community, ministry,
district, province or the whole nation.

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The Zambian political land scope covers , land , fresh water, trees and forests, minerals
and wildlife. All these resources need management and preservation for development
and beneficiation to the populace. Other portfolios are social protection, health,
education, transport, the environment, agriculture, energy and trade.

In Zambia the political scope is divided into ministries and parastatals and the private
sector. Ministries are run by Ministers and their Board of Directors and parastatal are
run by CEO’s and their board of directors and the private sector is run mostly in a
similar way as parastatals. These sectors preside over functional groups of people who
do work on their behalf as they would have been directed to do. At the helm of these
body of institutions is the country arms of governance the executive, the judiciary and
the legislature. Each has its own sphere of influence and largely independent of each
other. But each of these arms of governance make decisions that have an impact on the
development of the nation.

Zambian policies are crafted by cabinet while laws are debated and passed by
parliament. At each of these levels decisions are made that will be good for the nation
and sometimes good for individuals or certain sectors. These decisions
Are usually not reversible until another decision had been made to amend or revisit it.
Usually when there is a new government the new administration will revisit the decision
that would have been made by the outgoing administration with a view to realign them
to their election promises of revising fraudulent dealings of the past regime and more
importantly setting a mark as a government that will not tolerate corruption..

On 29 October 2002 President Levy Mwanawasa announced that Zambian government

will not allow the importation of Genetically Modified(GM) food aid into the country and
adivised the World Food Programme (WFP) to remove 26, 000 tonnes of GM maize that
had been imported into Zambia without authority.

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Despite the fact that Zambia was reeling under food shortage the Executive decide that
the risks incipient in GM made it possible for the decision to be justified. Decisions of
such magnitude could not be made without due consideration. Decision are made after
a decision process that include definition of the problem, gathering information and
collecting data, developing and weighing the options, choosing best possible options.
Plan and execute and take follow up action.

The cabinet then had decided to commission the president’s scientific advisor, Dr
Moses Band to lead a team of government scientists to investigate the problem. The
problem had been the risk that GM releases poses to biological diversity. Even though
Zambians were suffering and hungry a decision had to be made, and it was made for
the good of the nation as it was proved that indeed GM was a potential risk to the
environment, exports, food security and community rights. As the elderly would say .
nearly every decision we make will affect different people in one way or the other. Its
important to be aware of the influence our decisions will have, and understand what the
human cost will be.

The Zambian head of state Hakainde Hichilema recently disclosed plans to sell the
country’s presidential jet, purchased by the country’s previous administration, The jet
had been purchased by the former president Edgar Lungu for an amount the current
head of state believes was highly unnecessarily expensive and a much cheaper
alternative with similar capabilities could easily be secured and be adequate. However
in related news the Zambian Air Force is opposed to the idea, claiming that the jet is
military property not the government’s. Some in the public believe that it would
jeopardize the safety of their president. The anti corruption commission wants to
investigate possible money laundering were it could have been purchased at an inflated
price,

Such decisions when made will give confidence in the leadership and how that being a
leader does not give you the right to abuse public funds. This gives investors the much

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needed confidence in the rule of law. This is important to development as everyone is
earning what is duly his and any excess fund are channelled to development

These decisions could have a bearing on the provisions of the executive powers,
whether the head of state can unilaterally make those decisions and whether the
Zambian Air force has the powers to challenge the order of their commander in chief
and whether the public have the power to persuade the head of state to make a
particular decision and whether the anti-corruption body has the mandate to investigate
without a complainant. Despite the outcome any of the decisions to be taken it will be
for the good of the nation supposedly as no one is going to be prejudiced by the
decision of the head of state.

Once a problem has been identified it has to be solved. In the above scenario though it
may appear there is no problem the fact that it has been mentioned and concerns are
being raised then there is a problem. Enough information has to be gathered and
analyzed before a decision is taken out of the options available. Once the decision has
been made it will be implemented and the effect on development will then be judged by
the consequences arising from the decision.

Ruling party policies that are sometimes controversially implemented can sometimes
last as long as the party is in power. Once it is out of power some decisions are
reversed or repealed as they would not have been serving national development but
party interests.

Parliament enacts laws and periodically reviews provisions to better the lives of people
and to improve governance such as development agency ct.

