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 Learning Objectives
Appreciate the advantages and potential
disadvantages of various types of
interorganizational relationships
Analyze stakeholders to determine their strategic
importance
Select strategies for dealing with stakeholders
based on their strategic importance
Understand how to make partnerships effective
Create plans for functional-level resources to
implement business strategies
Determine how to effectively manage relationships
with external stakeholders
 Strategy Implementation

Managing
Stakeholder relationships and
Organizational resources
To move the organization towards the
successful execution of its strategies
Consistent with strategic direction
 Tourism Cluster in Costa Rica
Support Organizations Lodging Support Services
ICT Hotels Inns Financial
CANATUR Resorts Bed & Breakfast Communications
Environmental F& B Campgrounds Cabins Immigration and
protection customs
Restaurants
groups
Catering
Regional Motivations
tourism Food vendors
chambers Natural and cultural Transport Transportation
Adventure Airlines Infrastructure
Attractions
Conventions Car rentals Airports
National Parks Business Taxis Highways
Museums Health services Buses Ports
Entertainment Language training Cruise ships Railways
Sport and recreation Incentive travel
equipment rental Ferries
Casinos
Handicraft/souvenirs
Training Other Services
Management Promotion Security
Vocational Tour operators Hotels Health
Language Wholesale travel agencies Airlines
Government Attractions
Advantages of Interorganizational
Relationships
Resource Acquisition
Gain access to a particular resource, such as capital,
employees with specialized skills, intimate knowledge of
a market, or a modern production facility.
Speed to Markets
Firms with complementary skills partner to increase
speed to market with hope of capturing first-mover
advantages.
Enter Foreign Market
Often the only practical way to gain access to a foreign
market.
Economies of Scale
High fixed costs sometimes require firms to find partners
to expand production volume.
Advantages of Interorganizational
Relationships
Risk and Cost Sharing
Allows two or more firms to share the risk and cost of a
particular business endeavor.
Product / service development
Provides firms the opportunity to pool their skills to
develop new products and/or services
Learning
Provide participants with the opportunity to learn from
their partners (e.g. lean manufacturing, product
development, human resource management in an
unfamiliar country)
 Advantages of Interorganizational
Relationships
Strategic Flexibility
A valuable alternative to acquisitions, because they do
not have to be as permanent. They also require less of
an internal resource commitment, which frees up
resources for other uses.
Collective Political Clout
Can increase collective clout and influence governments
into adopting policies favorable to their industries or
circumstances.
Neutralizing or Blocking Competitors
Firms can gain the competencies and market power
needed to neutralize or block the moves of a competitor

Source: Adapted from B.B. Barringer and J.S. Harrison, Walking a Tightrope: Creating Value Through
Interorganizational Relationships, Journal of Management 26 (2000), p. 385, used with permission.
Strategic Importance of Stakeholders
and Decision to Partner
Formal Power

Economic High
Power Importance Partnering and
Inclusion in the
Political Power Firms Activities
Strategic
Influence on Importance
Environmental of External
Uncertainty Stakeholder
Facing the Monitoring and
Firm Traditional
Management
Low
Techniques
Possession of Importance
Knowledge or
Resources not
Found in Firm
Tactics for Managing and Partnering
with External Stakeholders
Traditional Management Partnering / Inclusion

Customers Customers
Customer service Involvement on design
departments teams or product testing
Marketing and marketing Joint planning sessions
research Joint training/service
On-site visits programs
800 numbers Financial investments
Long-term contracts Interlocking directorate
Suppliers Suppliers
Purchasing departments Involvement on design
Encourage competition teams for new products
among suppliers Integration of ordering
Sponsor new suppliers system with manufacturing
Threat of Shared information
systems
Long-term contracts
Interlocking directorate
Tactics for Managing and Partnering
with External Stakeholders
Traditional Management Partnering / Inclusion

