DMO

Lec 2: External Environment and Inter-organizational Relationship.

Organizational environment: all elements that exist outside the boundary of the organization and have
potential to affect all or part of the organization (Daft, 2007).
Internal environment: factors occurring inside the organization that influence its chores and activities,
particularly the behaviors of the employees.
External environment comprises the factors taken place outside the organization. They are more
unpredictable, hard to prepare for, and often bewildering.
Task environment contains all sectors with which the organization interacts directly and have a direct
influence on the organizations ability to achieve its goals including:

Industry sector: firms should consider about:

How big and strong their competitors?
Competitors weaknesses?
Nature of competition in your industry?
o

For example: Wal-mart has advantages that theyre biggest grocery retailer in US. To compete
with it, Wegman :
Wegman Build larger stores
Other food (ready made food + gourmet food (thuc an cho nguoi sanh` an)
Adding services (dry cleaning, child play centers, wine counters)

Suppliers are individuals and organizations that provide inputs like raw materials that organization
needs to produce good and services. Change in nature or type of any suppliers can produce
opportunities and threats to which manager should respond.
o

For example, candy manufacturer can use suppilers around the world for ingredients such as
sugar, bean, If suppliers can not supply enough to meet the demands because of low yields,

Human resources: The shortage of human capital such as skill shortage, talent gap, training schools,
unionlization,.. play a significan role on organizations performances.

Market sector: organization should pay attention on meeting customer demands, pivotal users,
clients
o

For example, Game makers can take advantage from changing interest of consumer from
playing gaming consoles to low-cost options like role-playing advanture game on PC.

International Sectors: becomes vital because of globalization and intense competitor: competition
from foreign markets, foreign customers.

For example, USAs drug manufacturers are facing pressure from international competitions
when outsourcing firms like Wuxi Pharmatech in Shanghai or Biocon in India have a low-cost
advantage

General environment: sectors which indirectly affect the daily operation of a firm including government,
sociocultural, economic conditions, technology and financial resources sectors.

Government sector: taxation policy affect organization cost when coporate tax on profit has an effect
on costs not only on charging higher prices of product but also affecting on bottom line.

Sociocultural sector: As society and culture change, businesses must adapt to stay ahead of their
competitors and stay relevant in the minds of their consumers. Changing preferences, demographic.
o

For example: Fashion company should pay attention on catching up the trend nowadays
otherwise they will be left behind.

Economic forces such as interest rates, inflation, unemployment, economic growth not only affect to
the well-being of a country but also impact the general health of organization.
o

For example, in 2008, US experienced with high unemployment, weak growth, high inflation,
high unemployment means fewer people can eat out but those look for inexpensive option, like
McDonalds. (Griffin, 2013)

Technology sector is an massive change has occurred recently. The power of social networking and
blogging can give review and feedback of product publicly => affect firms.

Financial resources sector: if financial control is effective, firm grows effectively and vice versa.

HOW DOES THE ENVIRONMENT INFLUENCE AN ORGANIZATION?

Environmental uncertainty increases or decreases as environments vary along five basic dimensions: stable
unstable, homogeneous hetergeneous, simple complex, resources availability and organizations intended
domain. Environment affect organization 2 ways: information and resources.
1. The need for information about environment: organization need information from environment to
moniter and respond based on that infor.
2. The need for resources from environment.
Uncertainty means that there is not sufficient info about environment factors for decision makers and they
have difficult time predicting external changes (Daft)
The environment creates uncertainty for organization managers, to be effective, they must respond by
designing org to adapt the changing environment.
The simple-complex dimension concerns environmental complexity, which refers to heterogeneity, or the
number and dissimilarity of external elements relevant to an organizations operations. The more external

factors that regularly influence the organization and the greater number of other companies in an
organizations domain, the greater the complexity is.

For example, Aviation ( ngnh hng ko) is affected by high demand of security, regulation,
competition, market condition.

The stable-unstable dimension refers to whether elements in the environment are dynamic.

For example, toymakers is in an unstable environment, they have to find way to solve the
problem of attracting customers in other regions: China, Brazil because of the declining in US
market.

The simple-complex and stable-unstable dimensions are combined into a framework:

ADAPTING CHANGING ENVIRONMENT

The best way for an organization to cope with complex environment is to develop a complex structure rather
than keep it simple and uncomplicated. Organizations need to have the right fit between internal structure and
the external environment.
Adding Positions & Departments:
The organization creates more departments that specialize in dealing with a specific sector of the
environment. As a result, there is a positive correlation between environmental complexity and internal
complexity. There are two technique of job designs:

Job enlargement is a horizontal expansion of job design technique wherein there is an

increase in the number of tasks associated with a certain job as well as the scope of ones
duties and responsibilities.