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QUESTION 2

What’s the importance of strategic decision making to today’s global economy?

The global economy is very dynamic and a complex competitive landscape and hence
it has to be responded to with strategic skills and tack that enables an organization to
survive and earn above average returns. The writer will begin by giving definition of
terms followed by a detailed discussion on the importance of strategic decision making
to today’s global economy. The writer will conclude with summary of the discussion.

Decision making is a management approach and process of selecting the most logical
choice from the available options to create the best solution. It is also defined as a
choice among competing alternatives and implementation of the chosen alternative.
Strategic decision making is the process of developing and putting into action choices
that will influence the long-term welfare of the organization. These choices often involve
major organizational change and large resource commitments that are difficult to
reverse once they are implemented. Global economy is the sum of activities that take
place both within a country and between different countries. Each country is a separate
unit, with its own industrial production, labor market, financial market resources and
environment.

Organizations have different structures and are in different environments which

demand different models of management decisions. The mission of these organizations
is driven by management who are saddled with the onerous task of making decisions
that will have a bearing on the future and survival of the organization in this global
economy. It is therefore vital that the decisions so made are effective for the efficient
functioning of the organization. These should be high quality and speedy decisions that
will enhance the performance of the organization. Thus the organization as the centre
that creates the environment where people of different backgrounds meet and decide
fulfill the company objectives it has to be managed by strategic leaders who are non

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compromising when it comes to making decisions that will have a bearing on the
company the country and possibly the region and beyond.

Decision making is the fundamental and most important activity of management. It is the
heart of the executive activities of the management. Decisions reflect the success or
failure of management and the rise or decline of the organization as these are a factor
of the quality of the decisions that would have been made at that strategic level. It is the
management that that set the decision making process in motion and decides its
direction and speed. The decisions being made are the barometer of the health of the
organizational culture. The quality decisions, when implemented correctly, provide an
opportunity for the organization to reposition and realign to better ‘fit’ in the environment
in which it is functioning. Accordingly, successful decision making enables the
organization to maintain competitive position, align internal operations with external
environment and survive threats and challenges, while conversely, a single, poorly
made decision can lead to the speedy deterioration of the organization and result in
corporate embarrassment, large economic losses for stakeholders or at worst
bankruptcy.

Today’s global economy is changing. Long back a product could survive for years
without any physical quality change. Vinyl records and cassettes took a long time on the
market. Nowadays the demands of the consumers make the need to be innovative a
priority in the goods and service industry. A company that manufacturers televisions will
not stick to one model as consumers become more demanding, trendy, fashion
conscious and have more disposal income which prompt them to want more customized
services. The organization that does not respond to the demands of the consumers will
forced out of the market. The products that are being consumed by economies are not
only local products but are global, talk of electronic gadgets, cars, clothing, machinery
or technology.

There are decisions of all kinds that can be made in an organization. These can be
financing decision, investment decision, operating decision and many other, and they

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are made regularly within the company. Decisions are mainly classified into three types
according to the purpose of the decision or according to the importance of the problem.
These are strategic decisions, tactical decisions and operational decisions.

The strategic decision is normally taken by the top management. It concerns the main
axes of development of the organization and the relations of the organization with the
external environment. this type of decision determines the future of the organization by
setting the fundamental orientations which commit it in the long term.

The tactical decision is normally taken by the intermediate hierarchy. It aims at

implementing the strategy, drawing up action plans, and correcting dysfunctions and, as
a result, it concerns resource management and the effectiveness of their use in order to
Monitor I the medium term development for example the improvement of a product

The operational decision is normally taken by the operational managers and covers all
the unforeseen events, particular situations which arise during the execution of the
operations. The operational decision relates to the day-to-day operation with the aim of
making the process of resource transformation to the product or service as efficiently as
possible. These decisions are very frequent and their impact is short-term. Operational
decisions, which are the most frequent in nature, concretize tactical decisions,
themselves resulting from strategic decisions.

As you go up the ladder of decision making the need and quality of information needed
becomes high. Thus the information requested for the strategic level of decision making
is in nature, complex, diversified, uncertain, quantitative, qualitative and of multiple
shapes. Thus strategic decision making is complex and therefore very important. Its
importance cannot be overemphasized without mentioning that an organization cannot
survive without these decisions being made in today’s global economy where strategic
decisions being made by your competitor will force you to make your own either to
counter it or in response to a situation that you would not have anticipated. This
dovetails with express opinions that you are not always the master of your own destiny.

