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1 Organizational Environment Organizational environment: set of forces surrounding an organization May affect its operation and access to scarce resources.

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Presentation on theme: "1 Organizational Environment Organizational environment: set of forces surrounding an organization May affect its operation and access to scarce resources."— Presentation transcript:

1 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 2 The Organizational Environment Organization Specific Forces Demographic / Cultural Forces General Forces Environmental Forces Economic Forces Technological Forces International Forces Political Forces Customers Government SuppliersUnions Distributors Competitors

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

4 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 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 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 7 Ideal Relationship Between Environmental Uncertainty and Organizational Structure LowHighEnvironmental Uncertainty Mechanistic Structure Low differentiation Low integration Centralized decision making Standardization Organic Structure Complex structure High differentiation High integration Decentralized decision making Mutual adjustment

8 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 9 Dilbert on Resource Dependence

10 10 FIGURE 6.6 Interorganizational Strategies for Managing Symbiotic Interdependencies Reputation InformalFormal Co-optationStrategic alliances Merger and takeover

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

12 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 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 14 A Few Good Men Describe the environment for American military organizations. What is their purpose? List their resource dependencies.


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