Chapter 3

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Organizational environment
Environment: set of forces surrounding an organization that have
potential to effect the way it operates
o Economic forces: interest rates, economy, unemployment
o Demographics: age, education, lifestyle
o International forces: outsourcing, global competition
o Political forces: government policy, taxes
o Technological forces: new production techniques
Domain: particular range of goods and services an organization
offers
2 Types of environment

Specific environment
o forces from outside stakeholder groups that directly affect
ability to secure resources
ex: changes in the number and types of customers
General environment
o Forces that shape the specific environment and the ability to
obtain resources for all organizations
global supply chain management: coordination of the flow of raw
materials and components around the world
o challenges associated with distributing products increase

o customer tastes vary by country

o each country has its own system of government and laws
3 factors causing uncertainty
complexity: degree to which an organization is related to
environmental factors
dynamism: degree of change of environmental factors
richness: abundance of resources in the environment
Resource dependence theory
The goal of an organization is to minimize its dependence on others
for supply of scarce resources

Organizations must simultaneously manage 2 aspects of resource

dependence
o Exert influence over others
o Respond to the needs of others
Inter-organizational strategies for managing resource dependence
Reputation: being held in high regard and trusted by organizations
Cooptation: forming a symbiotic relationship by neutralizing
problematic forces in the specific environment
Strategic alliance
o Long-term contracts
Informal agreement to cooperate
o Networks
manages dependencies by neutralizing problematic
forces
o Minority ownership
Buying into a company to have more control
o Joint venture
establish and share ownership of a new business

Merger/takeover

Collusion: secret agreement among competitors for illegal purpose

Cartel: association of firms that agree to coordinate activities
Third-party linkage: regulatory body that allows organizations to
share info and regulate competition
Transaction cost theory
goal of an organization is to minimize these costs
Transaction costs: costs of negotiating, monitoring, and governing
exchanges
Sources of transaction costs
o Environmental uncertainty <>bounded rationality

o Opportunism<>small numbers
o Risk<>specific assets
Transaction costs are low when
o Low uncertainty
o Many possible partners
o Nonspecific goods and services
Transaction costs are high when
o Uncertainty increases
o Small number of partners
o More specific products
Bureaucratic costs: internal transaction costs
Keiretsu: Japanese system for achieving benefits of formal linkages
without costs
o Toyota has a minority ownership in its suppliers
Franchising: authorizing a business to sell a companys products in
a certain area
o Franchiser sells right to its resources for a flat fee or share of
profits
Outsourcing: moving value creation to outside a company

Chapter 7

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Organizational culture: set of shared values and norms that controls

interactions in an organization
Can be competitive advantage
Can increase effectiveness
Values: general criteria to determine which behaviors have desirable
outcomes
Terminal value: desired end state, what you strive for
o Happiness, self-respect, professional excellence
Instrumental value: permanent preferred mode of behavior
o Honesty, sincerity, obedience

Norms: standards or styles of behavior considered acceptable

o Differences in global values and norms
Countrys culture can affect values or a companys
culture
Communicating styles, attitudes, and approaches can
impact culture
Many mergers fail because of incompatible cultures
o Merger teams can help smooth transition
Socialization: how members learn and internalize values and norms
Role orientation: characteristic way newcomers respond to a
situation
o Institutionalized role orientations: new employees are made
to accept the same conventional ways of doing things
o Individualized role orientations: new employees are
encouraged to find new innovative ways to do things

Organizational rites
Rite of passage: induction and basic training
Rite of integration: office Christmas party
Rite of enhancement: presentation of award
Where culture comes from
Property rights system: rights to use organizational resources
o Top managers establish terms
o Can change what motivates
o Strong property rights can harm organization
Ethics

o Moral values, beliefs, and rules

o Societal, professional, individual
Characteristics of people
Organizational structure
o Mechanistic: predictability and stability
o Organic: innovation and flexibility
o decentralized: encourages creativity and innovation
o Centralized: reinforces obedience and accountability
How to change culture

o Redesign structure
o Revise property rights
o Change people especially top management
Social responsibility: managers duty to make decisions that nurture,
protect, and promote welfare of stakeholders
Obstructionist approach: low end of commitment to social
responsibility
Defensive approach: commitment to ethical behavior
Accommodative approach: acknowledgement of the need to support

responsibility
Proactive approach: actively embrace the need in responsible ways
Benefits of social responsibility
o Workers benefit
o Quality of life is higher
o Right thing to do
o Increasing business and profit
Whistle-blower: informing an outside person of illegal behavior

Managers own ethics can influence behavior

Chapter 8

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Strategy and the environment

Strategy: the specific pattern of decisions and actions that
managers take to use core competences to achieve competitive
advantage
Core competences: skills and abilities in value creation that allow
superior efficiency and quality

Sources of core competences

functional resources: skills possessed by functional personnel
organizational resources: attributes that give competitive
advantage like skills of top management or possession of scarce
resources
coordination ability
o ability to coordinate functional and organizational resources
for maximum value
o control systems
o centralization or decentralization of authority
o development of shared cultural values

Four levels of strategy

Functional: a plan to strengthen resources and coordination of
abilities for core competencies

o perform functional activities at a lower cost then rivals

o perform functional activities that differentiates goods from
rivals
o structure can be easily imitated but culture cannot
Business: plan to combine functional core competences to position
for competitive advantage
o selecting the domain
o low cost: produces low priced goods for all customer groups
o differentiation: produce high-priced quality products for
particular market segments
o Focus: specialize in one segment with all resources

Corporate: plan to use core competences to protect and enlarge

domain
o search for new domains and defense of current ones
o vertical integration: strategy where an organization takes
over its suppliers (backwards) or its distributors (forwards)
o related diversification: entry into a domain where it can use
current competencies
shares resources or transfer skills to divisions
o unrelated diversification: entry into domains that have
nothing in common with core domain
o conglomerate structure: structure where each business is
placed in a self-contained division with no contact with others

Global expansion (4 types): plan involving expanding overseas and

obtaining scarce resources

o multi-domestic

duplication of value-creation in all countries

authority is delegated to each division
global headquarters use market and output controls
global geographic structure

international

o product managers are responsible for value creation on a

global level
o managers abroad are in control of their own division
o global product group structures

Global
o manufacturing and value-chain activities at a global location
must transfer between corporate headquarters and
global divisions
bureaucratic costs can be high
global product group structure

Transnational
o Differentiates through superior innovation and responsiveness
to global customers
lowers global cost structures
differentiates through superior innovation and
responsiveness
managers at regional level control local operations
grouped by world region

decentralizes control to overseas managers

global matrix structure

Presentations

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HP

Company focused on computers and printers

Hierarchical, centralized, lacked innovation
Split into 2 distinct companies
o HP enterprise (cloud technologies)
o HP inc. (printers and computers)
Environmental factors
o Tech change and shift in preferences
o Traditional computing is declining
Too large to compete, change leads to

o More decentralized and organic structure

o Innovation
Open and collaborative
Time Warner Cable
Structure based on geographic locations moves to structure based
on reference to customers
Environmental factors
o Changes in types of customers
o Competition makes resources scare

Zappos

Decentralization to centralization
o Authority to make decisions will be retained by top managers
Mutual adjustment to standardization
o Conformity to specific rules and norms for consistency
Mechanistic structure
o Designed to induce predictable accountable behaviors
Benefits
o Consistency
o Streamlined decision making
o Acceleration of development
and Holacracy
Democratic
No titles
Employees are partners
Work in circles and sub circles with certain roles