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Journal of Strategic Marketing

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The incorporation of
an interactive external
environment: an extended
model of marketing
relationships
Michael Jay Polonsky
Published online: 10 Jan 2011.

To cite this article: Michael Jay Polonsky (1999) The incorporation of an interactive
external environment: an extended model of marketing relationships, Journal of
Strategic Marketing, 7:1, 41-55, DOI: 10.1080/096525499346521

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 JOURNAL OF STRATEGIC MARKETING 7 41–55 (1999)

The incor poration of an inter active

exter nal envir onment: an extended model
of mar keting r elationships
MICHAEL JAY POLO NSKY
The Marketing and Enterprise Group, School of Management, U niversity of Newcastle,
Newcastle, NSW 2308, Australia

HA ZEL T. SUCHA RD
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School of Business, Australian Catholic University, Sydney, NSW 2060, Australia

DON R. SCOTT
School of Commerce and Management, Southern Cross U niversity, Lismore, NSW 2480,
Australia

Traditional m arketing theory has largely considered the external environm ent as an
uncontrollable fixed constraint. This determ inistic approach fails to consider the
often interdependent nature of the firm and its external environm ent. It is suggested
that there are m any com ponents of the business environm ent that can be influenced,
to the overall benefit of the firm , yet traditional m odels tend to suggest that the
external environm ent is m ainly an uncontrollable force. The incorporation of
stakeholder theory into a m odel of m arketing interactions can be used to integrate a
wider set of relationships into a firm ’s activities and, by incorporating this m ore
explicitly into the planning process, can create greater value for the firm . This paper
exam ines how stakeholder theory can be incorporated into a m odel of m arketing so
as to prom ote the inclusion of an interactive business environm ent into strategy
form ation.
KEYWOR DS: Stakeholder theory; strategy development; business environment; marketing
relationships

IN TRODU CTION
‘Marketing’s concern with the organisational–environment exchange process and the
broadening of the marketing concept have emphasised the importance of the external
environment for marketing theorists and managers’ (Zeithaml and Zeithaml, 1984, p. 46).
The view that firms need to expand the way in which they deal with their environments was
also supported by Kotler (1986, 1987) in his discussion of megamarketing, where he assumed
that firms are required to deal directly with a broader set of non-traditional external forces.
Such views suggest that marketers have the ability to ‘change’ or at least influence much of

0965–254X € 1999 R outledge

 42 POLONSKY ET AL.

the external environment to a significantly greater extent than is normally suggested under the
traditional marketing philosophy, for example by lobbying governments, interacting with
environmental groups, etc. Thus, marketers should not consider external factors purely as
constraints on organizational behaviour, but need to realize that they have the ability to
modify and possibly even influence these ‘constraints’.
One only needs to open any principles of marketing text (e.g. Kotler, 1991; McCarthy and
Perreault, 1993) to see the diverse range of factors that are traditionally considered in
marketing strategy development. One of the first activities in the planning process is analysis
of the internal and external environments (Kotler, 1991). However, in most diagrams
depicting the strategic planning process, no direct links are shown between these two
environments, suggesting that each is examined in isolation from the other and there is
usually no indication of the possible influence of the firm on these environments. Such an
approach does not allow for an ongoing interaction between the internal and external
environments, but rather suggests that the external environment should be considered to be
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deterministic or a constraint on the firm and its activities (Clark et al., 1994).
Traditionally, the core reason marketing theory examines these environments is to ensure
that a firm’s strategy satisfies consumers’ needs. Only after such groups are ‘. . . taken into
account and included in the decision making process. . .’ can the firm ‘. . . set its goals and
allocate resources’ (Galbraith, 1977, p. 203). This approach fails to consider that strategy and
the business environment are in fact interdependent. Strategies can change the way the
environment and firm interact, just as the environment changes the way in which strategies
can operate. The Porter (1980) model of the five environmental forces implicitly suggests that
strategies can be designed to modify the firm’s identified environment. However, this model
is also limited in its consideration of the many influencing forces and explicitly leaves out
government as a force with which the firm could interact and, thus, effectively suggests that
such forces are external constraints rather than interactive aspects of the environment.
However, research has shown (discussions by one of the authors with members of the ‘Porter
project’ team investigating the competitiveness of New Zealand, 1989) that government can
play a major role in firms’ marketing plan development, depending on the extent to which
the country in question is open to free market competition.
This paper therefore examines how marketers can interact with the business environment,
rather than simply considering it as a constraint on strategy development and, thus, assist
marketers in better achieving strategic objectives.

