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

Demographic / Cultural Forces 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 Domain Initially Now Domain 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

Dilbert on Resource Dependence

Interorganizational Strategies FIGURE 6.6 Interorganizational Strategies for Managing Symbiotic Interdependencies Informal Formal Reputation Co-optation Strategic alliances Merger and takeover

Third-party linkage mechanisms 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.