Understanding Stakeholder Theory and Its Analysis

Stakeholder theory is the theory of operation of a business which is centered on the notion that a business should take into account all stakeholder interests in order to determine its proper course of action. In order to put stakeholder theory into effect, one must understand who all the stakeholders of a given company might be, thus requiring stakeholder analysis.

Stakeholder analysis is the process of determining the parties that might affect and/or be affected by the actions of the company. Such parties are understood as stakeholders within the company in question. Stakeholder analysis also includes determining prevailing attitudes among stakeholders with reference to a particular course of action or project. This is significant because stakeholder analysis can lead to an understanding of stakeholders' reactions, and thus, can lead to a better implementation of stakeholder theory by ensuring that the stakeholders are best served and most satisfied with the actions taken.

Stakeholder analysis, at its core, requires a determination of the primary categories of stakeholders under consideration. This is significant primarily because one cannot conduct stakeholder analysis if one does not know exactly how one is choosing to qualify a stakeholder.

There are multiple methods of stakeholder analysis, some of which define stakeholders based on how strong and legitimate a stakeholder's relationship is to the company and how much actual power to influence the company a particular stakeholder can exert, while others define stakeholders in terms of determining who is affected by the actions of the company. The exact determination of stakeholder analysis will very much affect the implementation of stakeholder theory.

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