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
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
Two Women Boxing • Environment • Initially • Now • Domain • Initially • Now • What aspects of their environment require adaptation within their organization?
Sources of Environmental Uncertainty • complexity, dynamism, and richness • As the environment becomes more • complex, less stable, and poorer, the • level of uncertainty increases.
Organization Theory • Contingency theory: to manage its environment effectively, an organization should design its structure to fit its environment. • Fit with environment determines success.
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
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
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
FIGURE 6.6 Interorganizational Strategies for Managing Symbiotic Interdependencies Informal Formal Reputation Co-optation Strategic alliances Merger and takeover
FIGURE 6.10 Interorganizational Strategies for Managing Competitive Interdependencies Informal Formal Collusion and cartels Third-party linkage mechanisms Strategic alliances Merger and takeover
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
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.
A Few Good Men • Describe the environment for American military organizations. • What is their purpose? • List their resource dependencies.