Strategic Management: Formulation and Implementation

The Influence Of Shareholders

The view is widely held by Constable and others that too many companies are encouraged to seek short-term profits in order to please their major shareholders, and the it is only by considering the long term and the interests of all stakeholders that companies will become more effective competitors in world markets.

Constable contrasts two sets of objectives, ranked in order of priority:

Company A Company B
1. Maintenance and growth of market share Return on net assets, 1-3 year time horizon
2. Cash flow Maintenance and growth of employment
3. Maintenance and growth of market share Cash flow
4. Maintenance and growth of employment Return on net assets

He contends that company B is likely to grow at the expense of company A, and that these objective sets, A and B, are essentially those adopted by large UK and Japanese companies. To suggest that Japanese success rests solely on a particular set of objectives is oversimplifying reality, but it has certainty contributed.

Therefore, all stakeholders should be considered and consulted; priorities should be expressed; and crucially the objectives should be disseminated throughout the organization.

Each of the theories discussed in this section provides food for thought, but individually none of them explains fully where the organization is going and considering why. Each can be appropriate in certain circumstances and lead to high performance; in different circumstances they might be the wrong strategy. Therefore, it is useful emphasize the key role of the strategic leader, and his values, in establishing the main objectives and the direction in which he takes the organization.

There is no right or wrong list of priorities. However, whilst priorities can and will be established, all stakeholders must be satisfied to some minimum level. Moreover, in the final analysis the essential requirement is congruence between environment, values and resources.