Module 4

1. ORGANISATIONAL ENVIRONMENT
Assessing the Environment

• Complexity
• Heterogeneity à the number and dissimilarity of
external elements (e.g., competitors, suppliers,
industry changes, government regulations) that
affect an organization’s operations.
• Complex environment is one in which the
organisation interacts with and is influenced by
numerous diverse external elements.
• In a simple environment, the organisation interacts
with and is influenced by only a few similar
external elements.

• Dynamism
• Whether the environment in which the
organization operates is stable or unstable.
• Stable if it remains essentially the same over a
period of months or years.
• Unstable conditions, environmental elements shift
rapidly.
Handling the Environment
• Shifting from Organic to Mechanistic Models:
• More dynamic & Complex à Organic
• Adding Positions and Departments
• Increasing internal complexity.
• buffering roles à Buffer departments surround the technical core and exchange materials, resources, and money between the
environment and the organization.
• Differentiation and Integration
• Differentiation à Differences in cognitive and emotional orientations among managers in different functional departments, and the
difference in formal structure among these departments.
• Integration à The quality of collaboration among departments.
• Formal integrators à liaison personnel, project managers, brand managers, or coordinators. (horizontal communication)
Handling the
Environment
• Planning, Forecasting, and
Responsiveness
• Planning and environmental
forecasting actually become
more important as a way to
keep the organization
geared for a coordinated,
speedy response.
• Organizations that have
unstable environments
often establish a separate
planning department.
2. Organisational Ecosystem

• Interorganizational relationships
• Relatively enduring resource transactions, flows, and linkages that
occur among two or more organisations.
• Necessary evil to obtain what an organisation needs.
• Organisational ecosystem
• System formed by the interaction of a community of organisations
and their environment.
• Megacommunity approach à businesses, governments, and
nonprofit organizations join together across sectors and industries
to tackle huge, compelling problems of mutual interest, such as
energy development, world hunger, or cybercrime
• Organisation Types à Are they dissimilar or similar
• Organisation Relationship à Competitive or Cooperative
• 2.1. Resource
Dependence
• Try to minimise their dependence on
other organisations for the supply of
important resources
• Influence the environment to make
resources available.
• Organizations succeed by striving for
independence and autonomy
• In attempt to reduce dependency
• Larger the organisation, more
powerful in relationships
Acquisition/Merger • Greatest amount of control over joint outcomes because the acquiring firm absorbs
all of the resources, assets, and liabilities of the target organization.

Joint Venture • A new and distinct organisational entity set up by two or more organisations to
jointly develop an innovative product or shared technology.

Strategic Alliance • A strategic alliance is less formal and binding than a joint venture à contribute
resources to a common endeavour while maintaining its individuality.

Supply Chain • Establish contracts with key suppliers to acquire resources to supplement in-house
resources and capabilities.

Trade Association • A federation that allows organisations, often in the same industry, to meet, share
information, and monitor one another’s activities.