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Strategic decision making is intended to provide a competitive advantage and try to
change the overall scope and direction of the company. The power of strategic thinking
lies in combining the power of the right decision with the right time. To remain
competitive organizations through their executive wing must make decisions that will
enable them to remain competitive and survive, that will maximize short-term results
and minimize long-term risks. The importance of strategic decision making can be seen
through the vision, mission and goals that guide the future of the company. Following
are some of the reasons why strategic decision making is important in today’s economic
environment.

Strategic decision making is an essential skill for today’s leader that need to be natured
and continuously being exercised as the need is always there as the organization must
perform better in the future whether the present is better or worse. The skill need to be
improved on as new challenges evolve time and again and the experienced used to
solve a problem can be used to solve a similar one or be improved on to solve a
different one but taping into the steps followed previously.

Strategic decision making is a process that facilitates organizational learning through

the curves of economic challenges, improve performance and organizational outcomes
and reduce the probability of strategic failure or competition. Through business
intelligence reports for organizations strategic leaders can study them in order to predict
the future trends. Strategic decision making is necessary to overcome the obstacles that
come in the way of the organization’s progress.

It is one of the most important activities any organization can carry out as it brings out in
the open the direction that is to taken to realize the vision. Because it involves long-term
objectives it therefore requires intelligent and responsible office bearers who are not
afraid to take unpopular and painful decisions. A lot of knowledge should be at hand
including the processes, systems and policies that need to be galvanized before a
decision is made. Top executives can be exposed to secure and powerful software

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tools, data analytics tools and data discovery tools, loaded with options that assist in
making better and smarter decisions.

Strategic decision making involves the process of implementation. Having made the
right decision at the right time it becomes imperative that the decision chosen be
implemented. Implementation is the process of actually doing the work that would have
been decided to be done. Hence strategic decision making gets things done whether
the decision was right or not but once it has been made it has to be done.

Strategic decision making is a key tool to drive organization’ s business growth. Having
looked at all options at their disposal the executive managers will look at their objectives
and find the best way to achieve the objective. At their disposal also will be the decision
making process that will have a well-defined set of policies and rules which are to be
adhered to by all. Thus the strategic making process as a tool will be important as it
conforms to a standard set of processes that if followed will almost always bring about
appositive result in the form of a decision. Use is also made of other software tools that
are tailor made to address a set of challenges often faced by business executives.

Strategic decision making acts as a link between deliberate and emergent strategy. The
deliberate strategy is the existing plan that is already laid out for every organization. The
emergent strategy will then be a response to a situation or a circumstance at hand. So it
is important as there is already a working paper in the form of a deliberate strategy
from which it draws points to address the current challenge.

Strategic decision making is important as a deliberate platform to assess and analyze

organizational data that will can be used to resolve all the factors that affect an
organization performance and survival.

Strategic decision making helps organizations to achieve their goals. Goals are
achieved and success attained through making the right decisions. These decisions
that affect the organization are made at such strategic meetings based on the quality

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and amount of information that would have been gathered. Today’s economy is
dynamic and hence information is continuously surfacing on the public domain as well
as private domain. When such information comes the organization must take note and
remain vigilant or it is necessary for a response in a form that only strategic decision
making can make. Such decisions as, to discontinue a product or plant, a decision to
borrow funds, a decision to sell or acquire a subsidiary and many other possible
scenarios.

Strategic decision making helps organizations to be proactive. When faced with a

situation and strategic decisions are made it helps to improve the organization’s
efficiency. So the way the organization decides on future course of action will set the
tone for the rest of its subsequent actions.

Strategic decision making is key to the success of any organization. These decision will
affect it in a myriad of ways, from who gets hired, which goods or service to commence,
how much it generates, how it is viewed by customers and the community at large.