BACK GROUND
The basic ‘marketing philosophy’ is built on the premise that the firm’s strategies are designed
to ‘. . . accomplish an organisation’s objectives by anticipating customer or client needs and
directing a flow of need-satisfying goods and services from producer to consumer’ (McCarthy
and Perreault, 1993). Such an approach is often depicted visually as a set of concentric circles,
where the consumer is depicted in the centremost circle surrounded by the firm’s marketing
activities, which is then surrounded by other company activities and is finally surrounded by
the external environment (Zeithaml and Zeithaml, 1984; Schnaars, 1991; McCarthy and
Perreault, 1993). This depiction places the external environment (political, social, legal and
technological) in a position of interacting with marketing channels, suppliers, competitors and
publics, but not with the marketing activities of the firm.
There are three alternate perspectives in terms of dealing with the external environment.
 INCORPORATION OF AN INTER ACTIVE EX TERNAL EN VIRONMEN T 43

These are deterministic, where the environment is taken as given and is therefore an
uncontrollable variable, strategic involvement, where the firm can influence the environment
within which it operates and a combined approach falling somewhere in between (Clark et
al., 1994). Marketers, however, have traditionally adopted a deterministic approach, where
they tend to believe that they must design strategy within a given environment that is fixed at
a point in time (Zeithaml and Zeithaml, 1984; Kotler, 1987; Clark et al., 1994).
A deterministic view does not suggest that the environment is static, for marketers and
others realize that firm–stakeholder relationships change over time and in fact strategy may
have unintended or undesired consequences. For example, Altman and Petkus (1994)
suggested that, once strategy is implemented, organizations must evaluate whether the desired
outcomes are achieved and, if not, adjustments to strategies may need to be implemented.
Strategy development is, therefore, an iterative process that may evolve organically
(Mintzburg, 1979, 1987). As such, organizations must continually re-evaluate the effectiveness
of strategy and ensure that desired outcomes eventuate or that strategy is adjusted to address
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any ‘gaps’ that arise.

However, while marketers traditionally consider how the environment might change,
traditional models and academic training suggests that marketers cannot influence the direction
of these changes, as is implied in the model in Fig. 1. Continuous monitoring of the external
business environment is the main method marketers use to anticipate changes, ensuring that
their activities keep up with a dynamic environment and that they continue to operate
effectively within it, but formal direct interaction with the external environment is seldom
suggested.
While many marketers believe that the external environment is uncontrollable, all believe
that internal variables are largely ‘controllable’ (Zeithaml and Zeithaml, 1984; Kotler, 1987;
McCarthy and Perreault, 1993; Samli, 1993; Clark et al., 1994; Boyd et al., 1995). Those
taking a deterministic view often discuss many external variables with which marketers must
contend or which they should take as constraints on strategy development. For example,
Baker (1992) discussed ‘the environment as the ultimate constraint’ (p. 140) and classified
demographic, social and cultural, political, economic and technological factors as the domain
of this uncontrollable external environment. Similar factors are also classified as part of the
external or macro-environment by other authors, for example Boyd et al. (1995) and
McCarthy and Perreault (1993).
When developing strategy, marketers consider the influence of the external environment or
macro-environment on the firm. For example, as previously mentioned, much of Porter’s
(1980) work on competitive strategy examines the influence of various environmental forces
and how the firm must address these environmental forces through strategic activities. Porter
(1980) attempted to develop a process for examining the environment and suggested that,
based on the environmental factors, there are generic strategies that can be applied by
marketers. Other writers such as Aaker (1992), the Boston Consulting Group (1986) and Day
(1986) have suggested a similar ‘limited’ involvement of the environment in strategy
development. Such approaches are largely consistent with the deterministic perspective, i.e.
the environment is a given (i.e. deterministic) and the firm must operate within or around it.
These authors suggested that, before designing strategy, marketers must examine the external
environment and then design strategies that consider the specific situations that they face.
This perspective assumes that there is a one-way direction of interaction between the firm
and the wider environment. However, it is common practice in university strategy classes for
the instructor to explain that this is not what actually happens during the planning phase, but
 44 POLONSKY ET AL.

