Rosie Beattie Stakeholder Strategy

Appropriate stakeholder involvement in risk management for organisations

An organisation is a structure of people whose activities are co-ordinated and managed to achieve a collective goal or goals - in the private sector to achieve a profit and returns for shareholders, in the public sector to achieve a certain level of service.

Stakeholders are all those individuals or groups who have any kind of interest in the organisation. Rosie Beattie explains here that are three types of stakeholder - internal, connected and external.

Internal stakeholders are those within the organisation and may be defined as management and employees. They may be regarded as key stakeholders as they have a vested interest in the continuance of the organisation as their wages depend on it.

Connected stakeholders are those who are affected by the actions of the organisation. They may include suppliers and customers. Major suppliers and customers may be considered key stakeholders if they have a closer partnership type of relationship or if their profitability is affected by the actions of the organisation.
External stakeholders have an indirect involvement but may be greatly affected by the actions of, and affect the actions of the organisation. An example is government and other public sector bodies, pressure groups and the general public may be said to be external stakeholders.

We can only manage stakeholders that we are aware of. Regulators, end-users, your customer's customers, and internal support staff such as accounting or procurement. Too many project managers don't include these secondary stakeholders in their normal communication plans yet get indignant when they obstruct the project. In risk management we identify threats and opportunities. Rosie Beattie reminds us that stakeholders can be project adversaries just as easily as advocates.

While you are trying to uncover the hidden stakeholders, don't forget about the obvious ones: your team, your sponsor, and the people who will be approving the funding.

Tip: Make sure your stakeholders have a name and email id. Stakeholders are people, not organisations. "Facilities" isn't going to sign off on your change request, but Rosie Beattie from Boundary Court in Gatwick Road, who runs the department, might.

Risk management calls for prioritising the risks according to probability and impact. We can prioritise stakeholders similarly - by authority and interest.
key information: What do they care about? How will the project affect them? How does this project fit into their priorities? What do you need from them for the project to run smoothly?

Proactive, systematic risk management means finding the problems before they find you. Risk management doesn't have to be complex, but it does have to be disciplined. The same holds true for our stakeholders. Understanding who they are and what they want often isn't that difficult. The key is to be proactive, to reach out, and influence them before they influence you.

Porters five forces

Industry rivalry:
Many different stakeholders influence the FMCG market and even though Pickering & Co. have accomplished being the 3rd biggest FMCG manufacturer in the world, they are still facing serious competition from the number one G.F. Williams & Co. and the number 2 Boxley Ltd., which are the market leaders of the FMCG market. Currently the 3 of them are having such a high level that it is hard – Almost impossible - for new and smaller players to be considered much threat.
Even though Pickering & Co is the 3rd biggest FMCG manufacturer, it can never consider their position safe as the market is based on fashion and quickly alternating trends.

Their economic strength provide the possibility of focusing on a wider international scale, which in several cases crushes the smaller local competitors in the process as their narrow market is taken over by the international player.
Pickering & Co was until 2011-2012 able to dodge the financial crisis in which most of their competitors suffered great loses and ultimately shut down several of them in the process.

Not only were they able to dodge it they actually succeeded in experiencing a constant growth from 2008 to 2011. As a part of their future plan to secure growth they have started to enter market with high potential, which includes: Italy, China and Russia.

The competition in the FMCG market is intense no matter where in the world, the company chooses to enter. The competitors are as different as the market. Pickering & Co is in a good position as they just entered new markets in different sectors of the world, whereas their closest competitors are currently having 50% of their turnover in the US.

Threats of new entrants:
Every new entrant is a new threat to the established companies position.

It is not hard to get entry to the FMCG market as only very little knowledge is required to start up a internet store selling FMCG. However to enter the same league as Pickering & Co, who is producing and distributing the products themselves is a whole other story, as a huge capital and skills for design is required. For this reason, the market is heavily dominated by a very few but big operators. And as a result of this, entering the market and creating a trusted and recognized brand, which is able to compete with the big players, is hard and almost impossible. As earlier mentioned, huge capital is required as the prices on plastics, metals and granites are constantly increasing in price, and to counter this the big players are buying massive amounts to get discount and a small advantage. A newly started company will see itself forced to buy smaller amounts, as they don’t have the customer base, the production or the capital to carry out these kind of contracts. One of Pickering & Co’s strongest advantages is their 4 factories in Thailand, which is able to produce huge quantities, enough to meet the demand of almost the whole world.

