Managing the Organizational Dr.

Sumita Mishra
Environment
 Burns and Stalker
• Mechanistic Structures
-High Complexity, formalization and centralization. They
performed routine tasks, relied heavily on programmed
behavior and relatively were slow to responding to novel
situations.
Landmark -Ford Car Factories of the 1920s
Contributions • Organic Structures
-Flexible and adaptive with emphasis on lateral
communication, influence based on expertise, loosely
defined jobs and emphasis on sharing information.
-3M
 Emery and Trist
• Placid-Randomized Environment
-Stable, predictable and not prone to change. Economists’ model of
pure competition
-Beer distributors
• Placid Clustered Environment
-Change is slow but not random. Forces in the environment are
linked to one another. Powerful coalitions (suppliers or buyers)
Landmark • The disturbed reactive Environment
Contributions -Creation of monopolies. Anti-trust issues, 7-Up and Coke and Pepsis
• The turbulent Field Environment
-Most dynamic and ever changing. Coke’s action in New York City to
compete with Mountain Dew. Syringes in Pepsi cans, Glass Shards
in Gerber Baby Foods, Poisoning of Tylenol, Church of
Scientology's attack on Prozac and hate sites such as
Ihatemcdonals.com
 What is the PESTLE Analysis?

Porter’s five defining forces?

Pointers for
understanding • Competitors
environment • Substitutes
• Buyers
• Suppliers
• New Entrants
Growth Organic Inorganic
Strategies in Growth Growth
Organizations
 Expansion of Global Business

Inter
Thrust on horizontal external
Organizational relationships in organizations
Relationships
Growth through relationships
with other contributors to the
environment
 Biotherm and Renault : The Zoe Spa Car

Lego and NASA: The Space Act Agreement

Unusual
Collaborations Facebook and Mercedes Benz: Provision
of a high resolution screen in mbrace 2
cars for the purpose of social driving

Fiat and Lavazza: Improving the driving

experience through installing expresso
machines in cars
Future of Collaboration…..Inorganic
Growth
IOR Frameworks

RESOURCE POPULATION ECOLOGY TRANSACTION COST

DEPENDENCE THEORY THEORY THEORY
Resource Dependence Theory
Decade of Origin/Key Contributors
o 1970s
o Jeffrey Pfeffer, Gerald Salancik

Key Concepts
o Organization goal is the reduction of dependence on other organizations for
resources
o Symbiotic interdependencies IOR Strategies
o Competitive Interdependencies

o Choice of IOR strategy depends on its use in reducing environmental uncertainty

 Forward Vs. Backward Integration
Backward Integration: Go back into the value chain and secure
inputs or sources of raw materials… If I have a bakery then why do I
purchase a wheat farm?????
-Amazon’s move as a retailer and a book publisher

Forward Integration: Moving forward in the value chain and aiming

to secure the sources of distribution
How do Standard industries are made up of five steps in the supply chain:
Organizations raw materials, intermediate goods, manufacturing, marketing and
sales, and after-sale service.
Integrate? Intel supplies Dell with intermediate goods - its processors - that
are placed within Dell's hardware. If Intel wanted to move forward
in the supply chain, it could conduct a merger or acquisition of
Dell in order to own the manufacturing portion of the industry.
 Vertical Vs. Horizontal Integration
Vertical Integration: Can be both forward and backward in nature.
-Amazon’s move as a retailer and publisher (Backward and forward
integration)
-Amazon’s Kindle

How do Horizontal Integration:

Organizations What do we do with our competitors? Can we collaborate with
them?
Integrate?
Examples from the Petroleum Industry –BP and Amoco

JVs between Hero and Honda Maruti and Suzuki

Best Vertically integrated
companies

• Apple
1. Manufactures custom A chips for iPhones and iPads
2. Developed LCD and OLED Screen Technologies
3. Customs touch ID fingerprint sensor
4. Sells its products through its own exclusive stores
around the world
• Disney
1. Ownership of companies that produce films
2. Marketing of films under the Disney Brand
 Facebook and Instagram
• Acquisition in 2012 for $1 Billion

Best Examples Disney and Pixar

of Horizontal • Acquisition in 2006 for $7.4 Billion
Integration Exxon and Mobil
• Merger in 1998
• First and second largest energy
corporations in the USA
IOR Strategies
Informal Formal

Symbiotic IOR- Org. with

Suppliers+Disributors
Reputation Co- Strategic Merger &
optation Alliances Takeover
Contracts
Interlocking Networks
Directorate Min. Ownership

Joint Ventures
Informal Formal
Competitive IOR- Org.
with other organizations
that compete for Collusions/ Third party Strategic Merger &
resources Cartels Linkages Alliances Takeover
 -Least Formal
-Trust, Fair Business Practices, Goodwill among customers,
1.Reputation suppliers

