Part 3 - Managing in A Changing Global Environment

Organizational Theory,
Design, and Change

Teori Organisasi
Sudarsono, SE., MM
Chapter 3
Managing in a
Changing Global
Environment
Copyright 2007 Prentice Hall
3- 1
What is the
Organizational
Environment?
Environment: the set of forces
surrounding an organization that

have the potential to affect the
way it operates and its access to
scarce resources
Organizational domain: the
particular range of goods and
services that the organization
produces, and the customers and
other stakeholders whom it serves
3- 2
Figure 3-1: The

Organizational
Environment
3- 3
The Specific Environment

The forces from outside stakeholder
groups that directly affect an
organizations ability to secure
resources
Outside stakeholders include

customers, distributors, unions,
competitors, suppliers, and the
government
The organization must engage in

transactions with all outside
stakeholders to obtain resources to
survive
3- 4
The General Environment

The forces that shape the specific
environment and affect the ability
of all organizations in a particular
environment to obtain resources
3- 5

(cont.)
Economic forces: factors, such as
interest rates, the state of the
economy, and the unemployment
rate, determine the level of demand
for products and the price of inputs
Technological forces: the
development of new production
techniques and new informationprocessing equipment, influence
many aspects of organizations
operations
3- 6

(cont.)
Political and environmental
forces: influence government
policy toward organizations and
their stakeholders
Demographic, cultural, and
social forces: the age, education,
lifestyle, norms, values, and
customs of a nations people
Shape organizations customers,

managers, and employees
3- 7
Sources of Uncertainty in
the Organizational
All environmental forces cause
Environment
uncertainty for organizations

Greater uncertainty makes it
more difficult for managers to
control the flow of resources to
protect and enlarge their domains
3- 8
the Environment (cont.)
Environmental complexity:
the strength, number, and
interconnectedness of the
specific and general forces that
an organization has to manage
Interconnectedness: increases
complexity
3- 9
Environmental dynamism: the

degree to which forces in the
specific and general
environments change over time
Stable environment: forces that

affect the supply of resources are
predictable
Unstable (dynamic)
environment: it is difficult to
predict how forces will change that
affect the supply of resources
3-10
Environmental richness: the
amount of resources available to
support an organizations domain
Environments may be poor because:
The organization is located in a poor

country or in a poor region of a country
There is a high level of competition, and
organizations are fighting over available
resources
3-11
Figure 3-2: Three Factors

Causing Uncertainty
3-12
Resource Dependence
Theory
The goal of an organization is to
minimize its dependence on other
organizations for the supply of
scare resources and to find ways
of influencing them to make
resources available
3-13
Resource Dependence
Theory (cont.)
An organization has to manage
two aspects of its resource
dependence:
It has to exert influence over other

organizations so that it can obtain
resources
It must respond to the needs and
demands of the other organizations
in its environment
3-14
Interorganizational Strategies
for Managing Resource
Two basic types of interdependencies

Dependencies
cause uncertainty
Symbiotic interdependencies:
interdependencies that exist between an
organization and its suppliers and distributors
Competitive interdependencies:
interdependencies that exist among
organizations that compete for scarce inputs
and outputs
Organizations aim to choose the

interorganizational strategy that offers
the most reduction in uncertainty with
least loss of control
3-15
Figure 3.3: Interorganizational

Strategies for Managing Symbiotic
Interdependencies
3-16
Strategies for Managing

Symbiotic Resource
Interdependencies
Developing a good reputation
Reputation: a state in which an

organization is held in high regard
and trusted by other parties because
of its fair and honest business
practices
Reputation and trust are the most
common linkage mechanisms for
managing symbiotic
interdependencies
3-17

Symbiotic Resource
Interdependencies
(cont.)
Co-optation: a strategy that

manages symbiotic
interdependencies by neutralizing
problematic forces in the specific
environment
Make outside stakeholders inside

stakeholders
Interlocking directorate: a linkage
that results when a director from one
company sits on the board of another
company
3-18

Symbiotic Resource
Interdependencies
Strategic alliances:(cont.)
an agreement
that commits two or more companies

to share their resources to develop
joint new business opportunities
An increasingly common mechanism for

managing symbiotic (and competitive)
interdependencies
The more formal the alliance, the
stronger and more prescribed the
linkage and tighter control of joint
activities
Greater formality preferred with uncertainty

3-19
Types of Strategic
Alliances
Long-term contracts
Networks: a cluster of different
organizations whose actions are
coordinated by contracts and
agreements rather than through a
formal hierarchy of authority
Minority ownership
Keiretsu: a group of organizations,

each of which owns shares in the other
organizations in the group, that work
together to further the groups interests
3-20
Figure 3-4: Types of

Strategic Alliances
3-21
Figure 3-5: The Fuyo

Keiretsu
3-22
Types of Strategic
Alliances (cont.)
Joint venture: a strategic
alliance among two or more
organizations that agree to
jointly establish and share the
ownership of a new business
3-23
Figure 3.6: Joint Venture

Formation
3-24

Symbiotic Resource
Interdependencies
(cont.)
Merger and takeover:

results in
resource exchanges taking place
within one organization rather
than between organizations
New organization better able to

resist powerful suppliers and
customers
Normally involves great expense and
problems managing the new
business
3-25

Competitive Resource
Interdependencies
Collusion and cartels
Collusion: a secret agreement

among competitors to share
information for a deceitful or illegal
purpose
May influence industry standards

Cartel: an association of firms that
explicitly agrees to coordinate their
activities
May influence price structure of

market
3-26
Et fiyatlar Rekabet Kurulu'na

ikayet edildi
Tketiciler Birlii Bakan Vekili Mehmet Muta ahin

''Et fiyatlar zerinden haksz kazan elde etmeye
alan firmalar Rekabet Kuruluna ikayet ettik'' dedi.
3-27