It’s not just individual decision-makers who need to make strategic decisions, but also
members of an organization. Organizations within organizations, sun-organizations
within corporations and various teams within a firm. The reason that strategic decision-
making is important for an organization is that it helps them to be more efficient. Thus in
today’s economy a company’s ability to make the right decisions is a critical factor that
can determine success or failure. Not all decisions are equal, and not all decisions need
to be made on the same day or even in the same week. In most organizations, there is
a need o make decisions that affect the lives of its members. Organizations must
determine the best course of action for the organization in order to meet its objectives.
Strategic decisions are decisions that are strategic in nature. Strategic decisions require
strategic thinking with a clear understanding of the long-term, short-term and even
immediate future.

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SECTION B
QUESTION 3
1. Define strategic competitiveness, strategy, competitive advantage, above-
average returns, and the strategic management process.

Strategic competitiveness – According to Hitt, Ireland And Hoskisson in their

book, Strategic Management: Competitiveness and Globalization, strategic
competitiveness is achieved when a firm successfully formulates and implements
a value-creating strategy. Value creation is the effort that is exerted in order to
make the company valuable to its stakeholders. It is achieved when the return on
investment is higher than that of the average competitor in the sector. This
entails the company to produce goods and services that are satisfying to the
customer.

To achieve this companies have to strongly execute their strategies in order to

realize maximum benefits as good mission and visions will not yield anything if all
the planned strategies are not operationalized. These achievements should also
be measured against the company’s responsibility towards the natural
environment, the society and prevailing regulations. To achieve a sustainable
competitive advantage ,a company must ensure that its competitors are not able
to replicate their business models (competitiveness) , either by making it too
expensive or difficult for them to do so. This needs radical innovation,
courageous leadership and market expertise. Thus it is the successful value
creation that separates a company from its competitors and qualifying it to have
been strategically competitive.

Strategy – a strategy is an integrated and coordinated set of commitments and

actions designed to exploit core competencies and gain a competitive advantage
( Hill, C. & Jones, G. 2013). Usually there is a challenge that need to be solved
or addressed, then there is the guiding policy which is the principle that is
applied, then there is the course of action to be taken. A company pursues its
vision by deciding to take a particular course of action rather than the other. That

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way the company will choose the best among competitive alternatives and then
zero in on that alternative to achieve strategic competitiveness.
A company may decide to sell its interest in a subsidiary in order to concentrate
on certain products. Of the products it chooses to concentrate on it may decide to
add a new concept, add quality and or reduce price, all in order to beat its
competitors and earn more profits. That move or strategic decision will change
the way things were previously being done, or in rare cases it involves
continuation of the old way of doing things which does not bring much change
though in the competitive stage where competitors are always finding new ways
of outpacing each other.

Competitive advantage – a competitive advantage is when a company

implements a strategy that competitors are not able to duplicate or are too costly
for them to adopt or copy. These are factors that allow a company to produce
goods or service better or more cheaply than its rivals says John Dudovskiy
(2016). These factors allow the productive entity to generate more sales or
superior margins compared to its market rivals.

Competitors are always on the lookout for what the market leaders are doing and
will always try to copy their products or services. If they succeed in copying the
market leaders’ strategy then that leaders’ competitive advantage has ended. A
competitive advantage only lasts as long as no other player in the same industry
is able to duplicate the strategy. Thus it is incumbent upon the company to adopt
strategies that are difficult to be duplicated, copied or adopted. That way it will
always be able to maintain its competitive advantage.

Above-average returns – are returns in excess of what an investor expects to

earn from other investments with a similar amount of risk. Returns do not usually
always come in the form of figures such as the net profit, return on assets and
return on equity but can come as differences between opening and closing stock
market prices of shares divided by opening stock prices to give a percentage

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return. Companies need to manage their portfolios very carefully as ignorance of
risk factors will lead to company liquidations as investors withdraw their
investments if directors fail to run the company. Investors expect directors to add
value to their investments and hence the adoption of strategies that yield above-
average returns. Shapiro, Carl (1989)

Strategic management process – is the full set of commitments, decisions,

and actions required for a firm to achieve strategic competitiveness and earn
above-average returns. This process is done through a series of steps that if
followed correctly and religiously will certainly result in the company earning
above-average returns and add more wealth to shareholders. Kiechel, Walter
(2010). 
The first step is to scan the external and internal environments for what is there
that can be identifiable as its resources. The scan will also seek to identify the
competencies and capabilities of what is already there. This will form the
strategic inputs. Once these have been secured the company develops its vision
and mission which serves as the guiding principle that directs their trajectory.
Strategies are then formulated to enable them to achieve the goals set out in the
objective timeline. Strategies that enable the company to achieve
competitiveness and earn above-average returns

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QUESTION 6

Describe vision and mission and discuss their value; and the work of strategic
leaders

After a company has scanned both the internal and external environment and has
gathered all the information it needs for its strategies it then develops its vision and
mission for the benefit of investors. These investors get insight as well as confidence
throw the vision and mission statements that the company rallies behind in which it
seeks to inform stakeholders what the company is and what it stands for.