Disadvantage: involve too many change to job-classification and costly, lack of long-term commitment
of resouces

Job enrichment is vertical expansion of job, combining various existing and new tasks into one
large module of work. The work is then handed over to an employee, which means there is an
increase in responsibilities and scope.

Each sector in external environment requites employee or department to deal with it. For exaple, marketing
departments have responsibilities to find customers, financial group has to deal with financial problem like
bankers
However, managers should consider the impact of having too many positions and departments over control:
slow decision making, distorted message which lead to communication problem, reaction to the change of
environment become slower. Expensive. Too many people do the same functions.
Buffering & Boundary Spanning:

The traditional way to approach environment uncetainty was buffering. It helps organization by
absorbing uncertainty from environment to protect the technical core and help it function effectively, the
department that performs the primary production activity of the organization.

Boundary spanning serves 2 important roles in organization: detecting and processing information
about the change in environment and represent organizations interest to environment.
Managers need essential, precise information about competitors, customers, other elements
about environment to make good decision in the fast changing environment of todays world.
Business intelligence is an approach of boundary spanning: high-tech analysis of large
amounts of internal and external data to spot patterns and relationships that might be
significant.
For example, purchasing agents in organizations too combine buffering and boundary spanning
roles. As they transfer required raw materials etc into the organization, they also gather information
on new supplies and techniques and techniques of production from their suppliers.

Scan the external environment for threats, changes and opportunities. Use boundaryspanning
roles, such as market research and competitive-intelligence departments, to bring into the
organization information about changes in the environment. Enhance boundary-spanning
capabilities when the environment is uncertain

Differentiation & Integration

High uncertainty leads to Differentiation: Differences in cognitive and emotional orientations, and in
formal structure, among different functional departments.Organizational departments become
specialized to encouter against uncertainty from changing environment.
Strength: employees in one department have different goals and attitudes => deal with specialized part
of external environment. Weakness: difficult to coordinate and scatter resources.
Integration: process of achieving collaboration among various subsystems in accomplish organiztion
task.
+ Expensive in terms of number of managers, managerial time spend on coordinating org activities,
unnecessary investment.

Organic versus Mechanistic Control:

When external environemt is stable, internal organization chacterize by standard rules procedures. Clear
hierachy of top manager, organization are fomalized and centralized with decision make from the top =>
mechanisistic.
When external envvironment is changing, internal organization was looser, free flowing, adaptive. Less
hierachy of authority and control with few rules. Decision making was decentralized => organistic.
Organizations tend to adopt a position on the Mechanistic Organic continuum that corresponds to the
degree of environmental uncertainty they face, so that greater uncertainty corresponds to a more
organic control structure, and vice-versa.

Match internal organization structure to the external environment. If the external

environment is complex, make the organization structure complex. Associate a stable environment
with a mechanistic structure and an unstable environment with an organic structure. If the external
environment is both complex and changing, make the organization highly differentiated and organic,
and use mechanisms to achieve coordination across departments.
Planning & Forecasting: In a volatile and fast changing environment, serious planning and forcasting are
needed to respond to change.

Planning: The process of setting goals, developing strategies, and outlining tasks and schedules to
accomplish the goals.

Forecasting: The assumption based on management experience, knowledge, and judgment

o

Strength: organizations facing greater uncertainty will tend to increase their planning and
forecasting effort for a coordinated, speedy response; based on data in the past and future =>
planning can help org to soften adverse impacts.

Weakness: rigidity, time consuming, especially in emergency when quick decision are needed.
For example: Heinz, Malaysian, New Zealand airline have conceived specific management for
handling crisis. ( ke hoach co san)

Planning, forecasting and responsiveness enhance the organizations ability to quickly respond
to sudden changes. Environment is stable, organizations can concentrate on current problems
and day-to-day efficiency. Long-range planning and forecasting are not needed because
environmental demands will stay the same.

CONTINGENCY FRAMWORK FOR ENVIRONMENT UNCERTAINTY AND

ORGANIZATIONAL RESPONSES

Why do organisations need to have the right fit between internal design and
external environment? Discuss your answer with relevant examples by using
the Contingency Framework for Environmental Uncertainty. (2010-2011)
=> Question required the use of the contingency framework model for environment and how it impacts
organisations.

