The strategic importance of the "stakeholder approach" in the service industry

Abstract

In countries with a market economy it is generally agreed that companies should pursue economic profitability to survive and to provide shareholders with maximal value. The view is generally summarized as "the shareholder approach" in the management of businesses. However, not many people would disagree that companies also have certain social responsibilities. Unlike the shareholder approach, "the stakeholder approach" emphasizes responsibility over profitability and sees that company's success should be measured by the satisfaction among all stakeholders around itself, not by one stakeholder- shareholders. In this thesis, I examine how the stakeholder approach is beneficial for corporation's sustainability and competitiveness in the service industry by analyzing some empirical evidences in leading companies in it; Enterprise Rent-a-Car, Whole Foods, and Trader Joe's. In the service industry, companies can't help continuing interactions and relationships with all the stakeholders in daily business operations. Without supports from them, companies are hard to succeed. The analysis finds that the stakeholder approach is a legitimate management strategy and helps companies building trust and maintaining a sustainable competitive advantage, even giving better financial return in the long term.