1. 1. Closed versus Open Systems
Properties of Systems
1. Closed versus Open Systems
-Classical -Systems Theory
-Behavioral
-Management
Science
Implication: Importance of the
External Environment

2. Properties...
2. Natural versus Contrived Systems
Implication: Organizations can
perpetuate themselves
indefinitely

3. Properties...
3. Systems have boundaries
Implication: Need to think of managers
as boundary spanners.

4. Properties...
4. Hierarchy of Systems
Implication: The interconnectedness
of the parts of an org
and between the org
and its environment.

5. Properties...
5. Entropy and Negative Entropy
Implication: If an org. does not pay
attention to its environment,
it can be costly. If it does pay
attention, it can be beneficial.

6. Implication: Orgs. Need to be in sync with their environments.
Properties...
6. Steady State vs. Dynamic Equilibrium
Implication: Orgs. Need to be in sync
with their environments.

7. Properties...
7. Feedback
A necessary but not a sufficient
condition.
Implication: The importance of
feedback as a means of
monitoring the
environment

8. Properties...
8. Maintenance & Adaptive Mechanisms
Efficiency Effectiveness
Implication: Both sets of forces are
important to organization
success.

9. Maintenance & Adaptive forcesU T T I I O T G E A S R N N I A N A A L I M L
Technical
Core L L E E V L L E V E

10. Properties...
9. Equifinality of Open Systems
Implication: Need to be more ends
oriented, less means
oriented.

11. Properties...
10. Synergism
Implication: Can’t fully understand
an organization by just
looking at its separate
parts.

12. - Both closed and open systems have
Conclusion:
- Both closed and open systems have
merit - (in the proper environment)
- It’s a matter of degree.
Closed Open I I M
T.C. M TC

13. Importance of Systems Theory
1. Greater control over your own
destiny.
2. Shows the need to recognize the
equifinality of open systems.
3. Shows the need for a good feedback
system.
4. Should reduce the frequency of
suboptimization.

14. Contingency Theory
Argues that there are no universally
applicable management theories or
techniques.
What you do “depends” on the
“situation”.
-internal contingency factors
-external contingency factors

15. Internal Contingency Factors
Tasks
People
Purpose
Tech-
nology
Structure

16. External Contingency Factors
Socio-cultural
Factors
Economic
Factors
Technological
Factors
Political/
Legal Factors

17. General Environment of Coca Cola
Sociocultural
Economic
Baby boomers drinking less
Immigrants drink less
Concerns about recycling
Concerns about health
Increased acceptance in China
and India
Easier access to refrigeration
Slow economic growth
Prospect of economic recovery
Mideast crisis affect oil prices
Coca Cola
Technological
Political
Increased health standards
for bottling
Stricter liability legislation
New recycle friendly canning tech.
New promotional opportunities
via the internet
Threat of substitute drinks

18. I O Putting it together: A Contingency Model of Organizations Tasks
Socio-cultural
Economic
Tasks I O
People
Purpose
Techn
Structure
Technological
Political

19. How orgs deal with environments
General Task Environment
React
Anticipate
Proact
Take as a
given

20. Task Environment of Jet Blue
Customers Competitors
Business Travelers
Leisure Travelers
Price competition
New entrants: few
Substitutes: video conferencing
Suppliers
Strategic Partners
Jet Blue
Airbus supplies all planes
Jet fuel suppliers (e.g. Exxon Mobil)
Partnership with
satellite TV provider
Regulators
Labor
FAA
Airport Authorities
No union representation (yet)
Ample supply of pilots and flight
attendants due to industry downsizing

21. Task Environment Strategies
Competitive Strategies
Cooperative Strategies

22. Competitive Strategies
Pricing
Promotions
Production (demand smoothing,
forecasting,
reduced cycle time)

23. Cooperative Strategies
Cooptation
Bargaining
Joint Ventures (Coalitions)
Lobbying
Representation
Socialization
Domain Shifts

24. Based on the book “The World is Flat” Open sourcing Outsourcing
New Cooperative Arrangements
Based on the book “The World is Flat”
Open sourcing
Outsourcing
Offshoring
Supply chaining
Insourcing

25. Summary:
Systems and Contingency Theories
- Recognize that external factors
as well as internal factors affect
management.

26. Summary...
- These external factors can be
described in general or specific
terms.
General vs. Task Environment

27. - Provide us with a way of distinguishing between environments
Summary...
- Provide us with a way of
distinguishing between environments
Degree of change
Stable Dynamic
Simple
Complex
Least
uncertainty
Complexity
Greatest
uncertainty

28. Summary...
- Provide a way of distinguishing
between organizations.
(open versus closed organizations)

29. Summary...
- Provide a way of distinguishing
between situations faced by
organizations (or the same
organization over time).
(Different contingency factors may
become more or less important.)

30. Summary...
- Shows that organizations have
choices in dealing with their
environments
-do nothing and be at the mercy
of the environment
-react
-anticipate
-proact
-change environments

31. Summary of what we know about Management
Classical Behavioral Management
Approach Approach Science
Closed
Systems Systems
Theories Theory
Contingency Theory