Marketing
Channels
Technological-
Demographic
Natural
Economic
Environment
Environment
Marketing
Product Planning
Marketing
Analysis
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Target Publics
Suppliers Place Place
Consumers

Marketing Promotion
Control Marketing
Political- Implementation
Legal Social-
Environment Cultural
Environment

Competitors

FIG URE 1. The traditional marketing view of the enviro nment.

that the process is one of a continuous cycle of strategy development (one of the author’s
discussions with other university lecturers). However, because this interaction is not easily
depicted, many strategy models tend to suggest that the firm is affected by environmental
factors but that the firm cannot influence or change these factors. Some of the recent network
literature does, however, recognize that these factors are part of the wider set of firm–
stakeholder exchanges (Rowley, 1997). However, there is little suggestion as to how these
interactions occur, but rather that they simply exist and need to be considered.
As has been indicated earlier, this perspective of one-way flows (environment ® firm) is not
universally accepted. There are some who would suggest that marketers can control or influence
the supposedly ‘uncontrollable’ environment to some extent (for example, Galbraith, 1977;
 INCORPORATION OF AN INTER ACTIVE EX TERNAL EN VIRONMEN T 45

Zeithaml and Zeithaml, 1984; Kotler, 1987; Varadarajan et al., 1992; Samli, 1993; Clark et al.,
1994). Such a perspective is important as it suggests that firms have the ability to influence
macro-external environmental factors, which in turn will influence the success of organizational
strategy, i.e. the environment is not wholly deterministic. This perspective recognizes that the
firm can influence its network of exchanges with external environmental forces and, thus,
possibly better achieve strategic outcomes (Miller and Lewis, 1991; R owley, 1997).
The view that these relationships (firm « external environment) are interactive has also
been emphasized by other authors (for example, Galbraith, 1977; Miller and Lewis, 1991;
The Toronto Conference, 1994; Wood and Jones, 1995; R owley, 1997). However, it would
be a mistake to believe that marketers can ‘manage’ the external environment in the same
way that they manage the internal environment (Clark et al., 1994). R ather, as is suggested by
Harrison and St John (1996), R owley (1997) and Steadman et al. (1995), there is an
interactive relationship or interdependence between the firm and its environment. This
suggests that a strategic ‘involvement’ perspective is more accurate, even though marketers
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will still have to evaluate the situation at a given point in time before attempting to interact
with the various environmental forces.
If firms can influence the larger business environment ‘managers can create their own
futures’ (Varadarajan et al., 1992, p. 39). This interactive approach requires that firms examine
the environment and then develop a specific action to address or involve these forces. Wood
and Jones (1995) suggested that the firm should attempt to co-exist with the external
environment rather than attempt to manage it. On the other hand, Harrison and St John
(1996) suggested that ‘techniques associated with managing internal and external stakeholders
are converging’ (p. 47). While the boundaries distinguishing internal and external stakeholders
are dis-appearing, they still exist. Thus, firms may use strategies to internalize external
stakeholders into the strategy development processes, making them integrally participants in
strategy development (D’Aveni, 1995; Harrison and St John, 1996). It is unclear whether this
approach results in a ‘managed’ outcome, but, rather, it does make the firm and these groups
more interdependent (i.e. environment 1® strategy ® environment 2) and results in
organizational strategy evolving.
In examining ways in which firms can deal with the environment, Zeithaml and Zeithaml
(1984) extended Galbraith’s (1977) work. They put forward the view that there are three
broad options for dealing with the external environment.
(1) Independent strategies where the firm deals directly with the environment, changing
the way the environment relates to the firm.
(2) Cooperative strategies where the firm works (implicitly or explicitly) with others to
change the environment.
(3) Strategic manoeuvring where the firm changes or alters the way in which it deals with
the environment in an attempt to overcome environmental constraints (Galbraith, 1977;
Zeithaml and Zeithaml, 1984).
The way in which Zeithaml and Zeithaml (1984) discussed the three types of suggested
strategies (independent, cooperative and strategic manoeuvring) largely failed to ‘include’ the
environment in strategy formulation, but, rather, they discussed how it can be changed into a
predetermined or controllable variable. While Zeithaml and Zeithaml (1984) identified that
the environment is not necessarily predetermined, they seemed to suggest that the
environment is largely ‘managed’ rather than interacted with. As suggested by Galbraith
(1977), this approach is designed to ‘describe ways that the organizations can change the
 46 POLONSKY ET AL.

