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V The environment is the set of forces

surrounding an organization that have that


have the potential to affect the way it
operates and its access to scarce resources.
V Scarce resources-raw materials
Skilled workers
The information it needs to improve technology
The outside stakeholders such as customers
The banks and financial institutions that supply the
capital etc.
V The specific environment consist of forces
from outside stakeholder groups that directly
affect an organization's ability to secure
resources.
V Customers, distributors, unions, competitors,
suppliers and the Government are all
important outside stakeholders who can
influence and pressure organisations to act in
certain ways.
V The European divisions of General Motors
and Ford compete not only with European car
companies such as Fiat and BMW but also
with Japanese companies Toyota and Honda.
V The general environment consists of forces
that shape the specific environment and
affect the ability of all organisations in a
particular environment to obtain resources.
V Economic forces
V Technological forces
V Political forces
V Demographic, cultural and social forces.
V rnterest rates, the state of the economy
,unemployment rate, Level of demand for
products, GDP, per Capita rncome, The
economic policies etc.
V Development of new production techniques,
new information processing equipment, the
use of computerized manufacturing
technology, investment in advanced research
and development activities, rnternational
transfer of technology etc.
V Government policy.
V New laws implemented by the Government.
V Labour Laws.
V Pollution Control board Regulations.
V Tax Relaxations.
V ðge, Education, life style, norms, values and
customs of a nation`s people shape
organisation`s customers, managers and
employees.
V Environmental complexity.
V Environmental Dynamism.
V Environmental richness.
V Environmental complexity is a function of
strength, number, and interconnectedness of
the specific and general forces that an
organisation has to manage.
V The greater the number,and the greater the
differences between them , the more
complex and uncertain is the environment
and the more difficult to predict and to
control
V The more interconnected the forces in the
organization's specific and general
environments are , the more uncertainty the
organisation faces.
V The degree to which the forces in the specific
and general environments change quickly
over time and thus contribute to the
uncertainty an organisation faces.
V ðn environment is stable if forces affect the
supply of resources in a predictable way.
V ðn environment is unstable and dynamic if an
organisation cannot predict the way in which
the forces will change over time.
V Environmental richness is a function of
resources available to support an
organization's domain.

