Mother Earth

OTPR 2012

For ME
Can we identify the entities and their relationships in the
General environment Specific environment

Environment is the set of forces surrounding an organization that have the potential to affect the way it operates and its access to scarce resources.

The Specific Environment

The forces from outside stakeholder groups that directly affect an organizations ability to secure resources
Outside stakeholders include customers, distributors, unions, competitors, suppliers, and the government

The organization must engage in transactions with all outside stakeholders to obtain resources to survive

The General Environment

The forces that shape the specific environment and affect the ability of all organizations in a particular environment to obtain resources Economic forces: factors, such as interest rates, the state of the economy, and the unemployment rate, determine the demand for products and the price of inputs Technological forces: New production techniques and new information-processing equipment influence many aspects of organizations operations. Political, ethical, and environmental forces: influence government policy toward organizations and their stakeholders. Demographic, cultural, and social forces: the age, education, lifestyle, norms, values, and customs of a nations people .

The Organizational Environment

There is uncertainty in any business

Caused by Environment complexity (simple to complex) Environment Dynamism (Stable to unstable) Environment Richness ( Rich to poor)

Environment complexity
The strength, number, and interconnectedness of the specific and general forces that an organization has to manage
Interconnectedness increases complexity .

So, what is the interconnectedness in ME?

What affects what?

Environment Dynamism
The degree to which forces in the specific and general environments change over time
Stable environment: forces that affect the supply of resources are predictable. Unstable (dynamic) environment: when an organization cannot predict how the changes in the environment will affect them.

Which are the forces that are predictable and that which are not?

Environmental Richness.
The amount of resources available to support an organizations domain
Environments may be poor because:
The organization is located in a poor country or in a poor region of a country There is a high level of competition, and organizations are fighting over available resources

Your observation on ME please?

Resource Dependence & Transaction Costs Theoretical perspectives RD- The goal of an organization is to minimize its dependence on other organizations for the supply of scare resources and to find ways of influencing them to make resources available. TC-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

Resource dependence.

 The strength of one organizations dependence on another is determined by:

How vital the resource is to the organizations survival The extent of the other organizations control over these resources

An organization has to manage two aspects of its resource dependence:

It has to exert influence over other organizations so that it can obtain resources It must respond to the needs and demands of the other organisations in its environment

Two types of dependencies..

Symbiotic interdependencies: interdependencies that exist between an organization and its suppliers and distributors

 Competitive interdependencies: interdependencies that exist among organizations that compete for scarce inputs and outputs http://www.aiacaonline.org/craftmark.asp

Inter organizational Strategies for Managing Symbiotic interdependencies

 Reputation: a state in which an organization is held in high regard and trusted by other parties Cooptation: giving them a stake in the organization
Make outside stakeholders inside stakeholders Interlocking directorate: a linkage that results when a director from one company sits on the board of another company

Inter organizational Strategies for Managing Competitive interdependencies

 Collusion: a secret agreement among competitors to share information for a deceitful or illegal purpose May influence industry standards Cartel: an association of firms that explicitly agrees to coordinate their activities May influence price structure of market

Common strategies of symbiotic and competitive interdependencies..

Strategic alliances Mergers & Take overs

Strategic alliances
Long term contracts Networks: a cluster of different organizations whose actions are coordinated by contracts and agreements rather than through a formal hierarchy of authority Minority ownership

Keiretsu: a group of organizations, each of which owns shares in the other organizations in the group, that work together to further the groups interests

Joint venture: a strategic alliance among two or more organizations that agree to jointly establish and share the ownership of a new business

Mergers & Takeovers

results in resource exchanges taking place within one organization rather than between organizations
New organization better able to resist powerful suppliers and customers Normally involves great expense and problems managing the new business

Transaction Costs

 Environmental uncertainty and bounded rationality

Bounded rationality: refers to the limited ability people have to process information

Sources of Transaction Costs

Opportunism and small numbers

Dependent on a small number for supplies, the potential for exploitation is great

Risk and specific assets

Specific assets: investments that create value in one particular exchange relationship but have no value in any other exchange relationship

Beauracratic Costs are internal transaction costs

Transaction Costs
High

Low

Organizations begin to exchange more specific goods and services Uncertainty increases The number of possible exchange partners falls

Organizations are exchanging nonspecific goods and services Uncertainty is low There are many possible exchange partners

Inter organisational strategies to keep transaction costs low

Minority ownerships (Kieretzu) Franchising Another business authorised to sell a companys products in a certain area. Outsourcing- Moving a value creation that was performed inside an organisation to outside companies.