environment, reduce uncertainty and manage its dependence on others so that its present
structure and processes are adequate’ (p. 201).
Other literature seems to support the purely deterministic view of the environment as well.
Some authors have suggested that firms often apply ‘buffering’ strategies that protect the firm
from external environmental forces (Meznar and Neigh, 1995; Harrison and St John, 1996;
van den Bosch and van R iel, 1998) or undertake ‘adapting’ strategies that result in firms
adapting ‘to their environment by trying to quickly and fully comply with changing
expectations concerning corporate behaviour’ (Johnson, 1995, p. 248). However, these
approaches fail to consider the interdependent nature of the firm– environmental exchanges.
By taking the approach that the environment is interrelated or interdependent with
strategic activities, marketers may move from adopting a reactive posture to one where they
proactively ‘attack’ the environment (Zeithaml and Zeithaml, 1984; Clark et al., 1994), but it
is not clear whether such an approach is truly integrated. While various authors have
emphasized that organizational activities involve some type of exchange between the firm and
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the external environment, the perspective that the external environment can be managed does
not necessarily require an ‘exchange’ to take place. External forces need to be involved with
the firm so that they can assist in the shaping of strategy, as well as changing their ‘attitudes’
towards a firm’s given strategic direction. The process of including the various stakeholders’
‘views’ in strategy development requires extensive interaction and / or communication between
the firm and the external environment, which is largely missing from most strategy models.
The strategies suggested by Zeithaml and Zeithaml (1984) and Galbraith (1977) may be a
useful starting point, but they need to be made more interactive in nature.

EXPANDIN G THE BUSINESS ENVIRONMENT

R elationship marketing appears to be taking a first step in broadening the set of
environmental variables that are included in strategy development. Grönroos (1991) suggested
that the relationship approach to marketing is distinctly different to the traditional
transactional approach to marketing and that a relationship perspective has significant
implications for all facets of marketing strategy formation and, therefore, wider strategy as
well. R elationship marketing moves away from the pure consumer orientation. While
recognizing the importance of consumers, it also recognizes the importance of other forces
which were previously considered external to the firm. This type of perspective identifies that
there is a two-way interaction or relationship between the firm and these external
environmental forces.
R elationship marketing assumes that relationships are long-term, shared responsibilities and
benefits exist, mutual trust exists and there is some coordinated planning between the parties
(Dwyer et al., 1987). Adopting a relationship approach implies that each partner of the
relationship is involved (or shares a stake) in the other’s activities and should therefore provide
input into each other’s strategy formulation. These other groups represent forces in the wider
business environment. The firm may not be only incorporating the environment into strategy
formulation, but can actively change the environment by interfacing with it. Thus, there is a
two-way interaction taking place (firm « environment) rather than the traditional one-way
interaction (environment ® firm or firm ® environment).
Morgan and Hunt (1994) put forward the idea that ‘R elationship marketing refers to all
marketing activities directed towards establishing, developing and maintaining successful
relationship exchanges’ (p. 22). Adopting a relationship approach means that marketing is
 INCORPORATION OF AN INTER ACTIVE EX TERNAL EN VIRONMEN T 47

concerned with building relationships between a much broader group of environmental

