A hallmark of international competition is the diffusion and pervasiveness of services man- agement. Engagement with the global marketplace has compelled organisations to heighten the quality of business practices at global, national and local levels. The result has been a pro- found transformation of competition across these levels, along with the shift from manufactur- ing to the expanding domain of services. The momentous reshaping of stakeholder interests has been marked by the entry of services into most aspects of our lifestyles. The 1970s was an era of economic expansion when the Western world was challenged by foreign competi- tors, and particularly, by the Japanese with their higher-quality cheaper products. Customer
service relations departments, along with a host of other innovative business operations, were introduced into US manufacturing firms during the 1980s as competition strategies to mimic the core attributes of the Japanese management style. There was little alternative for the US automakers, whose dominant market position had declined and who, in the early 1980s, were experiencing losses of billions of dollars through decreased sales. These remarkable changes stimulated an enormous thirst for services during the 1990s. This accelerated impetus for growth in services was stimulated by the collapse of a number of centrally planned socialist systems and the emergence of a competitive market-based economy, new career opportuni- ties created by technological developments and the pace of information transfer, changes in skill composition from mass education, and the increased participation of women in labour markets. Stemming from these changes were the proliferation of new labour markets and new demographic profile characteristics, such as two income earner households, more highly edu- cated workers who are in better-paid jobs, with changes in skill composition and the increased role of women in paid work. As community affluence grew, so did stakeholder spending power, which in turn increased the demand for services (or the ‘McDonaldisation’ phenomenon) and the management of service.
Few people in developing and developed countries would not have been exposed to the McDonald’s chain of fast-food outlets. Since Ray Kroc purchased the US franchise rights in 1955 the organisation has expanded enormously and now sells ‘Big Macs’ on every continent. At the heart of this enormous success is aggressive marketing, and the employment of stan- dardised and routinised production processes. While these work arrangements are primarily designed to give the customer quality fast food, they also are the cornerstone of counter ser- vice. It is the personal experience between the customer and the McDonald’s counter staff that will shape stakeholder opinions of how they felt about the services interaction, how they were spoken to and, overall, whether they were satisfied with the treatment received. It is well documented that customers hold a normative view about how they believe they should be treated. The gap between this and the service actually provided (the service ‘gap’), in the framework of the ‘met–unmet’ expectations theory (Porter and Steers, 1973; Muchinsky and Tuttle, 1979; Bottger, 1990; Pearson, 1995), will determine the extent of customer sat- isfaction. Dissatisfied customers are likely to complain, to tell a wide audience of potential customers about their perception of poor service, and are unlikely to patronise the company again. In a climate of intense competition, such as between fast-food outlets and restaurants in the food retailing sector, many organisations have reinvented themselves in response to customer expectations.
In addition to organisations that provide a mixture of goods and service, there is also an increasing abundance of organisations that have purely service functions. These firms are collectively referred to as the services domain. Although service is an intangible activity (see Chapter1), and is difficult to assess, this element is crucial for success. For instance, today’s homes are reliant on garbage removal and other domestic services, such as water, gas and electricity, as well as the labour of different tradespeople to undertake such tasks as carpet cleaning, plumbing or other service repairs to household equipment, or even home renovat- ing. Moreover, in the fulfilment of social equity and quality of life ideals, most individuals are beneficiaries of services that include transportation, hospitality, education, health, law or even welfare, and finally death.
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All of these interactions require relationships between customers, companies and their social surroundings, and managers need to proactively address stakeholder interests to achieve improved efficiencies and ensure growth. An overriding need to ensure that proper account is taken of customer interests is the essence of the value of stakeholder theory. Traditional approaches assert that organisational survival was primarily achieved by the maximisation of return on shareholder investment. In contrast, stakeholder theory indicates that successful businesses will take into consideration the interests and expectations of a variety of stake- holder groups, including shareholders. It is the contention of this chapter that stakeholder theory has universal value for the production sector, for profit and non-profit organisations, for those firms such as retailers that have a goods and services component, as well as for ‘pure’ service organisations. Indeed, the very survival and continuing success of these businesses are highly dependent on an integrated stakeholder-based approach to services management.
Conclusion
Significant investment is being made in identifying and managing stakeholders. In particular, during the past two decades significant attention has been given to developing stakeholder theory as an alternative to the traditional economic and social structural models previously developed to predict organisational behaviour. To replace these dominant theories, scholars have focused on stakeholder theory, which underscores a more comprehensive management approach that aims to integrate social behavioural dimensions with economic expectations. The central objective of this framework is to describe how companies respond to the multiple and interdependent influences of stakeholders who exist in contemporary environments that are exceedingly complex.
The role of managers is a critical feature of the stakeholder framework. Ultimately, the benefits attained by particular stakeholders are determined by how managers prioritise com- peting claims. For instance, the community is frequently aggrieved by price ‘hikes’ in vehicle fuel, which is a commodity that affects the cost of almost every other good and service in an industrial world The dominant view is that the oil corporations are more driven by the profit-seeking demands of shareholders and less by the ethical priorities associated with wider social objectives. The resolution of such specific stakeholder interests may be represented by individuals, citizen groups, government or non-government bodies, as well as public entities, indigenous peoples, trade unions and minority groups. These stakeholders provide opportuni- ties for discourse to reach mutually acceptable outcomes that impact on institutional strate- gies for global action on ecological sustainable development. And across these arrangements, managers have a vital role as they endeavour to address the competing claims of the various stakeholders within the three aspects of stakeholder theory: (1) normative, (2) instrumental, and (3) descriptive. The normative concern is how managers ought to deal with stakeholders, the instrumental approach provides consequences for the management treatment of stake- holders, and the descriptive approach is concerned with how managers actively deal with stakeholders. In practice, it is managerial activity that determines how others perceive cor- porate values, the way the organisation addresses its stakeholders, and its economic corporate performance.