Textbook Notes (362,929)
Canada (158,105)
Business (2,364)
BU398 (130)

Ch05 Interorganizational Relationships.doc

7 Pages
Unlock Document

Wilfrid Laurier University
Joel Marcus

Chapter 5: Interorganizational Relationships Organizational Ecosystems • A system formed by the interaction of a community of organizations and their environment, usually cutting across traditional industry lines • Interorganizational relationships are the relatively enduring resource transactions, flows, and linkages that occur among 2 or more organizations o The presumption is that the world is composed of distinct businesses that thrive on autonomy and compete for supremacy Is Competition Dead? • A large percentage of new alliances in recent years have been between competitors • Traditional competition no longer exists because each organization both supports and depends on others for success and perhaps even survival • Most managers recognize that the competitive stakes are higher than ever in a world where market share can crumble overnight and no industry is immune from almost instance obsolescence • Companies need to coevolve with others in the ecosystem so that everyone gets strong o For example, wolves cull weaker caribou, which strengthens the herd. A strong herd means that wolves must become stronger themselves. • Ecosystems constantly change and evolve, with some relationships growing stronger while others weaken or are terminated. • The changing pattern of relationships and interactions in an ecosystem contributes to the health and vitality of the system • In an ecosystem, conflict and cooperation frequently exist at the same time o For example, P&G and Clorox are fierce rivals, but they collaborated on a new plastic wrap. P&G had a great invention, but didn’t have a plastic-wrap category, so they collaborated with Clorox so they could use the Glad brand name, to create Glad Press ‘n Seal. • Companies today may use their strength to win conflicts in negotiations, but ultimately cooperation carries the day. The Changing Role of Management • Within business ecosystems, managers learn to move beyond traditional responsibilities of corporate strategy and designing hierarchical structures and control systems • Managers now think about horizontal processes rather than vertical structures • Important initiatives are not just top down; they cut across the boundaries separating organizational units • Horizontal relationships now include linkages with suppliers and customers, who become part of the team • Managers learn to appreciate the rich environment of opportunities that grow from cooperative relationships with other contributors to the ecosystem • Managers strive to strengthen the larger system evolving around them, finding new ways to understand this big picture and how to contribute Interorganizational Framework Resource Dependence • A situation in which organizations depend on the environment but strive to acquire control over resources to minimize their dependence • Amount of dependence is based on two factors: o The importance of the resource to the firm o How much discretion or monopoly power those who control a resource have over its allocation and use Resource Strategies • When organizations feel resource or supply constraints, the resource-dependence perspective says they manoeuvre to maintain their autonomy through a variety of strategies • One strategy is to adapt or alter the interdependent relationships, either by purchasing ownership in suppliers, developing long-term contracts or joint ventures, or building relationships in other ways • Another technique is to use interlocking directorships, which means the board of directors include members of the boards of supplier companies • Organizations may join trade associations to coordinate their needs, sign trade agreements, or merge with another firm to guarantee resources and material supplies • Some organizations may take political action, such as lobbying for new regulations or deregulation, favourable taxation, tariffs, or subsidies, or push for new standards that make resource acquisition easier • Organizations using the resource-dependence strategy will do whatever is needed to avoid excessive dependence on the environment to maintain control of resources and hence reduce uncertainty Power Strategies • In resource-dependence theory, large, independent companies have power over small suppliers o For example, Wal-Mart has grown so large and powerful that it can dictate the terms with virtually any supplier • When one company has power over another, it can ask suppliers to absorb more costs, ship more efficiently, and provide more services than ever before, often without a price increase • Power is also shifting in other industries o For example, technology vendors have been putting out incompatible products and expecting their corporate customers to assume the burden and expense of making everything work together for decades. Now, with the declining economy, corporations cut back their spending on technology, which caused stiffer competition among vendors and gave corporate customers greater power to make demands Collaborative Networks • An emerging perspective whereby organizations allow themselves to become dependent on other organizations to increase value and productivity for all • Companies join together to become more competitive and to share scarce resources Why Collaboration? • 3 reasons: o Sharing risks when entering new markets o Mounting expensive new programs and reducing costs o Enhancing organizational profile in selected industries or technologies • Cooperation is a prerequisite for greater innovation, problem solving, and performance • Partnerships are a major avenue for entering global markets • Both Japan and Korea have long traditions of corporate clans or industrial groups, but North Americans typically have considered interdependence a bad thing because it would reduce competition • Interorganizational linkages provide a kind of safety net that encourages long-term investment and risk taking • Companies can achieve higher levels of innovation and performance as they learn to shift from an adversarial to a partnership mindset From Adversaries to Partners • Partnering allows reduced cost and increased value for both parties in a predatory world economy • The new model is built on interdependence and trust • Dependence on another company is seen to reduce, rather than increase risk Traditional Orientation: Adversarial New Orientation: Partnership • Low dependence • High dependence • Suspicion, competition, arm’s length • Trust, addition of value to both sides, • Detailed performance measures, closely high commitment monitored • Loose performance measures, problems • Price, efficacy, own profits discussed • Equity, fair dealing, both profit • Limited info and feedback • Legal resolution of conflict • Electronic linkages to share key info, • Minimal involvement and up-front problem feedback, and discussion investment, separate resources • Mechanisms for close coordination, people on site • Short-term contracts • Contract limiting the relationship • Involvement in partner’s product design and production, shared resources • Long-term contracts • Business assistance beyond the contract Population Ecology • Population-ecology perspective is when the focus is on organizational diversity and adaptation within a community or population or organizations • A population is a set of organizations engaged in similar activities with similar patterns of resource utilization and outcomes • Organizations within a population compete for similar resources or customers • Individual organizational adaptation is severely limited compared to the changes demanded by the environment • Innovation and change in a population of organizations take place through the birth of new forms and kinds of organizations more so than by reform and change of existing organizations • Organizational forms are relatively stable, and the good of a whole society is served by the development of new forms or organization • New organizations meet the new needs of society more than established organizations that are slow to change • New organizational forms such as JetBlue fit the current environment, fill a new niche, and over time, take away business from established companies • There are many limitations on the ability of an organization to change: o Heavy investment in plants, equipment, and specialized personnel o Limited info o Established viewpoints of decision makers o Organization’s own successful history that justifies its current procedures o Difficulty of changing corporate culture • True transformation is rare and unlikely even t in the face of all these barriers • New organizational forms are emerging o For example, a company buys leftover routers, servers, etc. from bankrupt corporations for pennies and then sells them for a profit • When looking at an organizational population as a whole, the changing environment determines which organizations survive or fail • The assumption is t
More Less

Related notes for BU398

Log In


Don't have an account?

Join OneClass

Access over 10 million pages of study
documents for 1.3 million courses.

Sign up

Join to view


By registering, I agree to the Terms and Privacy Policies
Already have an account?
Just a few more details

So we can recommend you notes for your school.

Reset Password

Please enter below the email address you registered with and we will send you a link to reset your password.

Add your courses

Get notes from the top students in your class.