Competitors Competitors
Direct competition based
on differentiation
Intelligence systems
Corporate spying and
espionage (ethical
problems)
Government
Legal, tax or government Government
relations offices
Lobbying and political
action committees
Campaign contributions
Personal gifts to
politicians (ethical
problems)
Joint ventures
Consortia or Alliances
Trade associations for
information sharing and
collective lobbying
Informal price leadership
Collusion (may be illegal)
Jointly or government
sponsored research
Joint foreign development
projects
Problem solving task forces
on sensitive issues
Appoint retired government
officials to board
Tactics for Managing and Partnering
with External Stakeholders
Traditional Management
Local Communities
Community relations
offices
Public relations
advertising
Involvement in community
service
Donations to local causes
Activist Groups
Organizational decisions
to satisfy demands
Public/political relations
efforts
Financial donations
Partnering / Inclusion
Local Communities
Task forces to work on
special community needs
Cooperative training and
educational programs
Development
committees/boards
Joint employment
programs
Activist Groups
Consultation with
representatives on
sensitive issues
Joint research and
development programs
Appointments to the board
Tactics for Managing and Partnering
with External Stakeholders
Traditional Management
The Media
Public/political relations
efforts
Media experts/press
releases
Unions
Union avoidance through
excellent treatment of
employees
Hiring professional
negotiators
Mutually satisfactory labor
contracts
Chapter XI protection to re-
negotiate contract
Partnering / Inclusion
The Media
Exclusive interviews or
early release of
information
Inclusion in social events
and other special
treatment
Unions
Contract clauses that link
pay to performance
Joint committees on safety
and other issues
Joint industry/labor panels
Inclusion on management
committees
Appointments to the board
Tactics for Managing and Partnering
with External Stakeholders
Traditional Management Partnering / Inclusion

Financial Intermediaries Financial Intermediaries

Financial reports Inclusion in management
Close correspondence decisions requiring
financing
Finance and accounting
departments Contracts and linkages
with other clients of
High-level financial officer financier
Audits Shared ownership of
projects
Appointments to the board