members than just the firm and its consumers. Koiranen (1995) seized on this point, defining
relationship marketing as ‘a marketing approach to establish, maintain and enhance long-term
relationships with customers and other internal and external stakeholders so that the objectives
of the parties involved are met’ (p. 84).
In taking this approach, Koiranen (1995) identified the dynamic and interactive nature of
relationship marketing and suggested that marketers need to incorporate and communicate
with both the internal and external environments. This extension seems to remove the
distinction between uncontrollable factors and the external environment. Building relation-
ships with external factors assumes, to some extent, that the organization’s behaviour affects or
can affect these external variables, as well as being affected by them (i.e. firm «
environment). However, Koiranen’s (1995) approach did not identify how firms can or
should interact with the environment, but only identified the fact that such interaction needs
to take place.
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Other marketing literature also appears to be broadening its approach from considering
only the relationship with consumers in the ‘controllable’ environment (i.e. a narrow
consumer-based orientation) to include a broader set of internal and external forces or
stakeholders. The recent work of Greenley and Foxall (1996, 1997) was not only concerned
with a firm’s market orientation (i.e. ability to address customers’ needs), but also examined
the firm’s orientation in terms of other stakeholders and environmental forces, including
competitors, employees, shareholders and unions. They suggested that adopting a multifaceted
orientation is important and that firms needed to be concerned with more than just the
consumer if organizations are to achieve broader strategic objectives.
In taking this perspective, Greenley and Foxall (1996, 1997) expanded on the work of
Miller and Lewis (1991), where both sets of authors suggested that the value of the firm is
only maximized when the value of transactions with all constituents or stakeholders (they did
not distinguish between the internal and external) are maximized and not only transactions
with consumers. The importance of creating value in all firm–stakeholder exchanges has also
been highlighted in the stakeholder work of Steadman et al. (1995) who suggested that a
changing external environment forces a firm to understand better and include external
stakeholders in strategy formulation. Others, such as Slater (1997), have suggested that
marketers need to provide ‘superior customer value while considering the interests of other
key stakeholders’ (p. 164). Menon and Menon (1997) also suggested that their concept of ‘. . .
strategic enviropreneurial marketing attempts to integrate the marketing strategy across
organizational units within a corporation and across multiple stakeholders. . .’ (p. 58). While
neither Slater (1997) nor Menon and Menon (1997) distinguished between internal and
external groups it can be assumed that both types of stakeholders should be considered in
marketing strategy development.
If all of the previous authors are indeed correct, adopting a customer focus to the detriment
of other stakeholders may not maximize the value of the firm and may not result in achieving
the firm’s objectives. It is unlikely that such a result would occur when firms adopt the
traditional environmental approach put forward in most principles of marketing texts, as the
traditional approach considers the environment to be deterministic in nature. Taking the
external environment as predetermined does not enable a maximization of transactions
between the firm and this environment, as there are no such transactions.
An approach that does not take external environmental factors as given, but rather makes
them an integral part of marketing strategy development process should considerably enhance
 48 POLONSKY ET AL.

the value of firms. Therefore, broadening the way in which the environment is considered is
essential for effective strategy development.