A vision Siame (2017) is a picture of what the firm wants to be, what it wants to
ultimately achieve. This vision is reflected on a vision statement that is written and
published on behalf of the company by its secretariat. This statement will lay out the
direction that the company will be in the future. It is usually short but precise and to the
point. Corporate strategies are executed following the vision statement and it guides the
path that the employees will follow as it would have been formulated by the top
executives or Chief Executive Officer. The vision statement must directly or indirectly
make reference to the company’s core business. A good vision statement acts as
motivation for employees and provides guidance on long-term goal setting. It is long-
term, aligned with the firm’s business values and short-term goals, focused on success
and inspiring. Examples of vision statements of some prominent companies include;

Tesla- To create the most compelling car company of the 21 st century by driving the
world’s transition to electric vehicles

Amazon-To be earth’s most customer-centric company; to build a place where people

can come to find and discover anything they might want to buy online

Coca cola-To craft the brands and choice of drinks that people love
Microsoft-To help people and businesses throughout the world realize their full potential

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Nike-Do everything possible to expand human potential

Ethiopian Airlines-To become the most competitive and leading aviation group in Africa
by providing safe, market driven and customer focused passenger and cargo transport.

Thus a vision is expressing a dream, which can be visualized by the eye of the mind
that is unique and special identity to the company and reflects the aspirations of the
Executive leadership. It helps the company to convince the stakeholders to have
confidence in its leadership and its business. It helps employees to maintain focus and
not lose sight of the long-term goal of the company. A vision statement helps to create a
legacy and designed to outlast the founder regardless of whether you decide to sell or
no longer there circumstantially.

Mission according to Pearce and Robinson (2003) describes the company’s scope of
operations; - product, market, marker operating policies, technological areas, social
responsibility and the expression of commitment to survival, growth and profitability,
sets the overall purpose of the company. The mission specifies the business it wants to
operate in and the people it intends to serve and how it intends to do so. It is more
concrete and precise than the vision. The mission in more galvanized if employees
share the ethical standards and values of the company as a guiding principle to be able
to implement the leadership vision. It should be inspiring and relevant to stakeholders.

The firm’s mission like the vision should be laid out as a statement and should not be
vague, too broad and not pervaded by things that are not desirable such as jargons and
unnecessary superlatives. Thus mission statements are crucial as strategic inputs for
strategic actions in order to achieve strategic competitiveness for earning above
average returns. Examples of mission statements of some leading companies include;

Tesla – To accelerate the world’s transition to sustainable energy

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Amazon-to serve customers through online and physical stores and focus on selection,
price and convenience

Coca cola – To refresh the world in mind, body, and spirit, to inspire moments of
optimism and happiness through our brands and actions and to create value and make
a difference

Nike – Bring inspiration and innovation to every athlete. F you have a body you are an
athlete

Ethiopian airlines – To became the leading aviation group in Africa by providing safe
passenger and cargo air transport, aviation training, flight catering, MRO and ground
services whose quality and price value proposition is always better than its competitors.

Thus a mission statement adds value to a company through some of the following,
It creates unique identity – it differentiates itself from its competitors through its mission
statement
It attracts talent – those looking for a job will look at the mission statement that they can
relate to and want to be identified with the company

Provides guiding culture – the values, norms and beliefs of a company create a unique
cultural environment that can be expressed through the mission statement
Improves performance – the mission statement motivates employees and gives them a
clear goal for working towards the company’s long-term plans for growth.

Building community – the mission statement helps potential customers and the
community members to build positive associations with their brand through workers who
build a good reputation with business partner’s clients and customers.

