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Organizational Theory. The environment consists of specific and general forces. Specific forces directly affect an organization’s ability to obtain resources. General forces shape the specific environment and affect the ability of all organizations in

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slide1

Organizational Theory

The environment consists of specific and

general forces.

Specific forces directly affect an organization’s

ability to obtain resources.

General forces shape the specific environment

and affect the ability of all organizations in

a particular environment to obtain resources.

slide2

FIGURE 3-1

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

slide3

Organizational Theory

Environmental complexity is a function of the

strength, number, and interconnectedness

of the specific and general forces that

an organization has to manage.

As complexity increases, uncertainty about

the environment increases.

struggling for new role at t to stop marketing to consumers
“Struggling for New Role, AT&T to Stop Marketing to Consumers”
  • AT&T, which for more than century has been synonymous w/ phone service in American home, announced in July 2004 that it would no longer market services to consumers
  • Company struggling to find role in volatile and competitive telecommunications industry created from breakup of AT&T monopoly in 1984
    • In two decades since AT&T lost its exclusive franchise to sell phone service, Co has moved in and out of businesses at frenetic pace, trying everything from selling computers to providing cable and wireless services, often w/ dismal results
    • Has maintained big business in long-distance calling, but collapse of telecommunications bubble in 2000 has hastened its decline as cost of phone calls has plummeted
    • Consumers are more and more buying packages of phone, data, and video services from cable, satellite, and phone carriers
struggling for new role at t to stop marketing to consumers1
“Struggling for New Role, AT&T to Stop Marketing to Consumers”
  • AT&T continued to sell telephone and data services to corporate users
    • Co wouldn’t turn away new consumers who asked for its service, but would stop trying to attract new customers or retain those who wish to defect
    • Hoped to build up corporate business by using money generated by its consumer operations and spending less on advertising, direct marketing, and other costs associated w/ acquiring retail customers
  • AT&T’s decision made it more likely that the four dominant local phone providers – Verizon, SBC, Bell South, and Qwest – can reassert their increasing market power
    • Telecommunications Act of 1996 allowed ‘Baby Bells’ to enter long distance market and compete w/ former parent AT&T
          • New York Times, 7/22/04
  • Stephen Colbert explains the whole AT&T thing
slide7

Organizational Theory

Resource dependence theory argues that

the goal of an organization is to:

Minimize its dependence on other

organizations for the supply of scarce

resources

AND

To find ways of influencing these

organizations to make resources available

slide8

Organizational Theory

Symbiotic (Resource) interdependencies

exist between an organization and its

suppliers and distributors.

Competitive interdependencies exist among

organizations that compete for scarce

inputs and outputs.

slide9

Organizational Theory

Strategies for Symbiotic (Resource)

Interdependencies (in order of

increasing formality)

Developing a good reputation—held in

high regard and trusted by other firms

Co-optation—a strategy that neutralizes

problematic forces in the specific

environment

slide10

Organizational Theory

Strategies for Symbiotic (Resource)

Interdependencies (in order of

increasing formality)

Strategic alliances—an agreement that

commits two or more companies to

share resources to develop joint

business opportunities

slide11

Organizational Theory

Strategies for Symbiotic (Resource)

Interdependencies (in order of

increasing formality)

Strategic alliances—various types,

presented in order of increasing formality:

Long-term contracts

Networks

Minority ownership (keiretsu)

Joint ventures

slide12

FIGURE 3-7

Interorganizational Strategies for Managing Competitive Interdependencies

Informal

Formal

Collusion and cartels

Third-party linkage mechanisms

Strategic

alliances

Merger

and

takeover

slide15

Organizational Theory

Transaction cost theory 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.

Transaction costs are defined as the

costs of negotiating, monitoring, and

governing exchanges between people.

slide16

Organizational Theory

Final report by Columbia Accident Investigation Board raised fundamental questions about NASA’s increasing dependence on Boeing and Lockheed Martin and other contractors.

Suggested that while streamlining space program during push toward privatization in mid-90s, NASA abdicated much of its responsibility for overseeing safety.

Crucial analysis about potential damage from debris conducted by team of inexperienced Boeing engineers who failed to seek assistance from more experienced colleagues.

slide17

Organizational Theory

  • CAIB recommendations:
    • Establish independent Technical Engineering Authority, funded from NASA HQ, to identify and analyze any possible hazards during shuttle’s life
      • Would be sole waiver-granting authority for all technical standards and would independently determine launch readiness
    • Give NASA HQ Office of Safety and Mission Assurance direct authority over entire safety of shuttle program, providing its resources independently
          • Source: Wall Street Journal, 8/26/03
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