V rn rich environments, resources are plentiful


and uncertainty is low.
V Environments may be poor for two reasons.
V 1. The organisation is located in a poor region
of country.
V 2. There is a high level of competition and
organisations are fighting over available
resources.
V Some theories emphasise internally driven
change.
V Others emphasise externally driven change.
V To provide an integrated approach to the
theories of change,Van De Ven and Poole
reviewed the literature extensively.
V rdentified 20 different theories of
development and change across 200000 titles
and 200 articles.
V They clustered them into four prototypical
theories.
V 1. Life cycle theory.
V 2. Teleological theory.
V 3. Dialectical Theory.
V 4. Evolutionary Theory.
V The basic assumption in theories based on
life cycle is that any organisation is like a
living organism. ðs an organisation
undergoes change, it passes through
stages/phases in both its structure/form and
functions somehow maintaining its identity
throughout the process.
V Greiner`s model of organisational
development follows life cycle theory, which
includes five stages in an organizations life
V 1.Creativity(Starting up phase)
V 2.Direction(the phase where more focus is
required.)
V 3.Delegation(the phase where the
organization grows larger)
V 4.Coordination(this is the phase of
differentiation of functions, need for
integration within the organisation)
V '. Collaboration(the phase where the
organisation becomes a total entity by
working together effectively in collaboration)
V This school of thought views organisational
development as a result of change in its goals
and purposes and considers this process as
ongoing with an organisation never attaining
a permanent equillibrium or being static.
V Examples of the applications of telelogical
theory include establishing organisation
mission statement , listing a set of goals
planning different strategies and so on.
V Proponents of this theory view development
as a repetitive sequence of goal
formulation,implementation,evaluation,and
modification of goals based on what was
learned or intended by the entity.
V Van Den and Poole state the basic
assumption with this school of thought as
organisations exist in a pluralistic world of
colliding events, forces or contradictory
values that compete with each other for
domination and control.
V The reason behind the organisational change
is collision between two different view points
.
V Organisational change is an ongoing and
evolving process and organisation change
proceeds according to a continuing cycle of
variation,selection and retention among
organisations competing for resources in a
specific environment.
V Such a change parallels biological evolution
and therefore it is known as evolutionary
theory.
V Van De Ven and Poole explain it further as
competition for scarce environmental
resources
between entities(organisations).
V Lewin`s model of change process has
provided the required framework for other
researchers to build on subsequent models or
theories of change.Lewin identified three
ways that lead to
organisational change.
V Change the individual workers,implying
change at the individual level.
V Change the various organisational structures
and systems.
V Change the organisational climate.
V ðccording to Beer and Nohria, about 70% of
all change initiatives fail.
V The reason behind such failures is that
managers, lose focus and get immersed in
the pile of text available in print and online
that is to aid them to carry on the change.
V Theory E views organisational change from
the context of changing the economic value
of the organisation.
V rt gives prime importance to the shareholder
value and considering it to be the only
legitimate measure of corporate success.
V Such change includes high usage of economic
incentives,drastic layoffs,downsizing and
restructuring.
V This approach to change is adopted by
corporate houses operating in the ðsian and
European economies.
V Change is based on organisational capacity.
V They will not focus solely on their stock
prices.
V The goal is often to develop organisational
culture and human capability through
individual and organisational learning.
V These include the process of changing,
obtaining feedback,reflecting and making
further changes.
V Organisations are dependent on their
environment for the resources they need to
survive and grow.
V The supply of resources is dependent on the
richness, dynamism and complexity of the
environment.
V The goal of an organization is to minimize its
dependence on other organizations for the
supply of scarce resources in its environment
and to find ways to influence them to make the
resources available.
V ðn organization must manage two aspects of
resource dependence.
V 1. rt has to exert influence over other
organizations so that it can obtain resources.
V rt must respond to the needs and demands of
other organizations in its environment.
V The strength of one organizations
dependence on other organization depends
upon two factors.
V 1. How vital is the resource for the
organization's survival.
V 2.The extent to which the resource is
controlled by other organizations.
V To manage their resource dependence and
control their access to scarce resources,
organisations develop various strategies.
V The flow of resources over organizations is
uncertain and problematic.
V To reduce uncertainty,organisation needs to
devise interorganisational strategies to
manage the resource interdependencies in its
specific and general environment
V Managing these interdependencies allows an
organisation to protect and enlarge its
domain.
V rn the specific environment, two basic types
of interdependencies cause uncertainty.
V 1. Symbiotic.
V 2. Competitive.
V rnterdependencies are symbiotic when the
output of one organization becomes the
input of other.
V Competitive interdependencies exist
between organizations when they compete
for scarce resources.
V 1. Developing a good reputation-ð state in
which the organization is held in high regard
and trusted by other parties because of its
fair and honest practices.
V 2.Co-Optation-rt is a strategy to neutralise
the problematic forces in the environment.
-ðn organisation that wants to bring
opponents to its side gives them a stake in or
claim on what it does and tries to satisfy their
interests.
V Ex. Pharmaceutical companies.
V Parent teacher associations.
V rnterlocking Directorate.