It is best for organisations to develop a complex structure to cope in a complex

environment instead of a simple and uncomplicated one. Drawing on the
framework for assessing environmental uncertainty, discuss whether you agree
with this statement. (2011-2012)
=> FEEDBACK: Question 1 requires discussion on the changing patterns, uncertain events and complexities in the
environment which are factors that would determine whether they agree with the statement for an appropriate structure in
the organisation. The framework for assessing environmental uncertainty should be discussed not only to help respond
and adapt to the complexities of the environment but also determining the appropriate structure. The 4 dimensions in the
framework to be discussed: 1. Simple + stable=low uncertainty; 2. Complex + Stable = Low-Moderate Uncertainty; Simple
+ Stable = High-Moderate Uncertainty; Complex + Stable = High Uncertainty.

Discuss measures that organisations may adopt to mitigate environmental

uncertainty and change. (2012-2013)
=> Question 1 requires discussions that incorporate Framework for Environmental Uncertainty which are 4 dimensions:
1. Simple + stable=low uncertainty; 2. Complex + Stable = Low-Moderate Uncertainty; Simple + Stable = High-Moderate
Uncertainty; Complex + Stable = High Uncertainty and explanations Organisational Responses. In addition there should
be explanations on measures adopted: adding positions and departments; building Relationships; differentiation &
integration; organic vs mechanistic design; planning, forecasting and responsiveness.

Discuss the various measures available for organisations in adapting to each

level of environmental uncertainty. (2013-2014)
=> Question 2: As an organizations environment becomes more complex and uncertain, the organization has to add jobs
and departments; boundary spanning roles; increased differentiation and integration; put in place an organic design that
fits with rapidly changing environment; have effective planning & forecasting for speedy response towards uncertainty and
to cope with all the elements in the environment.

Lecture 3: Strategy and Organization.

Johnson and Scholes: strategy is the direction and scope of an organization over the long-term: which
achieves advantage for the organization through its configuration of resources within a challenging
environment, to meet the needs of markets and to fulfill stakeholder expectations.
Strategy is about:

Where is the business trying to get to in the long-term? (direction)

Which markets should a business compete in and what kinds of activities are involved in such markets?
(markets; scope)
How can the business perform better than the competition in those markets? (advantage)
What resources (skills, assets, finance etc.) are required in order to compete? (resources)
What external, environmental factors affect the businesses ability to compete? (environment)
What are the values and expectations of those who have power in and around the business?
(stakeholders)

To support and accomplish org strategic intent and keep people focused on direction determined by
org mission, vision, goals, manager have to select specific strategy that design option that can help
org can achieve its purpose and goals in its competitive environment. Determining External and
internal environment to determine what your strategy direction is.
Three models for formulating strategies are:
Mintzbergs 5Ps for Strategy: By approaching strategy formulation in the form of the 5Ps (plan, ploy, pattern,
position, perspective), the all-encompassing view of the business is more viable and therefore the objectives
set are more tenable towards a strategy that is multi-prolonged, long term and even sustainable for a
companys growth and advantage.

Plan: some sort of consciously intended course of action, a guideline (or set of guidelines) to
deal with a situation.

Ploy (how to beat your competitors): As plan, a strategy can be a ploy too, really just a specific
manoeuvre (mo) intended to outwit (vt qua ) an opponent or competitor.

Pattern (what are your actions, specific processes you have to compete)
N c th khng c nh trc hoc khng c
cng b, song cc hot ng ca t chc u nhm chung vo mt xu th no th c coi l
chin lc.

Position (where are u position?) means of locating an organisation in an "environment".

Tc l v tr cng ty mun ginh c trong mi trng cnh tranh, c bit l trong so snh vi
cc i th cnh tranh. Theo cch nh ngha ny, chin lc l s n khp, ho hp gia cc yu
t ni ti v cc yu t mi trng. V th c xc nh v pht trin qua k hoch, xu th hot ng
ca doanh nghip.
Perspective (Do we have same vision, mission?) Chin lc khng n thun l chn v th ca
cng ty m cn l thch thc ca cc nh qun l nhn nhn th gii, l tng ca cc nh qun l
cn c chia s vi cc thnh vin khc ca t chc.