Board Interlock • Director serves on the boards of multiple companies, creating connections among
the companies.
• 2.2. Collaborative Networks
• Companies join together to become more competitive and to share scarce resources.
• Large pharmaceutical companies join with small biotechnology firms to share resources
and knowledge and spur innovation.
• Advantage à sharing risks when entering new markets, mounting expensive new
programs and reducing costs, and enhancing the organization’s profile in selected
industries or technologies.
• Greater innovation, adaptation, problem solving, and performance.
• Ford Motor Company and Toyota compete fiercely to sell cars and trucks, but to fend off
new rivals such as Alphabet getting into the auto business, Toyota teamed with Ford to
integrate Ford’s apps platform into Toyota vehicles
• Global Trend à Adversaries to partners
2.3. Population Ecology
• Population is a set of organisations engaged in similar activities with similar patterns of resource utilization
and outcomes.
• Organisations within a population compete for similar resources or similar customers
• Innovation and change in a population of organisations take place through the birth of new types of
organisations more so than by the reform and change of existing organisations.
• Large, established organisations often become dinosaurs and perish.
• Individual organizations suffer from structural inertia and find it difficult to adapt to environmental changes.
• Strategies for Survival
• Generalist
• Organizations with a wide niche or domain—that is, those that offer a broad range of products or services or
that serve a broad market—are generalists.
• Advantage the general nature à more departmentalisation, building ecosystems
• Specialist
• Organizations that provide a narrower range of goods or services or that serve a narrower market are
specialists.
• Organic, more specialised products, more R&D
• 2.4. Institutionalism
• Organizations adopt structures and processes to please outsiders, and these activities come to take on rule-like
status in organizations.
• The institutional environment reflects what the greater society views as correct ways of organizing and behaving.
• Legitimacy is defined as the general perception that an organization’s actions are desirable, proper, and appropriate
within the environment’s system of norms, values, and beliefs.
• Organizations and industries must fit within the cognitive and emotional expectations of their audience.
• organization incorporate positions or activities (e.g., e-commerce division, chief compliance officer, social media
director) perceived as important by the larger society.
• Many aspects of structure and behavior may be targeted toward environmental acceptance rather than toward
internal technical efficiency.
3. Organizational Size
• The Big Company
• Everyone wants to make the Fortune
500 list.
• Firms must grow to stay economically
healthy
• Large size enables companies to take
risks that could ruin smaller firms
• The Small Company
• Quick reaction to changing customer
needs or shifting environmental and
market conditions.
• Greater employee commitment
because it is easier for people to feel
like part of a community.
• Employees typically work on a variety
of tasks.
• Big Company-Small Company Combination
• In certain departments, treat it as
small company
4. Organizational Life Cycle
Stages of Life-Cycle Development

Stage 1: Entrepreneurial stage.

• Emphasis is on creating a product or service and surviving in the marketplace.

Crisis: Need for leadership.

• The creative and technically-oriented owners are confronted with management issues.
• Entrepreneurs must either adjust the structure of the organization to accommodate continued growth or else bring in
strong managers who can do so.
• Stage 2: Collectivity stage.
• Leadership crisis is resolved à organization begins to develop clear goals and direction.
• Focus on hierarchy of authority, job assignments, and a beginning division of labor.
• Communication and control are mostly informal, although a few formal systems begin to appear.
• Eg: Jobs remained as CEO and visionary leader, although A. C. Markkula had been brought in as CEO
to handle most of the management responsibilities.
• Crisis: Need for delegation.
• Lower-level employees gradually find themselves restricted by the strong top-down leadership.
• Lower-level managers begin to acquire confidence in their own functional areas and want more
discretion.
• The organization needs to find mechanisms to control and coordinate departments without direct
supervision from the top.
• Stage 3: Formalization stage
• Involves the installation and use of rules, procedures, and control systems.
• Communication is less frequent and more formal, and more likely to follow the hierarchy of
authority.
• Engineers, human resource specialists, and other staff may be added.
• Top management becomes concerned with issues such as strategy and planning and leaves
the operations of the firm to middle management.
• Product groups or other decentralized units may be formed to improve coordination.
• Incentive systems based on profits may be implemented to ensure that managers work
toward what is best for the overall company.
• Crisis: Too much red tape.
• The proliferation of systems and programs may begin to strangle middle-level executives.
• The organization seems bureaucratized.
• Innovation may be restricted.
• The organization seems too large and complex to be managed through formal programs.
• Stage 4: Elaboration stage:
• A new sense of collab- oration and teamwork is seen.
• Managers develop skills for confronting problems and working together.
• Managers learn to work within the bureaucracy without adding to it.
• Formal systems may be simplified and replaced by manager teams and task
forces.
• Teams are often formed across functions or divisions of the company.
• The organization may also be split into multiple divisions to maintain a small-
company philosophy.
• Crisis: Need for revitalization:
• Periods of temporary decline.
• Renewal may occur every 10 to 20 years.