The threat of net entrants is therefore currently valued to be a minimum as huge capital and several years of branding, opening factories and trade connections are needed to enter the market. Also, Pickering & Co already have 30 years of experience in the market, which also is one of their main strengths. The threat of new entries is of course present, but the chance of this scenario happening is very limited.

Bargaining power of the suppliers:
Pickering & Co’s products are primarily produced by plastics, metals, general commodities and granites. For most of the raw material used by Pickering & Co are not replaceable by substitutes and they are therefore dependent on the suppliers available on the market. However due to the size of costumer Pickering & Co generally are, they are also able to find a new supplier if they please. Conclusion would therefore be that even though the suppliers of course hold some power, Pickering & Co can at any time find another supplier if they get a better deal somewhere else.

Threat of substitutes:
For all companies, regardless of industry, it is necessary to relate to substitute products. The main factor the companies are looking for is how big the risk that the substitute can take over the market. The existence of substitute products, prices of its products, and can ultimately jeopardize the existing products competitiveness.

As FMCG is a fashion product, there are several indirect substitutes. Mostly giving social status FMCG is easily substituted with other products with the same or a bigger amount of social status connected to them. This can be reflected by trends, as an example the Iphone is a huge trend, giving different kinds of social status all over the world, in Denmark for example you expect everyone to actually have one. Whereas more poor countries, people are intrigued if they see someone having one.

In relation to Pickering & Co, there is a lot of substituting products, however most of them are complementing each other by matching with each other or with the style of clothing the wearer is having. Therefore it can be concluded that the big question is how relevant or modern their products are to the target groups, and if they are able to follow up on the price or if they are forced to buy the cheaper look a likes because of their budget size. Also, if the product are winning in relation to the question of the consumer actually get the feeling that they need the product or can live without having a piece.

The bargaining power of the customers:
Pickering & Co is using different sales channels based on each market and store. But they are however using a set of standards that each retailer must follow, no matter if it’s a concept store or a small retailer with the right to sell their products. This concept is secure in that the image that Pickering & Co is wishing for their customers is maintained no matter where the product is sold from and by who. Even though Pickering & Co’s retailers are having a big influence on each sale, in the end it all comes up to the individual consumer and in the FMCG market the consumer is having quite a big bargaining strength as there is a huge number of competitors also fighting to sell their products. Even though Pickering & Co is the 3rd biggest FMCG company in the world there will always be competitors no matter what market they are in, and this gives the consumer the ability to be picky.

The customers can for example buy the chair from Pickering & Co, but the next day buy look alike tables to fit onto the chair from a competitor, which is why they can allow themselves to be picky. However, the strong brand of Pickering & Co’s name is currently trendy which is why –luckily- the customers see value in knowing that the table and chair is not a look alike but the actual prestigious product from Pickering & Co.

Ultimately, relations between the supply base are described as adversarial and there are also quality and delivery problems. It would seem therefore that a more collaborative approach such as a strategic alliance or partnership style of relationship might bring benefits such as information sharing on schedules so as to overcome the delivery problems. No mention is made of whether delivery and logistics is handled in-house or not, but to outsource delivery and logistics to a professional firm would ensure an efficient delivery service. A more collaborative relationship where there is transparency and a sharing of ideas would also increase efficiency and bring about mutual understanding and a joint search to overcome quality problems. To adopt a tiered structure of supply management and to encourage a first tier and second tier supplier base to adopt the principles of Total Quality Management as part of the production processes would mean the priorities and values of all companies involved, all interested stakeholders, would need to be clarified, and then realised. This approach may be considered costly in terms of management time and effort, however the resultant increase in quality would be sufficient to justify this approach.