THE STAKEHOLDER MARKET ING PERSPECTIV E

It has been suggested that many of the existing theories of the firm are deficient and do not
allow firms to develop strategic marketing plans effectively (Anderson, 1982). One of the
reasons that existing models are deficient is that they do not consider the widest set of
stakeholders when designing strategy. As such, stakeholder theory can assist in designing a
more comprehensive planning framework as it takes a broader approach to dealing with the
business environment, such that all influencing forces are considered. The acceptance of a
stakeholder marketing perspective as a part of the market planning process therefore should
enable marketers to evaluate comprehensively both the external and internal business
environment in terms of possible modifications that may be able to be achieved. The result of
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this should be a decision as to how external and internal environmental factors should be
treated, i.e. which should be treated as deterministic and which need to be ‘involved’ in the
strategy development process. If marketers adopt a stakeholder theory approach, they should
be able to design strategies that incorporate stakeholder involvement and, thus, take into
account how the firm and its environment interact, not just how the environment affects or
constrains the firm (Steadman et al., 1995). Such an approach would be consistent with an
extended relationship marketing perspective, i.e. building relationships with all groups that
facilitate firm exchanges, not simply focusing on one narrow environmental force such as
consumers to shape strategy (Tuominen, 1995; R owley, 1997).
There is some marketing literature that has embraced such a stakeholder perspective (Miller
and Lewis, 1991; Petkus and Woodruff, 1992; Koiranen, 1995; Tuominen, 1995; Greenley
and Foxall, 1996; Polonsky, 1996). However, it has been suggested that, on the whole,
marketers have not integrated stakeholder theory into marketing theory or practice (Miller
and Lewis, 1991; Nasi, 1995). While some authors broadly discuss stakeholder theory in a
marketing context, a closer examination reveals that many of these have not truly integrated
the core components of stakeholder theory (Gwin, 1991; Suchard and Suchard, 1994;
Carrigan, 1995), as they have not broadened the strategy process to enable it to interact with
the wider business environment.
Stakeholder theory provides an approach by which marketers can integrate the business
environment into strategy development (Freeman, 1984; Nasi, 1995; Atkinson et al., 1997),
although it is still evolving (The Toronto Conference, 1994; Wood and Jones, 1995) and
there is still some general disagreement as to the specific definition of stakeholder theory
(Clarkson, 1994, 1995; Donaldson and Preston, 1995; Mitchell et al., 1997). However,
Freeman’s (1984) definition is widely accepted in the literature (The Toronto Conference,
1994; Mitchell et al., 1997). He suggested that stakeholder theory is based on the principle
that ‘(T)he firm takes into account all of those groups and individuals that can affect, or are
affected by, the accomplishment of organisational purpose’ (Freeman, 1984, p. 46). This
definition implies that the firm considers both the internal and external environmental forces
that influence the firm and those that are influenced by the firm. Such a perspective
recognizes the two-way direction of any exchange and emphasizes that the environment is
neither totally controllable nor totally uncontrollable.
Stakeholder theory requires that the firm ‘take into account its relationship with specific
stakeholder groups as it sets corporate direction and formulates its strategies’ (Roberts and
 INCORPORATION OF AN INTER ACTIVE EX TERNAL EN VIRONMEN T 49

King, 1989, p. 64). By applying stakeholder theory, marketers should follow a process that
allows them to develop a strategy that integrates the ‘concerns’ of environmental forces by
considering who their various stakeholders are and how these stakeholders interact with the
firm. This understanding should result in strategies that address both the objectives of the firm
and its stakeholders. Thus, a stakeholder approach should result in more effective strategy
formulation (Atkinson et al. , 1997; R owley, 1997) than does a traditional marketing approach.
Interacting with the environment will not only ensure that marketers are proactive in terms
of a better understanding of the external environment, but it can lead to more flexible
organizations and, thus, more flexible managers. Harrison and St John (1996), suggested that
‘Flexibility reflects not only the speed of response (to environmental change), but also an
organization’s ability to reduce the impact of environmental change and the costs of
responding to it’ (p. 49). Such a perspective is different to the simple buffering or adoptive
approach identified by Meznar and Neigh (1995) and van den Bosch and van R iel (1998) as
the process is concerned with interacting with the environment rather than minimizing its
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influence. A stakeholder marketing approach thereby suggests that marketers should interact
with the external environment rather than simply reacting to such external forces.
Marketers need to realize that each firm faces a different set of relevant stakeholders
depending on the specific issue and these may even vary across firms within the same
industry. As such, strategy formulation should consider specific forces or stakeholders in the
particular environment before it can focus on a potentially narrow set of generic forces such
as suggested by Porter (1980). Because each situation is dependent on a different set of
environmental forces the marketer needs to examine the environment in their given context.