Work of Strategic leaders

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Hitt, Ireland et.al (2011) states that strategic leaders are people located in different parts
of the firm using the strategic management process to help the firm reach its vision and
mission. Leadership according to Johnson, Scholes, et.al (2013) is the process of
influencing an organization (or group within an organization) in its efforts towards
achieving an aim or goal. Strategic leaders are decisive, committed to nurturing those
around and below them, and also committed to helping the firm create value for all
stakeholder groups. Hitt (2011) further states that no matter their location these
strategic leaders are decisive and committed to nurturing those around and below them
so as altogether help to create value for all stakeholders.

The strategic leader plays very important role as a change driver who creates and
develops change management strategies and develops techniques to make
employees accept the change from time to time. He should be honest, bold,
shrewd, a visionary, an analyst, a strategist, a tactician, a technologist and have the
ability to identify those necessary people to work with him to achieve the desired
results to achieve sustainability. The strategic leader should help the company to
grow and gain competitive advantage by playing different types of roles to achieve
long-term strategic results and help to implement change management easily and
quickly.

The strategic leader generally plays major roles in the business though dependent
on the size and scope of the business. He acts as a navigator to deal with
difficulties, solves problems and influences the work culture. He analyses vast
amounts of conflicting information understands the problem and identify feasible
and optimal solutions.cas a strategist he develops long-term strategies and sets
targets to match the vision of the organization by setting future plans and the
required direction and actions.

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The strategic leader acts as an entrepreneur by taking opportunities and expands
the business by creating innovative products and services to the market, generating
new style of leadership and ideas. He acts as a mobilizer who gathers all kinds of
resources and develops teams and partnerships with different kinds of talents do
build capacity to rapidly implement the objectives. He also works as talent
advocate by identifying talented and skillful employees both internally and
externally. He then encourages these talented individuals to be innovative by
providing training and guidance to reach their optimum abilities.

The strategic leader works as a captivator by building confidence among

employees and cultivate a culture of belongingness by convincing them to accept
his/her leadership. He works as a global thinker who understands diversity within
the organization and always identifying global opportunities. The strategic leader
works as a change driver who adapt to dynamic business environment through
making continuous change management strategies and evolving new techniques
acceptable to employees by convincing them of the fruitful outcomes of the
changes. Last but not least he works as the guardian of the organization. In this role
he keeps a keen observation of the business environment and guards it against any
disturbances and takes bold and wise decisions with courage and risk attitude for
the long-term benefit of the organization. He takes the onus of failure and shares
the successes with all employees. He is not emotional; and keeps away from
personal relationships in as far as the achievement of firm’s goals is concerned
elevating himself to be popular by taking bold, useful and sometimes unpopular
decisions.

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QUESTION 7

Define stakeholders and describe their ability to influence organizations

Stakeholders are groups or individuals that have a vested interest in and can exert
influence on an organization’s strategy and whose interests are directly affected by the
activities of the an organization. Hitt, Ireland, et.al, states that stakeholders are the
individual and groups who can affect the firm’s vision and mission, are affected by the
strategic outcomes achieved, and have enforceable claims on the firm’s performance.
Different stakeholders have different priorities and can affect or be affected by a
business’ operations and performance.

An organization cannot operate in isolation as it needs partners that will make the
business thrive and earn above-average returns. However despite their importance to
the organization stakeholders can hold the company at ransom by withholding
participation if the performance of the organization is not to their satisfaction.
Participation can come in the form of supplies, payments and even labor. The
stakeholders will continue to support the organization as long as it is performing well
and it is the ability of the firm to maintain good relations with stakeholders that will
enable it to have competitive advantage over its competitors. Companies management
however have the daunting task to insulate the company from over dependence on
stakeholders as their eventual influence on its operations and decision making
processes.

There are three types of stakeholder in an organization. These are the capital market
stakeholders, the product market stakeholders and the organizational stakeholders.
Each group of stakeholders has different expectations from the decision makers of the
firm they will be dealing with towards meeting their own objectives. Thus some
stakeholders tend to have more leverage on the firm than the others leading to some
trade-offs being reached for those stakeholders who deal with strategic management
processes.

