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institutions, and unions), or political power (dissident stockholders, political action
groups, and governmental bodies). Sometimes the parties that exercise significant
power over firm decisions don’t register as having a significant stake in the firm (step
2). In recent years, for example, Wal-Mart has encountered significant resistance in

some communities by well-organized groups who oppose the entry of the mega-
retailer. Wal-Mart executives now have to anticipate whether a vocal and politically
powerful community group will oppose its new stores or aim to reduce their size,
which decreases Wal-Mart’s per store profitability. Indeed, in many markets, such
groups have been effective at blocking new stores, reducing their size, or changing
building specifications.
Once you’ve determined who has a stake in the outcomes of the firm’s
decisions as well as who has power over these decisions, you’ll have a basis on which
to allocate prominence in the strategy-formulation and strategy-implementation
processes. The framework in the figure will also help you categorize stakeholders
according to their influence in determining strategy versus their importance to
strategy execution. For one thing, this distinction may help you identify major
omissions in strategy formulation and implementation.
Having identified stakeholder groups and differentiated them by how they are
affected by firm decisions and the power they have to influence decisions, you’ll
want to ask yourself some additional questions:
• Have I identified any vulnerable points in either the strategy or its
potential implementation?
• Which groups are mobilized and active in promoting their interests?
• Have I identified supporters and opponents of the strategy?
• Which groups will benefit from successful execution of the strategy and
which may be adversely affected?
• Where are various groups located? Who belongs to them? Who
represents them?
The stakeholder-analysis framework summarized in the figure is a good
starting point. Ultimately, because mission and vision are necessarily long term in
orientation, identifying important stakeholder groups will help you to understand
which constituencies stand to gain or to lose the most if they’re realized.
Two Challenges
Two of the challenges of performing stakeholder analysis are determining how
stakeholders are affected by a firm’s decisions and how much influence they have
over the implementation of the decisions that are made. Many people have a tendency
to fall into the trap of assessing all stakeholders as being important on both
dimensions. In reality, not all stakeholders are affected in the same way and not all
stakeholders have the same level of influence in determining what a firm does.
Moreover, when stakeholder analysis is executed well, the resulting strategy has a
better chance of succeeding, simply because the entities you might rely on in the
implementation phase were already involved in the strategy starting with the
formulation phase. Thus, you now have a good idea of how to engage various
stakeholders in all the stages of the P-O-L-C framework.

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