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Organizational Environment

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Presentation on theme: "Organizational Environment"— Presentation transcript:

1 Organizational Environment
Organizational environment: set of forces surrounding an organization May affect its operation and access to scarce resources Organizational domain: the range of goods and services that the organization produces, and the customers and other stakeholders whom it serves

2 Demographic / Cultural Forces
The Organizational Environment International Forces Demographic / Cultural Forces Political Forces Customers Distributors Suppliers Organization Unions Government Competitors Environmental Forces Technological Forces Economic Forces General Forces Specific Forces

3 Two Women Boxing Environment Domain
Initially Now Domain What aspects of their environment require adaptation within their organization?

4 Sources of Environmental Uncertainty
complexity, dynamism, and richness As the environment becomes more complex, less stable, and poorer, the level of uncertainty increases.

5 Organization Theory Contingency theory: to manage its environment effectively, an organization should design its structure to fit its environment. Fit with environment determines success.

6 Dealing with Uncertainty
When the environment is unstable and uncertain, organizations are more effective if their structures are: Less formalized More decentralized More reliant on mutual adjustment

7 Ideal Relationship Between Environmental Uncertainty and Organizational Structure
Low Environmental Uncertainty High Mechanistic Structure Low differentiation Low integration Centralized decision making Standardization Organic Structure Complex structure High differentiation High integration Decentralized decision making Mutual adjustment

8 Resource Dependence Theory
The goal of an organization is to: Minimize its dependence on others for scarce, critical, nonsubstitutable resources Influence others to provide resources

9 Dilbert on Resource Dependence

10 Interorganizational Strategies
FIGURE 6.6 Interorganizational Strategies for Managing Symbiotic Interdependencies Informal Formal Reputation Co-optation Strategic alliances Merger and takeover

11 Third-party linkage mechanisms
FIGURE 6.10 Interorganizational Strategies for Managing Competitive Interdependencies Informal Formal Collusion and cartels Third-party linkage mechanisms Strategic alliances Merger and takeover

12 Transaction Cost Theory
Transaction costs: the costs of negotiating, monitoring, and governing exchanges between people Transaction costs are low when: Exchanges are nonspecific Uncertainty is low There are many possible exchange partners

13 Transaction Cost Theory
Organizations adopt increasingly formal linkage mechanisms with their exchange partners as transaction costs increase. These mechanisms also carry bureaucratic costs within the organization.

14 A Few Good Men Describe the environment for American military organizations. What is their purpose? List their resource dependencies.

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