A Classification of Stakeholder Orientation
George Leonard, Ph.D. Candidate, National University of Ireland Galway.
Dr. Declan Fleming, Head of Marketing Discipline, National University of Ireland Galway.
Abstract
Stakeholder Orientation has developed to become a major topic in strategic management
literature and has more recently begun to permeate into the marketing literature. This paper
traces the steps that occurred in that cross over and attempts to help in the development of a
stakeholder marketing concept. The paper also looks at the ways in which organisations are
practicing a stakeholder orientation, and tries to discover to what degree are these
organisations practicing this stakeholder orientation to its full potential. A strategic matrix is
offered which endeavours to aid organisations in deciphering their level of stakeholder
orientation as well as offering an opportunity for classifying those different levels of
stakeholder orientation.
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1. Introduction
The word “stakeholder” first appeared in a memorandum of the Stanford Research Institute
back in 1963 (Cots, 2011). Armstrong (1980) was the first person to coin the term
stakeholder theory. Since then stakeholder theory has developed to become one of the most
widely discussed theories in many fields within business literature (Rowley, 1997).
Armstrong (1980) argues that all shareholders are a fundamental stakeholder of the
organization rather than being the pre-eminent stakeholder they are often perceived to be in
the more traditional conception of the firm. Armstrong (1980) also discussed how a firm’s
relationship with these stockholders must be managed in conjunction with all other
stakeholders, as opposed to the more traditional mode in which management is seen as an
agent of the shareholders. This difference in organisational structure is illustrated in
Appendix.1 (Figure.1 & Figure.2). Freeman (1984: 52) defines stakeholders as “any group or
individual who can legitimately affect or is affected by the achievement of the firm’s
objectives”. In the literature Stakeholder theory is often referred to as stakeholder
management: Berman, et al. (1999), or as a stakeholder orientation: Ferrell, et al. (2010). For
the purpose of this paper stakeholder orientation (SO) will be the term used.
2. SO & Marketing
SO was predominantly management centric with Laplume (2008) noting from personal
correspondence from Frederick [Laplume (2008: 1153)] that “the stakeholder idea fits into
the mentality of strategically-minded corporate managers”. More recently there has been an
increase in stakeholder marketing related papers published in highly ranked marketing
journals. The Journal of Strategic Marketing published a paper by Maignan, et al. (2011)
entitled “Stakeholder orientation: development and testing of a framework for socially
responsible marketing”. The Journal of Macro-marketing also published a paper by Lusch &
Webster (2011) entitled "A Stakeholder-Unifying, Co-creation Philosophy for Marketing".
3. Marketing Concept & Market Orientation
Deshpandé, et al. (1993: 23) noted that “managers are returning to the dictum of the so-called
"marketing concept," with its call for customer orientation and innovation as the focus for all
business planning and strategy”. Slater & Narver (1999: 1165) said “The nature and benefits
of a market orientation (MO) have been discussed in the strategic marketing literature for a
decade”. MO is defined by Kohli &Jaworski (1990: 3) as “the organization wide generation,
dissemination and responsiveness to market intelligence”. MO is a fundamental marketing
concept and is essentially a business philosophy, an ideal or a policy statement according to
Barksdale & Darden (1971). Narver & Slater (1990: 22) stated that “market orientation is a
one dimension construct consisting of three behavioural components” and that these were a
“customer orientation, competitor orientation, inter-functional co-ordination”. This is
illustrated in Appendix.2 (Figure.3).
4. MO - SO & Performance
Narver & Slater (1990) found a direct relationship with a firm’s level of market orientation
and its business performance in terms of profit. More recently Song and Parry (2009: 158)
found that “perhaps an increase in market orientation enables the firm to reduce costs by
accelerating its development efforts, reducing production costs, and better targeting its
marketing efforts”. Jaworski & Kohli (1993: 3) also helped develop our understanding of the
market orientation concept by stating that it is “the organization wide generation,
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dissemination and responsiveness to market intelligence that helps create the competitive
advantages” which in turn leads to a firm’s greater financial performance. Ferrell, et al.
(2011: 95) called for a move away from MO to SO where they stated “Firms characterized by
MO are outward focused and are likely to be in a privileged position to experience the
influence of actors other than customer and competitors”. Kohli & Jaworski (1990: 3) define
as “the organization wide generation, dissemination and responsiveness to market
intelligence”. Given this, SO could be described as the organisation wide generation,
dissemination and responsiveness to market intelligence, to an extended list of stakeholders
and Ferrell, et al. (2010) illustrate the similarities of both orientations, (see Appendix.2,
Figure.4). Market orientation, Kohli and Jaworski (1990) and a stakeholder orientation,
Berman et al. (1999) have both been shown to augment a firm’s financial performance which
in most cases is in terms of profitability. Ferrell, et al. (2010: 95) also argue that “the bonds
of identification stimulated by SO translate into increased stakeholder resources (e.g.
employee commitment, good reputation) and, in turn into enhanced business performance”.