Source: Adapted from J.S. Harrison and C.H. St.John, Managing and Partnering with External Stakeholders,
Academy of Management Executive (May 1996), p. 53. Used with permission
Actions that Increase the Likelihood
of Successful Partnerships
Carefully study and select a partner
Define roles of partners
Develop a strategic plan
Keep top managers involved
Meet often, informally, at all managerial levels
Appoint someone to monitor partnership
Maintain enough independence to develop
your own expertise
Anticipate and plan for cultural differences
Functional-Level Resource Management
Functional-level strategy is the collective
pattern of day-to-day decisions made and
actions taken by managers and employees
who are responsible for value-creating
activities within a functional area
Paying attention to the details
Many companies are successful because of excellence at
the functional level
The following characteristics are essential:
Decisions made within each function are consistent
Decisions made within one function are consistent with
decisions made within other functions
Decisions made in all functional areas are consistent with
and support the strategies of the business
Conducting a Functional Strategy Audit
Marketing Strategy
Target Customersfew vs. many, what groups, what regions
Product Positioningpremium commodity, multi-use, specialty
use
Product Line Mixa mix of complementary products
Product Line Breadtha full-line offering of products
Pricing Strategiesdiscount, moderate, premium prices
Promotion Practicesdirect sales, advertising, direct mail,
Internet
Distribution Channelsfew or many, sole contract
responsibilities
Customer Service Policiesflexibility, responsiveness, quality
Product/Service Image premium quality, good price, reliable
Market Researchaccuracy, frequency and methods for
obtaining marketing information
Conducting a Functional Strategy Audit
Operations Strategy
Capacity Planninglead demand to ensure availability or lag
demand to achieve capacity utilization
Facility Locationnear suppliers, customers, labor, natural
resources or transportation
Facility Layoutcontinuous or intermittent flow
Technology and Equipment Choicesdegree of automation,
use of computers and information technology
Sourcing Arrangementscooperative arrangements with a few
vs. competitive bid
Planning and Schedulingmake to stock, make to order,
flexibility to customer requests
Quality Assuranceacceptance sampling, process control,
standards
Workforce Policiestraining levels, cross-training, rewards,
use of teams
 Areas of Interdependency and
Potential Conflict Between
Marketing and Operations
Facility Size and Process Choice vs.
Market Forecasts
Facility Location vs. Market Planning
Production Schedules vs. Forecasts,
Orders and Promotions
Operating Policies
Conducting a Functional Strategy Audit
Information Systems Strategy
Hardwarelocal area network (LAN), mainframe, minicomputer,
internal systems, links to Internet
Softwaredata processing, decision support, Web
management, computer automated design (CAD), computer
integrated manufacturing (CIM), just-in-time inventory
Personnelin-house experts, subcontracting or alliances
Information Securityhardware, software, physical location
and layout
Disaster Recoveryoff-site processing, backup procedures,
virus protection and treatment
Business Intelligencemanagement support, marketing,
accounting, operations, R&D, human resources, finance
Internetuses of Internet in communications, marketing,
resource acquisition, research or management
Conducting a Functional Strategy Audit
R&D/Technology Strategy
Research Focusproduct, process, applications
Research Orientationleader, early follower, late follower
Project Prioritiesbudget, quality, creativity, time
Knowledge Creationtraining, alliances and ventures,
acquisitions, cross-functional teams
Corporate Entrepreneurshipseed money grants, time off
to develop a venture, management support, rewards for
entrepreneurs, ideas come from everyone
Conducting a Functional Strategy Audit
Human Resources Strategy
Recruitmententry level vs. experienced employees, colleges,
technical schools, job services
Selectionselection criteria and methods
Nature of Workpart-time, full-time, or a combination, on site or
off site, domestic or foreign
Performance Appraisalappraisal methods and frequency, link to
rewards
Salary and Wageshourly, piece rate, commission, fixed,
relationship to performance, competitiveness
Other Compensationstock ownership programs, bonuses
Management Compensationstock awards, stock options,
bonuses linked to performance, perquisites, low interest loans
Benefitsmedical, dental and life insurance, paid leave,
vacations, child care, health club
Personnel Actionsdisciplinary plans, outplacement, early
retirements
Trainingtypes of training, availability of training to employees,
tuition reimbursement
Conducting a Functional Strategy Audit
Financial Strategy
Sources of Capitaldebt, equity, or internal financing
Financial Reportingfrequency, type, government,
shareholders, other stakeholders
Capital Budgetingsystem for distributing capital, minimum
ROI for investments, payback
Overhead Costsallocation of overhead costs based on direct
labor, machine use, sales volume, activity
Financial Controlsystem to ensure accuracy of internal and
external financial information, audits
Returns to Shareholdersdividends policy, re-purchase of
stock, treasury stock, stock splits
Financial Targetsestablishment of financial targets for
functional areas and business units, method of reporting on
progress
Problems with Capital
Budgeting Systems

Inaccurate Cost Data

Base Comparisons
Hurdle Rate
Qualitative Factors
 Major Concepts in Chapter 7
Strategy implementation involves managing
relationships with internal and external
stakeholders as well as managing other
organizational resources. These processes
overlap.
One of the most important reasons for
interorganizational relationships is to acquire
need resources, especially knowledge
Stakeholders that are high priority for
partnerships possess a large amount of
formal, political or economic power, have a
large impact on the uncertainty facing the
firm or possess needed resources
 Major Concepts in Chapter 7
A set of traditional monitoring and management
techniques apply to stakeholders that are not high
priority for partnerships
The travel industry is composed of a complex and
diverse variety of organizations. These firms work
together in a tourism cluster to provide the overall
tourism experience
Strategies are implemented through day-to-day
decisions. The challenge is to create a pattern of
integrated, coordinated functional-level decisions
that meets the needs of stakeholders and fulfills
the planned strategies of the organization