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Capital Market Stakeholders
Capital market stakeholders refer to groups that provide and affect the availability and
cost of company capital. These are shareholders, venture capitalists, banks and debt
investors. Shareholders who would have started the company would
like to see a return on their investments. They are prepared to inject more capital
provided the financial statements show that their investments are well secured. High
risk are relative to high returns and hence were risk is high those concerned will keep
an eye against anything that will have an influence that may change the course of the
business. If the shareholders are not happy and dissatisfied with the way the business
is being run they may withhold further funding or even sell their shares or change the
whole top management team. Thus there is need to safeguard their interests but also
ensuring that the business is left to run independently without relying much on the
shareholders who if left to be too influential on the running of the business the business
may fold as they would have taken over the policy and decision making roles of the
executives. The business hence has to respond quickly to dissatisfied shareholders.
Other stakeholders like banks and other lenders who would have given the company
debt and , as a consequence would need the company to repay it want to see a greater
return on their investment that the risk they would have taken. Businesses always need
external funding to finance the purchase of machinery, new plants which cannot be met
by the cash generated by the business.

Product Market stakeholders

Product stakeholders refer to parties who influence or are affected by the company’s
offer. Their satisfaction contributes to the company’s success. These include suppliers,
customers, unions, host communities and government. These stakeholders have
different levels of expectations from the company. The company competitors have an
indirect role to play in so far as the market playing field is concerned. Customers want
cheap and quality products to satisfy their need. Suppliers want high prices for the
supply of their products. Supplier dissatisfaction will result in input supply stop. But
competitors may start offering lower prices for their customers and this company’s

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customers may look elsewhere for cheaper products hence the company will be forced
to reduce its prices or persuade its suppliers to always provide raw materials as and
when they are needed or reduce prices. Customers bring money into the company
which is later used to pay suppliers. Customer dissatisfaction can have an impact on a
lower income. They flow money to competitors. Without customers and suppliers there
will be no business. Host communities would want the company to be the providers of
employment to the community residents. They will provide labor and expect the
company to decent wages. They expect the company to prioritize healthy labor
practices. They also want the company not to cause externalities such as pollution and
provide community plough backs through provision of boreholes, recreational facilities
thereby lessening the demand on local and public authority’s services. Hence these
stakeholders would want a situation where there is a balance that they see where a
company looks stable which would mean that there is no conflict with shareholders and
that there is an assurance that business will remain as usual. Unions want job securities
for their members, desirable working conditions and an assurance the business will
operate as a going concern in the foreseeable future. Government provides
infrastructure, education and transport. These have a bearing on the business as it will
have skilled human capital and also it will lower transport costs and indirectly affects the
cost and quality of its products. Government would want the business to thrive that way
the company will create more labor and thus more taxes and comply with applicable
laws and regulations.

Organizational stakeholders.
Organizational stakeholders refer to parties who have a direct interest in the
performance of the company. These stakeholders are directly affected by the
company’s practices. They include employees, managers and staff. These stakeholders
expect the organization to provide a dynamic, stimulating and rewarding working
environment. Workers want to see the company growing and providing them with
opportunities to also grow with it through training and further skills development. At all
levels these stakeholders want to be participants in an organization where they are
rewarded according to their contribution. Those benefits can come in the form of salary,

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benefits, good work facilities and environment while also taking into consideration their
skills, knowledge and expertise. The satisfaction of the employees is key to company
success and they are more productive when satisfied. Company managers and
executives are responsible for allocating company resources and evaluating its
resources. They manage resources to create value. They take strategic steps to exploit
opportunities and minimize threats. The way they organize the company can have a
significant effect on the company’s ability to compete in the market.

This in conclusion a company must be able to identify its stakeholders and their
importance. When it has identified them it must manage them. In managing them the
company must prioritize them and try as much as it can to satisfy them. Stakeholders
wield certain powers that the organization must be able to exploit or minimize. . Hence
the earning capacity of the organization will determine how it will respond to
stakeholders’ interest. Organizations that earn below average returns do not have the
capacity to minimally satisfy stakeholders. Thus the company must labor to earn above
average returns and that way they will rely less on the influence of the stakeholders.
This flexibility will enable the company to satisfy multiple stakeholders as it will not be
held at ransom by those stakeholders who would think they have power over the
decisions of the company. The support of each stakeholder is important to the company
but their interests cannot all be satisfied hence there will always be trade-offs in
decision making.

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