OB Chap 3

Organizational
System in the
Global Environment
By:
Salim Shirzai
MBA

Outline
Introduction

Introduction
As William F Gleuck and Lawrence say The environment
includes factors outside the firms which can lead to
opportunity for or threats to the firm. Although there are many
factors, the most important of the sector are: socio-economic,
technological, supplier, competitors, and government.

Organizational Environment
As open systems organizations interact with their environment
by taking inputs, changing their internal processes and
technologies because of environmental requirements and
giving output to the environment. Environment includes:
1. Economic
2. Political-legal
3. Socio-culture
4. Technological
5. Global

 General and Specific Environment

General Environment Includes:
Culture forces
International forces
Political forces
Environmental forces
Economic forces

Specific environment such as:

Customers
Distributers/suppliers
Unions
Compotators

 Sources of uncertainty in the Organizational Environment

An organization likes to have a steady supply of resources so
that it can easily manage its domain and satisfy its stakeholders.
The forces discussed previously create uncertainty for
organization and makes it difficult for them to control the flow of
resources they need. Following are of high importance:
1. Environmental complexity
2. Environmental dynamism
3. Environmental richness

s
Lawrence and Lorsch Theory on Environmental Fit: They identified
three main sub-environments which is necessary for
organizations success:
1. The market sub-environments corresponding to sales
2. The technical sub-environments corresponding to production
3. The scientific sub-environments corresponding to research and
development
Therefore, most organizations create departments (subsystem) for
sales, production and R&D representing the total organization (total
system).

Theories of Organizational Change

Resource Dependence Theory
Organizations are dependent on their environment for the
resources they need to survive and grow. According to
resource dependency theory, the goal of an organization is to
minimize its dependency on other organizations for the supply
of scarce resources therefore organization must:
1. Exert influence over other organizations so that it can obtain
resources
2. Respond to the needs and demands of the other
organizaions.

 Managing Interdependencies in Specific Environment

In the specific environment, an organization needs to manage its relationship with suppliers,
unions and customer, interest groups. The basic interdependencies that cause uncertainty
are;
Symbiotic Interdependencies: in this type of interdependency the output of one organization
is input another organization. In this kind of interdependency followings are to be
considered:
1. Good reputation; develop a good reputation to be trusted
2. Cooperation: strengthens relationship
3. Strategic Alliances: agreements with other parties:
Long-term contracts, networks, minority ownership by purchasing minority stakes in other organizations, joint
ventures, merger and takeover

4. Managing Competitive Resource Interdependencies: competing for scarce inputs and

outputs. This can be managed by collusion, third party linkage mechanism, strategic
alliance, merger and amalgamation.
5. Merger
6. Amalgamation: a new company is formed to take over the existing business of all the
amalgamation. Amalgamation takes place where two or more companies organizae for a
new company with which to consolidate

 Transaction Cost Theory

According to this theory, the goal of the organization is to minimize the costs of
exchanging resources in the environment and the cost of managing exchanges
inside the organization. Organizations try to find mechanisms that make interorganizational transactions relatively more efficient.
Sources of Transactions Costs
Environmental uncertainty and bounded rationality
Opportunism and small numbers: opportunity and small number of
stakeholders
Risk and Specific Assets: specific assets are investments (in skills, machinery,
knowledge) that create value in one particular exchange relationship but have
no value in any other exchange relationship.

Managing Globalization in Todays

Organization
In todays context, myriad or countless changes are taking
place in business. Most of the developing countries have
adopted economic liberalization as a policy and program for
their development. The path of economic liberalization is
strewn with many dangers.
Managing
globalization

Rapid changes

Modern day
organization

Multiple stakeholders in
organization

Quality and cost

conscious customer

Globalization and the Global

Village
Globalization has led to the emergence of the global village in the world
economy. The internet along with rapid political and social changes ahs broken
down old national barriers to competition. Globalization implies that the world
is free from national boundaries and that it is really a borderless world.
Managing a Diverse Workforce
Ethical Behavior and Personal Integrity
Technological Innovation
Management Challenges in the Global Marketplace
Understanding Cultural Differences: individualism vs collectivism, Power Distance, Uncertainty
Avoidance, Masculinity vs femininity, time orientation
Developing Cross-cultural Sensitivity: Cultural diversity, gender diversity, age diversity, ability
diversity, making diversity an asset for the organization, benefits of diversity such as better
problem solving, retain best talents, promotes creativity and innovation problems of diversity
such as less cohesive, communication problems.

Reference
P G Aquinas (2013), Organizational Bhaviour- concepts
realities, applications and challenges, New Delhi

Thank
You