External Relationships


An organization is concerned with maintaining a healthy relationship with suppliers and customer, with whom they interact daily. However, for an organization to be successful, it has to maintain healthy and fruitful relation with all the stakeholders. These stakeholders may or may not be directly involved in the market. But they impact how business will function in the market.

The external stakeholders are a large and diverse group. They include

  • Government and other legal bodies

  • Financial Institutions and Creditors

  • Consumers Rights Organization and Environmentalist

  • Media

  • Industry Associations

A simple understanding of stakeholder is anyone or anybody who gets affected and or affect the actions undertaken by the organization.

Government Relationships

All organizations are affected in some way or the other by the government and legal bodies in for legislation, act or tax policy. These bodies could be operating at national level (e.g. Central Board of Taxes) or at local level (e.g. Municipality) or at international level (e.g. World Trade Organization).

The amount of impact of these bodies on the organization is dependent of sphere at which it operates i.e. local market, national market and international market.

Any government’s economic policy or central bank’s monetary policy has an indirect or direct impact on the organization. A direct impact would be passing legislation to break cartels or monopoly or price regulation.

Government’s role is just not restricted to economic and monetary policy, but it sphere of influence includes society, the environment, and culture fabric of the country. Regulation around food and health safety directly impacts the function of the organization. For example, cigarette manufacturers anxiously await budget hoping government does not increase sales/excise tax, thereby increasing the selling price.

Political environment also plays an important in impacting functioning of the organization. Any sudden animosity between neighboring countries can result in government imposing trade embargo thereby halting commerce.

Financial Institutions and Creditors

Financial institutions, banks, creditors, lenders do not serve as direct customer for an organization, thereby not really forming the inside core of relationship marketing. However the influence they have on the overall working of the organization make them important element of relationship marketing. This aspect of relationship marketing is called Public Relationship or Investor Relationship management.

For an organization, it is important to have loyal and long term customer, but it is equally important to have loyal and long term investor who will stay invested in the company. Long term investors provide financial stability to the organization and also help companies avoid hostile takeover bids.

Financial performance as understood by an external stakeholder like an analyst will also determine the fate of the company. If the analyst expresses a positive response to the financial performance, it is likely that company will attract steady investors and also keep supplier confidence going. By providing quality company information to financial analyst, PR team can develop strong relationship with them.

Consumer Groups and External Pressure Group

Another extension of external stakeholders is public pressure groups like consumer activist, environmentalist, human and animal activists, ideological groups, local leaders etc.

Consumer groups are created to fight for the rights of consumers and sometimes represent a portion of customers. It is generally perceived that consumer group exists to provide customer satisfaction. However, they may be constituted to take on organization perceived with too much power or control over the market. These consumer groups can exert pressure through boycotts or protests.

Environmentalist groups like Greenpeace, World Wildlife Fund, PETA raise issue against companies which they believe are hurting the environment. Some of the issues raised by this group are illegal dumping of industrial waste in rivers, water wastage, plastic usage, pesticide usage.

Some of ideological and animal rights groups are difficult to deal and negotiated with. It requires a different PR strategy from company to protect its interest.

Public opinion leaders, civil rights leaders, TV Hosts are high profile individuals who command substantial public support. Any opinion expressed by them against any company can generate a negative environment for the company.

Essentially, companies are left with two options in dealing with pressure groups. The first option is to go alone and develop its own corporate social responsibility agenda and develop wider public acceptance. The second option is to develop working relationships with pressure groups and gaining their favorable opinion.

Mass Media

In the current world with 24x7 media and the flow of information, it is very important to pay particular attention on strategies to deal with mass media. Typically, organizations need to develop strategies to tackle news reporters and editors, investigative journalist, and sectorial analyst.

Organization need to develop a proactive approach in dealing with mass media. By creating open channels of communication with them. This could be achieved through providing them with actual and crucial business information from the senior management interview or product testing etc.

Industry Associations

Sometimes companies join hands in delivering value to customers. This so called alliance and collaborations have their own set of challenges. These collaborations can be divided into four categories internal (within the industry), external (outside industry), informal (business network) and formal (trade associations and alliances)

There are so many external relationships, organizations have to deal with. It has to determine which one of it is going to impact it most and develop strategies around that. Relationships with external stakeholders can make or break the success of an organization.

❮❮   Previous Next   ❯❯

Authorship/Referencing - About the Author(s)

The article is Written and Reviewed by Management Study Guide Content Team. MSG Content Team comprises experienced Faculty Member, Professionals and Subject Matter Experts. We are a ISO 2001:2015 Certified Education Provider. To Know more, click on About Us. The use of this material is free for learning and education purpose. Please reference authorship of content used, including link(s) to ManagementStudyGuide.com and the content page url.