ITM 102 Lecture Notes - Standard Operating Procedure, Agency Cost, Transaction Cost

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ITM Chapter 3
What is organization?
- Capital and Labour are primary production factors provided by the environment
Technical definition:
- Stable, formal social structure that takes resources from environment and processes them
to produce outputs
- A formal legal entity with internal rules and procedures, as well as a social structure
Behavioral definition:
- A collection of rights, privileges, obligations, and responsibilities that is delicately balanced
over a period of time through conflict and conflict resolution
Features of Organizations
-Principle of efficiently: maximizing output using limited inputs
Routines and business processes
- Routine (standard operating procedure) are precise rules, procedures and practices that
have been developed to cope with virtually all expected situation.
- Firm become more efficiently for producing goods and services as employees learn the
Organization Politics
- Occupy different positions with different specialties, concerns, and perspectives (leads to
political struggle, competition and conflict).
- Divergent viewpoint about how resources, rewards, and punishment should be distributed
- Political resistance greatly hampers organizational change
Organizational Culture
- All organizations have bedrock unassailable, unquestioned assumptions that define their
goals and products
What products the organization should produce
How and where it should be produced
For whom the products should be produced
- Powerful unifying force and restraint on change
Organizational Environment
- Organizations and environments have a reciprocal relationship
- Organizations are open to, and dependent on, the social and physical environment
- Organizations can influence their environments
- Organization must respond to legislative and other requirements imposed by the
government as well as actions of customers and competitors.
- New technologies, products, changes in public taste and value put strains on any
organization’s culture, politics and people
- Environments generally change faster than organizations, and most are unable to adapt to
a rapidly changing environment
- Information systems can be instrument of environmental scanning, act as a lens
Disruptive Technology
- Technology that brings about sweeping change to businesses, industries, markets
- Examples: personal computers, word processing software, the Internet, the PageRank
- First movers and fast followers
- First movers – inventors of disruptive technologies
- Fast followers – firms with the size and resources to capitalize on that technology
Organizational Structure
Other organizational Features
- Organization have goals and use different means to achieve them
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