Micheal E. Porters Competitive Strategies: Porter proposed that managers can formulate a strategy that
makes the organization more profitable and less vulnerable if they understand the following five forces in the
industry environment:

Threat of New Entrants: Depends on the amount and extent of potential barriers create pressure for
established organizations hold down the prices or increase their level of investment.
Power of Suppliers: Determined by the concentration of suppliers and the availability of substitute
suppliers. Powerful suppliers can charge higher prices, limit services or quality, and shift costs to their
customers, keeping more of the value for themselves.
Power of Buyers: Powerful customers can force down the prices, demand better quality or service, and
drive up costs for the supplying organization.
Threat of Substitutes for a companys product or service: Affected by changes in cost, new technology,
social trends that will deflect buyer loyalty, and other environmental changes.
Rivalry among Existing Competitors:

The sustanability of generic strategy require firms owns some barriers that the immintation of strategy be
difficult.
In finding its competitive edge within these five forces, a company can adopt one of three strategies:
differentiation, low-cost leadership, or focus.

Differentiation:
o
o
o
o
o

Distingush their products or services from others in the industry by using advertising, distinctive
product features, exceptional service, or new technology.
Organization need strong coordination among functions in r&d, product development and
marketing, attract highly skilled labor, scientist or creative people. (Porter, 1980)
(+) Reduce rivalry, fight off threat of substitutes products due to loyalty of customers.
(-) costly activities: R&D, advertising.
Organic design fits this strategy the most, requiring the employees to be learning oriented.
Structure is fluid and flexible with strong horizontal coordination. Empowered employees work
directly with customers and are rewarded for creativity and risk taking. The organization values
research, creativity, and innovativeness over efficiency and standard procedures.

For example: Ralph Lauren in fashion industry follow differentiation strategy by offering
different segments in the apparel, home, accessories and fragrance products. With their

goods classified as luxury items, the main focus of RLs strategy is to supply the
consumer with a high quality product with an excellent brand name. Their target market
are usually people with decent incomes who and do not mind paying a little extra for
superior quality and brand.
WEAKNESS:
Require large financial investment ( for R&D, advertising..)
Canibalization (t tt ot doanh thu):

Low-cost leadership:
o
o

Increase market share by emphasizing low cost compared to competitors.

Organization seeks efficient, pursues cost reductions, tight controls, structured organization,
incentive based on metting stric quantitative target to produce product more efficient. (Porter,
1980)
Low-cost leadership strategy focuses on efficiency approach which is more mechanistic for
the organization design. The strategy is associated with stability rather than taking risk or new
opportunities for innovation and growth, having strong, centralized authority and tight control,
and emphasis on efficient procurement and distribution systems. Employees generally perform
routine tasks under close supervision and control.
For example, Walmart attract customers by supplying everyday wide selection of lowest
cost general merchandise.
Weakness:
If perceptions of quality become too low, business will suffer.
The needs to keep expenses low might lead cost leaders to be late in detecting
key environment trends.
Low-cost firms emphasis on efficiency => make it dufficult to change quicky if
needed. For example, lose sight of changes in customer needs.
Imitation ability of competitors.

Focus (niche): organization concentrate on choosing market niche where buyers have distinctive preferneces
or requirements, develop unique ability compared to competitors to serve the need of target customers
segment. Firms try to achieve either low-cost advantage or differentiation advantage within a narrowly
defined market. Focus strategy is quite effective for small business (Goldman & Nieuwenhuizen, 2006)

With a differentation focus, business creates competitive advantage through differentiation within niche
or segment.
o

For example, Harley Davidson - motorcycle brand focus on older customers and adventurous
spirit - differentation themselves through quality and image than speed. Although its price still
high, but in 2001, sale grew in double digits. (Hoskisson et. al., 2012)

With a cost focus, business aim to be the lowest cost producer in that niche or segment.
o

For example: IKEA international furniter retailer design low cost modular furniture that
customer can easily assemble. They also arrange their products by room instead of by
products for young buyers who have little time or inexperienced.

Porter (1985): achieving cost leadership and differentation always inconsistent because differentation
is usually costly unless:
1. Competitors stuck in the middle.
For example, Crown Cork is a firm that achieved both differentation and low cost
strategy because its competitors were not investing in low-cost steel can industry
=> Crown Cork took that advantage without sacrifice differentation in process.
2. When cost is strongly affected by share or interrelationships: cost position is hevily determined
by market share and there are interrelationships between industries that one can exploit, other can
not.
3. When a firm pioneer major innovation:
However, he also stressed that the combination of low cost and differentiation is unlikely to produce
sustainable competitive advantage, its just temporary. If firms can, the benefits will be significant. The
sustainability of generic strategy requires firms owns some barriers that other can not immitate.
However, he also suggested that firms may be able to create 2 largely separate business units within
same corporate, each with different generic strategy.