AN EXTENDED M ODEL OF M ARKETING RELATION SH IPS

R ather than McCarthy and Perreault’s (1993) set of concentric circles (see Fig. 1) an extended
market relationship model looks more like a wheel with many spokes (see Fig. 2). In a
stakeholder marketing model, the firm and not the consumer, as suggested by most models of
the marketing environment, is in the centre of the diagram. There are of course
interconnecting links to the other environmental forces (i.e. stakeholders), both internal
and external. These links are multidirectional in nature highlighting the interaction between
the firm and its environment. In addition, environmental forces interact directly and
indirectly. This emphasizes the fact that all environmental forces are also interdependent and
are not insulated from each other. In reality stakeholder relationships are not simply dyadic
transactions, but rather are comprised of complex networks of firm– stakeholder and
stakeholder–stakeholder interactions, as depicted in Fig. 3 (R owley, 1997). (The model is
only designed as an example and, thus, stakeholders are not ‘named’ as they would vary for
the specific situation. Additionally, the interactions could be made more complex.)
Stakeholders not only interact directly with the firm but interact with other stakeholders
and, therefore, some stakeholders may only ‘indirectly’ interact with the firm. These indirect
links may be extremely important, particularly if these groups have the ability to exert
political pressure on ‘other’ direct stakeholders (Westley and Vredenburg, 1991; R owley,
1997). As such, a stakeholder perspective needs to consider the entire network of firm–
stakeholder and stakeholder– stakeholder exchanges, not just firm–stakeholder interactions.
Freeman (1984); R oberts and King (1989); and Savage et al. (1991) identified four steps
that should be followed in interacting with stakeholders (the model has been referred to in
the literature as a stakeholder management model although it does not necessarily assume that
 50 POLONSKY ET AL.

GENERAL
PUBLIC

GOVERNMENT
CONSUMERS

INTEREST
GROUPS
COMPETITORS

MEDIA
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LEGAL/COURTS
FIRM

SCIENTIFIC
EMPLOYEES COMMUNITY

FINANCIAL SHAREHOLDERS
INSTITUTIONS
SUPPLIERS

FIG URE 2. An extended model of marketing relationships.

R
S
A Q
F
G B
P
H Firm
E
C O
I
N
D M
J L
K

FIGURE 3. Stakeholder network model.

stakeholders are simply ‘managed’). These have been added to by Altman and Petkus (1994).
These steps are as follows.
(1) Identify the relevant stakeholders in relation to the marketing being addressed.
 INCORPORATION OF AN INTER ACTIVE EX TERNAL EN VIRONMEN T 51

(2) Determine the stake and importance of each stakeholder group in relation to the
marketing activity.
(3) Determine how effectively the ‘expectations’ of each stakeholder are being met, i.e. is
there a gap between business performance and stakeholders’ expectations.
(4) Modify marketing objectives and priorities to consider stakeholder interests and reduce
the gaps that exist.
(5) Implement strategy and then adjust strategy if the desired outcomes are not achieved.

In considering marketing relationships, these stakeholder ‘management’ steps can be applied

together to identify which stakeholders should be addressed and how they should be
addressed. Strategies for stakeholder interaction need to not only consider stakeholders existing
expectations or perceptions of organizational activities, but also need to consider how groups
fit within the firm’s wider stakeholder network. Strategies can then be developed that
consider the degree to which stakeholders’ influence is deterministic and to what extent
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interaction can occur to bring about a ‘change’ in the stakeholder’s or others’ behaviour.
This process will utilize a relationship approach in that the firm’s activities will be based on
a network of interconnected exchanges with a broader set of players being considered in the
exchange relationship. It will, thus, recognize that even though participants may not be
directly involved in the exchange process, they may have a significant impact on the overall
exchange network (Atkinson et al., 1997; R owley, 1997) and each group may need to be
taken into consideration differently.
Each of the groups identified in this proposed model would have their own stakeholder
diagram and, thus, there would be a broad network of interconnecting exchange models with
elements in one model potentially interconnecting with elements in the others’ models. Thus,
when designing marketing strategy, marketers will need to not only consider how they
interact with key members of their stakeholder network, but also the forces that can influence
other members.