DeBeers Benetton
Nestle

-Neutralizing problem forces in the environment

-Make customers, suppliers, distributors organization
2. Co-optation Stakeholders
-Rugmark and IKEA, Pampers and Unicef
-Interlocking Directorate: Director of one company sits
on the board of another company
 3. Strategic Alliances- Agreement that commits two
or more companies to share their resources to develop
joint new business opportunities

Informal Formal

Minority Joint
Long Term Networks
ownership Ventures
Contracts
-Org. action coordinated -Buying of minority -Joint
-Least formal as stake/shares in
no org. ties apart by contracts rather than ownership of
formal ties organizations Business
from agreement -Kiretsu (Toyota
-Sharing of -Nike with its suppliers -IBM with
and distributors owns Intel to
Resources or Risk 49% shares in
of marketing, R&D produce
supplier companies) mainframes
-Kellogg's with Farmers
What is a Minority Ownership? Keiretsu

literally system, series, grouping of enterprises, order of succession) is a set of companies

with interlocking business relationships and shareholdings.
Horizontal Keiretsu
• primary aspect of a horizontal keiretsu (also known as financial keiretsu) is that it is set
up around a Japanese bank through cross-shareholding relationships with other
companies.
• The bank assists these companies with a range of financial services.
• The leading horizontal Japanese keiretsu, also referred to as the “Big Six”, include: Fuyo,
Sanwa, Sumitomo, Mitsubishi, Mitsui, and Mizuho Financial Group .
Vertical Keiretsu
Also known as industrial keiretsu) are used to link suppliers, manufacturers, and distributors
of one industry.
Toyota/Honda
Tier arrangement
 4. Mergers &
-Most Formal Takeovers
-Symbiotic and Competitive
-Resource exchanges within an organization
-Merger or takeover of an organization/customer/supplier
-McDonalds (ownership of cattle ranches in Brazil)
-Exxon and Mobil
-Daimler and Chrysler
-Acquisition Model of Cisco Systems
-Differences between JVs and Mergers: Legal,
Ownership, Commitment and scope
 1.Collusions
&
-Collusion is a secret agreement among competitors to Cartels
share information for an illegal purpose
-Cartel is an association of firms that explicitly agree
to coordinate their activities
-GM and Ford collusion to keep the prices of trucks artificially high
2.Third
Party
Linkage
-Relatively formal though indirect
Mechanisms
-A regulatory body that allows organizations to
share information and regulate competition
-NASSCOM (India), MITI (Japan)
Decade of Origin/Key Contributors
o 1970s
o Michael Hannan, John Freeman

Key Concepts
o Explains how organizations are born & die in a population of
existing organizations
o Population is a set of organizations engaged in similar
activities with similar resource utilization & outcomes
o Organizations follow a pattern of natural selection

o INNOVATIONS THAT SUSTAIN LEAD TO ECOLOGICAL CHANGE

Population Ecology
Theory
Some Iconic Innovations?

HAVE THESE CREATED ECOLOGICAL CHANGE?

1. Osborne 1 in 1981

2. Walkman in 1982

3. Simon by IBM in 1992

 R Strategy
Specialists
-Entering an environment
-Skills to pursue a narrow
early
range of resources in a single niche
-Apple and the PC
-Baypackets, 99 acres

Survival
Strategies

Generalists K Strategy
-Spreading of skills to compete for -Entering an environment
a broad range of resources in many Niches Late
-Infosys -IBM and the PC
 Tesla
Disruptive Google
Brands that
have changed Visa
the World Apple
Facebook
 Decade of Origin/Key Contributors
o 1970s
o Ronald Coase

Key Features
o Transaction Costs are the costs of negotiating,
Transaction monitoring and governing exchanges between
people
Cost Theory o Goal of organization is to reduce the costs of
exchanging resources in the environment & costs
of managing exchanges internally
o Environmental Uncertainty & Bounded
Rationality+ Opportunism & Small Numbers+
Risk & Specific Assets = Transaction Costs
 Biggest Marketing Blunders leading to increase in transactional costs

-Gerber

-Coca Cola

-Fiat

-Kenneth Cole

-Netflix and Qwikster

 3. Outsourcing
-The process of moving a value creation activity performed
inside an org. to another company
-cheaper bureaucratic costs and extra value
-GE Capital, Nike

2. Franchising
-Is a business that is authorized to sell a company’s products in a
certain area
-The franchiser sells the right to use its resources to a person or
group for a flat fee or a share in the profits
-McDonalds & Body Shop

1. Keiretsu
IOR Strategies