V 3. Strategic ðlliance-ðn agreement that
commits two or more companies to share
their reources to develop joint new business
opportunities.
V Ex. Dell and Microsoft formed a strategic
alliance to bring high performance rnfiniBand
technology to the next generation business
servers.
V Networks
V Minority Ownership
V Organisations do not like competition.
V Competition threatens the supply of scarce
resources and increases the uncertainty of
the specific environment.
V Organisations use variety of techniques to
manipulate the environment to reduce the
uncertainty of their competitive
interdependent activities.
V Collusion-ð secret agreement among
competitors to share information for a deceitful
or illegal purpose.
V Organisations collude in order to reduce
competitive uncertainty they experience.
V Competitors in an industry can collude by
establishing industry standards.
V rndustry standards functions like rules of
conduct and may tell competitors what prices
they should charge, what their product
specifications should be etc.
V The dominant organisation is likely to be the
price leader.
V ð Cartel is an association of firms that
explicitly agree to co ordinate their activities.
V ð regulatory body that allows organizations
to share information and regulate the way
they operate.
V Ex. Trade association-ðn organization that
represents companies in the same industry
and enables competitors to meet. Share
information, and informally make
agreements that allow them to monitor one
another`s activities.
V Ex. Micro electronics and Computer
Corporation, an applied R&D Co-operative
funded by rntel and Motorola.
V Strategic ðlliances.
V Mergers and Take over.
V The costs of negotiating, monitoring and
governing exchanges between people.
V Transaction costs also arise when
organisations exchange resources or
information. Organisations interact with
other organisations to get the resources they
require, and they have to control those
symbiotic and competitive
interdependencies.
V ðccording to transaction cost theory, the goal
of the organisation is to minimise the costs of
exchanging resources in the environment and
the costs of managing exchanges inside the
organisation.
V Environmental uncertainty and bounded
rationaliy- The higher the level of uncertainty
in the environment, the greater is the
difficulty of managing transactions between
organisations.
V Opportunism and Small numbers-When an
organisation is dependent on one supplier or
on a small number of trading partners, the
potential for opportunism is high.
V Risk and Specific ðssets-Specific assets are
investments in skills,machinery,knowledge
and information that create value in
particular exchange relationship but have no
value in any other exchange relationship.
V ðn organisation that sees any prospect of
being trapped or blackmailed will judge the
investment in specific assets to be too risky.
V rnternal transaction costs are called bureaucratic costs
to distinguish them from the transaction costs of
exchanges between organizations in the
environment.
V Communication and integration between functions
and divisions are complex and difficult.
V rt costs money, because managers have to spend time
in meetings rather than creating value.
V So managing an organization's structure is a complex
and expensive problem that becomes much more
expensive and complex as the organization grows.
V Transaction Cost theory can help managers to
choose an interorganisational strategy by
enabling them to weigh the savings in
transaction costs achieved from using a
particular linkage mechanism against the
bureaucratic costs of operating the linkage
mechanism.
V Locate the sources of transaction costs that may
affect an exchange relationship and decide how
high the transaction costs are likely to be.
V Estimate the transaction cost savings from using
different linkage mechanisms.
V Estimate the bureaucratic costs of operating the
linkage mechanism.
V Choose the linkage mechanism that gives the most
transaction cost savings at the lowest bureaucratic
cost.
V The implication of Transaction Cost view is that a
formal linkage mechanism should be used only
when transaction costs are high enough to demand
it.
V The organization should take over or merge with its
suppliers or distributors, only if the saving in
transaction costs outweighs the costs of managing
the new acquisition.
V Other wise, the organisation has to rely on less
formal mechanisms such as strategic alliances and
long term contracts to handle exchange
relationships.
V rnformal linkage mechanisms avoid the need
for an organization to incur bureaucratic
costs.
V The three linkage mechanisms that enable
organizations to avoid bureaucratic costs
while minimizing transaction costs are
kairetsu,franchising and outsourcing.
V Organisations are exchanging non specific
goods and services.
V Uncertainty is low.
V There are many possible exchange partners.
V rn these kind of environments, it is easy for
organisations to negotiate and monitor
interorganisational behaviour.
V So, organisations can use relatively informal
linkage mechanisms.-unwritten, word-of-mouth
contracts.
V Organisations begin to exchange more
specific goods and services.
V Uncertainty increases.
V The number of possible exchange partners
fails.
V Organisations will begin to feel that it cannot
afford to trust other organisations.
V Organisation will choose more formal linkage
mechanisms.
V On June 7, 1993, Samsung Chairman Kun hee
Lee ðnnounced his new management policy.
V To completely overhaul Samsung
corporation.
V Change it into a truly innovative company.
V He achieved his goal in less than 10 years.
V Combined cell phone,ultrathin laptops
V Lack of Concern for quality.
V Concern was for quantity.
V Defective Products-a necessary evil.
V Hierarchical and deferential culture
discouraged employees from questioning the
authority or thinking outside the box.
V Line stop system
V Six Sigma program
V ðdvanced quality control methods.
V Change everything except your spouse and
children.
V Empowered employees.
V Senior managers were required to visit the
fields.
V No unnecessary regulations.
V Jobs were restructured-engineers and
designers from across the company were
forced to work together.
V No life time employment.
V Senior managers were fired.
V Now, the success is due to Lee`s new
management and ongoing commitment to
change.

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