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
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The Organizational Environment
International Forces
Demographic / Cultural Forces
Political Forces
Customers
Suppliers
Distributors
Unions
Organization
Government
Competitors
Environmental Forces
Technological Forces
Economic Forces
General Forces
Specific Forces
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Two Women Boxing
Environment
Initially
Now
Domain
Initially
Now
What aspects of their environment require
adaptation within their organization?
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Sources of Environmental Uncertainty
complexity, dynamism, and richness
As the environment becomes more
complex, less stable, and poorer, the
level of uncertainty increases.
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Organization Theory
Contingency theory: to manage its
environment effectively, an organization
should design its structure to fit its
environment.
Fit with environment determines success.
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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
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Ideal Relationship Between Environmental
Uncertainty and Organizational Structure
Low
Environmental Uncertainty
High
Mechanistic Structure
Organic Structure
Low differentiation
Complex structure
Low integration
High differentiation
Centralized decision making
High integration
Standardization
Decentralized decision making
Mutual adjustment
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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
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Dilbert on Resource Dependence
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FIGURE 6.6
Interorganizational Strategies
for Managing Symbiotic Interdependencies
Informal
Reputation
Formal
Co-optation
Strategic
alliances
Merger and
takeover
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FIGURE 6.10
Interorganizational Strategies
for Managing Competitive Interdependencies
Informal
Collusion
and cartels
Formal
Third-party
linkage
mechanisms
Strategic
alliances
Merger
and
takeover
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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
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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.
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A Few Good Men
Describe the environment for American
military organizations.
What is their purpose?
List their resource dependencies.
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