IM PLICATIONS
For marketers, adopting the stakeholder marketing perspective identified has many
implications. It requires that the relationships between organizational actions and various
members, internal and external, are more widely considered. Such a view is consistent with
the wider relationship perspective of marketing. That is, the firm and its relational members
(including all stakeholders) are interdependent and each group’s success is dependent on the
other. Actions that are not consistent with the objectives of the firm’s wider set of relational
members will strain the exchange relationship, thus reducing the effectiveness of these wider
exchanges.
This approach should enable marketers to achieve organizational objectives more effectively,
as they will have programmes in place to address gaps that may arise between the activities of
the firm and the views of the relational members depicted in the extended model. Such gaps
might require the firm’s direct involvement in the external as well as the internal business
environment. These objectives will be established in consultation with the members of both
the internal and external environments and will be developed from an extensive consideration
of the various influences. Such an approach should make strategy more realistic in being
better able to adapt and influence changes in the environment. Thus, working with the
 52 POLONSKY ET AL.

relational members of the stakeholder environment should create more organizational

flexibility, as well as reducing environmental uncertainty (Harrison and St John, 1996).
This process is more complex and involved than simply monitoring the wider business
environment. Environmental monitoring assumes that the environment is deterministic in
nature and that the firm reacts to the environment rather than interacting with the
environment. The suggested approach does not consider the environment to be deterministic
in nature. R ather a stakeholder approach formally recognizes the interdependence of the firm
and its environment and includes them in its strategy development. This will require that
specific processes be put in place to enable this formal involvement to occur.
Marketers need to move towards a mind set that integrates firm–environment interactions.
Changing the way in which the firm views the environment should enable them to include
these various forces in the strategy development process better and they may begin to
consider how they can work with the environment rather than to simply consider it as a
constraint. This change in mind set will come at a price, for the firm may need to develop
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formal and informal links with a wider set of environmental members. Therefore, the
planning process will become more complex. However, it is suggested that the benefits from
involving these various members will outweigh the cost of modifying processes (Miller and
Lewis, 1991; Greenley and Foxall, 1996, 1997; Atkinson et al., 1997; R owley, 1997).
U nderstanding the full set of stakeholder exchange modes is an important component of
the stakeholder marketing approach. Developing diagrammatic representations of all these
exchanges will enable marketers to identify how stakeholders can directly and indirectly
influence organizational outcomes. Marketers will then be able to design strategies that allow
for efficient interaction with the most ‘important’ stakeholders. However, this process is
interactive and marketers must continually consider how stakeholder networks and re-
lationships change, for these changes will potentially affect the success of given strategies and
types of firm–stakeholder interactions.

C ON CLUSION S
Marketers should move towards a more integrated approach and deal with a wider set of
forces in the business environment. This perspective requires that marketers broaden their
view of marketing relationships from being simple dyadic exchanges to broader networks of
stakeholders exchanges as described in the suggested model. When developing strategy they
need to consider this wider range of interconnecting relationships, of which adopting a
customer orientation is only one aspect. Focusing solely on the customer will neglect many
other groups and environmental forces that can influence organizational outcomes. Customers
are important, but so are these other relational members. To consider one without the other
can mean that the firm will not be not satisfying all its relational members’ objectives and,
thus, stakeholder dissonance of varying degrees may arise or more effective opportunities for
strategic interaction could be overlooked. This could result in the firm not maximizing its
long-term value nor achieving its objectives. It is anticipated that a more involvement-
oriented strategic planning process will be fostered by using a model which clearly identifies
the range of possible environmental forces with which a marketer may need to interact.
However, more theoretical and empirical research is needed to clarify the role of the
required involvement of external environmental aspects into the organizational strategy
development process. In this regard, academics may be able to assist in the development of
new approaches to strategy development. There has been some preliminary work within the
 INCORPORATION OF AN INTER ACTIVE EX TERNAL EN VIRONMEN T 53

stakeholder literature that has considered this issue (Freeman, 1984; Savage et al., 1991). Yet,
to date, there has been no quantitative validation of the effectiveness of any of these
approaches. Further qualitative and quantitative work with firms is also required to examine
the types of stakeholder relationships required in various industry sectors and cultural
environments and the process by means of which these can be built into a strategy
development process. The growing interdependence of the firm and its stakeholders makes
this area one in which substantial future contributions can be made to marketing theory and
practice.

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