Organizing in a
Changing Global
Environment
Copyright 2013 Pearson Education, Inc. Publishing as Prentice Hall 3-1
List the forces in an organizations specific
and general environment that give rise to
opportunities and threats
Identify why uncertainty exists in the
environment
Describe how and why an organization
seeks to adapt to and control these forces
to reduce uncertainty
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Understand how resource dependence
theory and transaction cost explain why
organizations choose different kinds of
interorganizational strategies to manage
their environments to gain the resources
they need to achieve their goals and create
value for their stakeholders
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Environment: is the set of pressures and
forces surrounding an organization that
have the potential to affect the way it
operates and its ability to acquire scarce
resources.
Organizational domain: The particular
range of goods and services that the
organization produces and the customers
and other stakeholders it serves.
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An organization establishes its domain by
deciding how to manage the forces in its
environment to maximize its ability to
secure important resources.
An organization attempts to structure its
transactions with the environment to
protect and enlarge its domain so that it
can increase its ability to create value for
customers, shareholders, and employees.
One major way to do this is to expand
internationally.
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The forces from outside stakeholder groups
that directly affect an organizations ability
to secure resources.
Changes in the number and types of
customers, and in customer tastes, are
forces that affect an organization.
Customers, distributors, unions,
competitors, suppliers, and the government
are all important outside stakeholders that
can influence and pressure organizations to
act in certain ways.
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In addition to responding to the needs of
customers, organizations must decide how
to manage relationships with suppliers and
distributors to obtain access to the
resources they provide.
Global supply chain management: The
coordination of the flow of raw materials,
components, semi finished goods, and
finished products around the world.
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In the global environment, supplies of
inputs can be obtained not just from
domestic sources but from any country in
the world.
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The challenges associated with distributing
and marketing products increase in the
global environment
The tastes of customers vary from country to
country
Many advertising and marketing campaigns are
country specific
Many products are customized to overseas
customers preferences
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An organization that establishes global
operations has to establish good working
relationships with its new employees and
with any unions that represent them.
Each country has its own system of
government and its own laws and
regulations that control the way business is
conducted
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The forces that shape the specific
environment and affect the ability of all
organizations in a particular environment to
obtain resources.
It is determined by four forces:
Economic forces,
Technological forces,
Political, ethical, and environmental forces,
Demographic, cultural, and social forces
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Interest rates, the state of the economy, and the
Economic forces unemployment rate, determine the level of demand
for products and the price of inputs
The development of new production techniques and
Technological forces new information-processing equipment influence
many aspects of organizations operations
Political, ethical, and Influence government policy toward organizations
environmental forces and their stakeholders
Demographic, cultural, The age, education, lifestyle, norms, values, and
and social forces customs of a nations people
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Resource supply is depending on the
complexity, dynamism, and richness of the
environment. A poor environment faces
scarce resources.
Resource dependence theory: A theory that
argues the goal of an organization is to
minimize its dependence on other
organizations for the supply of scarce
resources in its environment and to find
ways of influencing them to make resources
available.
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An organization must simultaneously
manage two aspects of its resource
dependence:
It has to exert influence over other organizations
so it can obtain resources
It must respond to the needs and demands of the
other organizations in its environment
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The strength of one organizations
dependence on another for a particular
resource is a function of two factors :
How vital the resource is to the organizations
survival (raw materials and component parts)
The extent to which other organizations control
the resource
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To reduce uncertainty, an organization
needs to devise interorganizational
strategies to manage the resource
interdependencies in its specific and
general environment.
Managing these interdependencies allows
organizations to protect and enlarge their
domain.
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For example, in specific environment,
organizations need to manage their
relationships with forces (suppliers,
consumer interest)
If they restrict access to resources, they can
increase uncertainty.
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In the specific environment, two basic types
of interdependencies cause uncertainty:
Interdependencies are symbiotic when the
outputs of one organization are inputs for
another one.
Symbiotic interdependencies are those
interdependencies that exist between an
organization and its suppliers and
distributors.
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Competitive interdependencies are
interdependencies that exist among
organizations that compete for scarce
inputs and outputs.
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Reputation is a state in which an
organization is held in high regard and
trusted by other parties because of its fair
and honest business practices.
The more formal a strategy is, the greater
the cooperation between organizations.
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Cooptation: a strategy that manages
symbiotic interdependencies by neutralizing
problematic forces in the specific
environment.
For example: interlocking directorate : a
linkage that results when a director from
one company sits on the board of another
company.
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Strategic Alliances: an agreement that
commits two or more companies to share
their resources to develop joint new
business opportunities.
Strategic alliances are becoming an
increasingly common mechanism for
managing symbiotic (and competitive)
interdependencies between companies
inside one country or between countries.
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There are several types of strategic alliances
like long-term contracts, networks,
minority ownership, and joint ventures.
Long-term contracts: Alliances spelled out
in long-term contracts between two or
more organizations are undertaken with the
purpose of reducing costs by sharing
resources or by sharing the risk of research
and development, marketing, construction,
and other activities.
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Networks: A network is a cluster of different
organizations whose actions are
coordinated by contracts and agreements
rather than through a formal hierarchy of
authority. Members of a network work
closely to support and complement one
anothers activities.
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Minority ownership: A more formal alliance
emerges when organizations buy a minority
ownership stake in each other. Minority
ownership makes organizations extremely
interdependent.
The Japanese system of keiretsu shows how
minority ownership networks operate.
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keiretsu is a group of organizations, each of
which owns shares in the other
organizations in the group, and all of which
work together to further the groups
interests.
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Joint Venture: a strategic alliance among
two or more organizations that agree to
establish and share the ownership of a new
business.
Joint ventures are the most formal of the
strategic alliances because the participants
are bound by a formal legal agreement that
spells out their mutual rights and
responsibilities.
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Collusion: A secret agreement among
competitors to share information for a
deceitful or illegal purpose
Cartel: An association of firms that
explicitly agrees to coordinate their
activities
Third-party linkage mechanism: A
regulatory body that allows organizations to
share information and regulate the way they
compete
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Strategic alliances - Can be used to manage
both symbiotic and competitive
interdependencies
Merger and takeover - The ultimate method
for managing problematic
interdependencies
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Transaction costs: The costs of negotiating,
monitoring, and governing exchanges
between people
Transaction cost theory: 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
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Transaction costs are low when:
Organizations are exchanging nonspecific goods
and services
Uncertainty is low
There are many possible exchange partners
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Transaction costs increase when:
Organizations begin to exchange more specific
goods and services
Uncertainty increases
The number of possible exchange partners falls
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