Competitive Resource
Interdependencies
Third-party linkage(cont.)
mechanism:
a regulatory body that allows
organizations to share information
and regulate the way they compete
Strategic alliances: can be used
to manage both symbiotic and
competitive interdependencies
Merger and takeover: the
ultimate method for managing
problematic interdependencies
3-28
Figure 3-7: Interorganizational

Strategies for Managing Competitive
Interdependencies
3-29
Transaction Cost Theory

Transaction costs: the costs of
negotiating, monitoring, and
governing exchanges between
people
Transaction cost theory: a theory
that states that the goal of an
organization is to minimize the costs
of exchanging resources in the
environment and the costs of
managing exchanges inside the
organization
3-30
2009 Nobel Prize in

Economics: Economic
governance
3-31
Sources of Transaction
Costs
Environmental uncertainty and

bounded rationality
Bounded rationality: refers to the

limited ability people have to process
information
Opportunism and small numbers
Attempt to exploit forces or stakeholders
Risk and specific assets
Specific assets: investments that

create value in one particular exchange
relationship but have no value in any
other exchange relationship
3-32
Figure 3-8: Sources of

Transaction Costs
3-33
Cooperation vs.
opportunism: The prisoners
dilemmaPrisoner B Stays Silent Prisoner B Betrays
Prisoner A Stays Silent
Prisoner A Betrays
Each serves 6 months
Prisoner A: 10 years
Prisoner B: goes free
Prisoner A: goes free

Prisoner B: 10 years
Each serves 5 years
3-34
Transaction Costs and

Linkage Mechanisms
Transaction costs are low when:
Organizations are exchanging

nonspecific goods and services
Uncertainty is low
There are many possible exchange
partners
3-35

Linkage Mechanisms
Transaction costs are high when:
(cont.)
Organizations begin to exchange

more specific goods and services
Uncertainty increases
The number of possible exchange
partners falls
3-36

Linkage Mechanisms
Bureaucratic costs: internal
(cont.)
transaction costs
Bringing transactions inside the

organization minimizes but does not
eliminate the costs of managing
transactions
3-37
Using Transaction Cost Theory to

Choose an Interorganizational
Strategy
Transaction cost theory can be
used to choose an
interorganizational strategy
Managers can weigh the savings
in transaction costs of particular
linkage mechanisms against the
bureaucratic costs
3-38
Using Transaction Cost Theory to

Choose an Interorganizational
Strategy
(cont.)
Managers
deciding which strategy to
pursue must take the following steps:
Locate the sources of transaction costs that

may affect an exchange relationship and
decide how high the transaction costs are
likely to be
Estimate the transaction cost savings from
using different linkage mechanisms
Estimate the bureaucratic costs of
operating the linkage mechanism
Choose the linkage mechanism that gives
the most transaction cost savings at the
lowest bureaucratic
cost
3-39
Keiretsu
Japanese system for achieving the
benefits of formal linkages
without incurring its costs
Example: Toyota has a minority

ownership in its suppliers
Affords substantial control over the

exchange relationship
Avoids bureaucratic cost of ownership
and opportunism
3-40
Franchising
A franchise is a business that is
authorized to sell a companys
products in a certain area
The franchiser sells the right to
use its resources (name or
operating system) in return for a
flat fee or share of profits
3-41
Outsourcing
Moving a value creation that was
performed inside the organization to
outside companies
Decision is prompted by the weighing
the bureaucratic costs of doing the
activity against the benefits
Increasingly, organizations are turning to

specialized companies to manage their
information processing needs
3-42

Part 3 - Managing in A Changing Global Environment

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Part 3 - Managing in A Changing Global Environment

Uploaded by

Copyright:

Available Formats

Organizational Theory,

Design, and Change

surrounding an organization that

Figure 3-1: The

Copyright 2007 Prentice Hall

The Specific Environment

Outside stakeholders include

The organization must engage in

The General Environment

Copyright 2007 Prentice Hall

The General Environment

The General Environment

Shape organizations customers,

uncertainty for organizations

Copyright 2007 Prentice Hall

Copyright 2007 Prentice Hall

Environmental dynamism: the

Stable environment: forces that

Environments may be poor because:

The organization is located in a poor

Copyright 2007 Prentice Hall

Figure 3-2: Three Factors

Copyright 2007 Prentice Hall

Copyright 2007 Prentice Hall

It has to exert influence over other

Two basic types of interdependencies

Organizations aim to choose the

Figure 3.3: Interorganizational

Copyright 2007 Prentice Hall

Strategies for Managing

Developing a good reputation

Reputation: a state in which an

Strategies for Managing

Co-optation: a strategy that

Make outside stakeholders inside

Strategies for Managing

that commits two or more companies

An increasingly common mechanism for

Greater formality preferred with uncertainty

Keiretsu: a group of organizations,

Copyright 2007 Prentice Hall

Figure 3-4: Types of

Copyright 2007 Prentice Hall

Figure 3-5: The Fuyo

Copyright 2007 Prentice Hall

Copyright 2007 Prentice Hall

Figure 3.6: Joint Venture

Copyright 2007 Prentice Hall

Strategies for Managing

Merger and takeover:

New organization better able to

Strategies for Managing

Collusion: a secret agreement

May influence industry standards

May influence price structure of

Et fiyatlar Rekabet Kurulu'na

Tketiciler Birlii Bakan Vekili Mehmet Muta ahin

Strategies for Managing

Figure 3-7: Interorganizational

Copyright 2007 Prentice Hall

Transaction Cost Theory

2009 Nobel Prize in

Copyright 2007 Prentice Hall