In business there are seven main constituency groups that must be managed in order to ensure successful outcomes and the development of business opportunities:
- Customers - the people and other organisations that buy the business’ products and services
- Partners - external individuals and organisations, including other businesses, which are involved in running the business
- Employees - personnel hired to run the business
- Contingent workers - short term contract and temporary staff that add extra capacity and expertise at stages in the cycle of business activities, e.g. spikes in demand
- The owners - people and organisations that have a financial interest in and/or responsibility for the business
- Government and regulators - the people and organisations that set the legal framework and regulations within which the business operates
- Competitors - other businesses and organisations that compete to meet the same customer needs with products and services, and to acquire and consume the same types of resources (note, these are not mutually exclusive)
For a business to continue to succeed it stands to reason that the needs and requirements of each of these groups must be understood and their affect on how resources are acquired, organised, and consumed by the business in pursuit of successful outcomes must be finely balanced in a dynamic equilibrium.
For example, the price that the business sets in the marketplace for its products needs to be attractive to customers when compared with competing business’ products. This price is dependent on the cost of labour and other materials and resources that are consumed in getting the product to market. Employees will have an interest in obtaining the best wage they can for their labour and competitors will be competing to attract skilled staff from a limited labour market by offering a more attractive package of remuneration, benefits, and working conditions.
The owners of the company will likely have expectations for dividends and returns on their investment which will themselves impinge on pricing through the profit margin needed to satisfy them. Regulatory and legal frameworks within which the business operates will impose their own limits and restrictions which affect the cost of doing business, and thus the offer price for products and services in the marketplace.
It is the understanding and balancing of these constituency interests into a set of principles and policies for making business decisions and plans that characterises a strategy. Developing, implementing, and governing compliance with a strategy is the most important contributing factor to long-term business success. Furthermore, the monitoring and evolution of the strategy in response to change needs to be a fundamental constituent of the strategy itself and demands skilled specialists within the business to advise managers and to guide business functions as they implement change.