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.
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FIGURE 3-1
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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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.
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“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,4
and video services from cable, satellite, and phone carriers
“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
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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
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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.
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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
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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
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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
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FIGURE 3-7
Interorganizational Strategies for Managing Competitive Interdependencies
Informal
Collusion
and cartels
Formal
Third-party
linkage
mechanisms
Strategic
alliances
Merger
and
takeover
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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.
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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.
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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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