5. Multiple Stakeholder Orientation Profiles
Every organisation has a completely different set of stakeholders, all of which are vying for
organisational resources simultaneously. This myriad of stakeholders makes it difficult for
management to satisfy all their needs at once and the argument against stakeholder theory at
this junction according to Jensen (2010: 32) is “stakeholder theory directs corporate managers
to serve too many masters”. Obviously certain stakeholders will have to take priority at
certain points in time. In this case we say an organisation has primary and secondary
stakeholders, whereby the primary stakeholders take prima facie over the secondary. The
reason for doing so as Clarkson (1995: 106) explained is because “a primary stakeholder
group is one without whose continuing participation the corporation cannot survive as a
going concern”. Without serving all primary stakeholders the organisation would not exist.
Jensen would have to run an organisation which only had one primary stakeholder for his
understanding of management to be practical. Clarkson (1995: 107) then went on to define
the secondary stakeholder groups “as those who influence or affect, or are influenced or
affected by, the corporation, but they are not engaged in transactions with the corporation and
are not essential for its survival”.
Greenley, et al. (2004: 163) theorized that “Multiple Stakeholder Orientation Profiles”
(MSOP’s) existed because of this conflict of interests for organisational resources. They
found that when customers, competitors, employees and shareholders were taken to be the
primary stakeholders that four distinct MSOP’s assessing strategic planning differences
within organisations. The MSOP’s were: (1) a shareholder focus MSOP (19%), (2) a market
focus MSOP (37%), (3) undeveloped MSOP (27%), and (4) an employee focus MSOP (17%).
This research was based on a cross section of 500 UK companies and targeted senior
marketing executives. An argument can be made that none of the orientations above are in
any way a form of SO. They are simply four different and distinctive orientation profiles
which are practiced by organisations when a certain amount of primary stakeholders are
accounted for in a sample. Freeman (1984: 52) stated “we must not leave out any group or
individual who can affect or is affected by organisational purpose, because that group may
prevent our accomplishments”. Therefore by operating any of the MSOP’s which Greenley,
et al. (2004) observed, an organisation is not in actual fact practising a stakeholder orientation.
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Freeman (1984: 52) also stated that “even though when we put the concept (SO) to practical
tests we must be willing to ignore certain groups who will have little or no impact on the
corporation”. This would it seems allow for certain groups or individuals to be ignored, but
according to the definition offered by Clarkson (1995: 106) that “a primary stakeholder group
is one without whose continuing participation the corporation cannot survive as a going
concern” it is not possible to practice any of the MSOP’s as they all ignore one or more
primary stakeholder’s when assessing strategic planning differences. These distinctive
orientations or MSOP’s that Greenley, et al. (2004) observed are what could be called: (1) A
Shareholder Orientation, (2) A Market Orientation, (3) A Stakeholder Disorientation, and (4)
An Employee Orientation. These labels would seem to be more accurate as the arguments
laid out above would appear to question the stakeholder orientation element of the profiles.
However the Greenley, et al. (2004) paper on multiple stakeholder orientation profiles did
provide a contribution to our understanding of SO by showing the varying degrees to which
organisations engage with their primary stakeholders. This would indicate that organisations
need to assess the degree to which they are stakeholder oriented and that a system for doing
so would be based around primary stakeholders. The quadrant below in Appendix.3 Figure.5
outlines a process for determining the level of stakeholder orientation an organisation has in
terms of its theoretical and practical commitment to being stakeholder oriented. In the first
segment of the quadrant we see those organisations that have a high level of SO in theory but
not in practice. These organisations may have a mission statement or certain policies
attempting to be socially conscious, but on closer inspection fail in practice be as good as first
expected. One such example would be the practice of corporate social responsibility (CSR).
CSR investment strategies have been criticised by many including Keim (1978: 34) who
stated “These investments are in the interests of owners with diverse equity holdings because the benefits from an activity undertaken by one firm may be appropriable to other
firms, all of which may be included in the owner's portfolios”. These organisations are
labelled Pseudo-Stakeholder Oriented in the quadrant due to their poor level of commitment
to practicing a SO.
Other organisations neither practice nor speak to being stakeholder oriented and this group of
organisations are what the quadrant has labelled Stakeholder Dis-oriented or comparatively
are what Greenley, et al. (2004) labelled as having an undeveloped MSOP. The third group of
organisations are highly committed to being stakeholder oriented both in theory and practice
and these organisations are labelled by the quadrant as having a real Stakeholder Orientation.
The final group are labelled Stakeholder Pre-oriented when the policies and procedures they
have in place are not using SO language but are in practice showing a high level of
commitment to SO practices.
6. Conclusion
SO has become an important part of marketing literature in recent times, with a multitude of
scholars publishing in the area. This paper attempts to further our understanding of both
Stakeholder Theory and the marketing concept itself. The SO quadrant further helps our
understanding of the Stakeholder Theory by providing a platform for organisations to
discover the degree to which they are indeed stakeholder oriented. It also offers organisations
a way to pro-actively engage in assessing their level of SO and in doing so they can
determine their position within the quadrant and therefore take the strategic steps necessary to
become stakeholder oriented.
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Appendix.1
Figure.1: Stakeholder Theory View of the Firm.
Source: Freeman (1984)
Figure.2: Traditional Principal-Agent View of the Firm.
Source: Armstrong (1980)
Appendix.2
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Figure.3: Market Orientation:
Source: Narver & Slater (1990)
Figure.4: The Market Orientation – Stakeholder Orientation Overlap
Source: (Ferrell, et al. 2010).
Appendix.3
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Figure.5: Stakeholder Orientation Classification Matrix
Source: Leonard (2011)
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