Miles and Snows Strategy Typology: Managers seek to formulate strategies that are congruent with the
external environment. The four strategies can be developed are:

Prospector (= differentiation strategy):

o Perceive dynamic and uncertain environment, flexibility to combat with changing environment.
o Identify new product and exploit new opportunity, accept to take risk => create changes, give
them compeitive advantage over competitors.
o Rely on technology that difficult to analyze.
Have organic structure: loose structure, low division of labor, low formalization and
low centralization.
For example, Nike product Air Jordan XX3 was introduced as a first program shoes making
from recycle materials and limit toxic chemical glues.

Defender (= low-cost leadership): opposite with prospector.

o
o
o

Protecting its current market, maintain stable growth, serving current customers, generally by
lower its costs and improve performance of its existing products.
It emphasis on organizational stability and its core technological efficiency => sufficient strength
to cope with changing environment.
Perceive certain and stable environment, seeking for stability to achieve efficiency.
Have mechanic structure: tight control, extensive division of labor, high fomaliztion and
high centraliztion.
For example, Tata iron and steel company (TISCO) took advantages to sell large quantity of
steel when the steel price were decontrolled ( bi b vic kim soat ca 9 ph). To maintain
the stability of its operating environment, TISCO had a mechanistic design (tall and
centralized structure, division of labor, ), also maintained captive (gi) iron-ore and coal
mines for its raw materials, policy of company encouraged total involvement of their
employees => help maintain industrial peace. (Shukla, 2008)

Analyzer (mix of prospector and defender):

o Balances efficiency and learning, tight cost control with flexibility and adaptability. Efficient
production for stable product lines, emphasis on creativity, research, risk taking for innovation.
o Minimize risks when seeking new opportunities.
o Strength of analyzer: respond to prospectors while maintain efficiency in operation (defender)
For example, Amazons strategy not only defends its core business of selling books and others
on Internet but also expand innitatively their business in digital media.
Yahoo use this strategy to keep its roles as Internet portal while extend that portal into more
applications.

Reactor:
o No clear approach design. Design characteristics shift abruptly depending on current needs.

Having no concsistent strategic approach, it drifts with environmental events, react to

environment when forcing to change, reacting but failing to anticipate( d tinh) or
influence those event.
It also contribute to organization fairlures because of these reasons (Shukla, 2008):
Top managament may not have clearly articulated organizations strategy.
Management has not fully shaped otganization struture and fit the chosen
strategy.
Management may maintain the organizations current strategy-structure
relationship although there is a significant change in environment. (often true for
highly conservative organizations.
o
o

For example, when the market share of smartphone segment declining,

Windows Phone 8 is Microsoft's reaction to older versions of Android and iOS.
When market for truck, construction and argicultural equpment was booming,
International Harvester (IH) was fail to catch up the pace to invest in R&D,
improve in distribution =>lost million dollars => then, it moved to become a
dominant firm in trucking, argiculture, construction of medium-size truck
manufacture => also fail because it could not anticipate in the change of
envionment.

Drawing on Porters competitive strategies and Miles and Snows strategy

typology, explain how strategy affects organisational design. (2010-2011)
=> Question 3 was the most popular question attempted by many students. It is basically explaining
how strategy affects organisation design. The theories by Porter and Miles & Snow were discussed but the
general weakness was the ability to articulate (ni r rng) the link between strategy and design in a
convincing and critical manner.

A good business strategy only focuses on making products and services as

unique and distinctive as possible to gain competitive edge in the market
(p.113). Drawing on Porters competitive strategy and Miles & Snows strategy
typology, discuss the validity of this statement. (2011-2012)
=>

Question 2 requires discussion on differentiation strategy which is not the only approach in making

products or services unique and distinctive rather adopting even a low cost leadership approach can
equally be effective. Students should incorporate Porters competitive strategies discussing on
Differentiation and Low Cost leadership strategies. Furthermore Miles & Snows Strategy Typology is to
formulate strategies that will be congruent(ph hp) with the environment.

Drawing on Porters Competitive Strategies and Miles and Snows Strategy

Typology discuss how strategy affects organisational design. Illustrate your
answer with appropriate examples. (2012-2013)
=>

Question 5 requires discussion on Miles & Snows Strategy Typology and Porters Competitive

strategies and how it affects the organisation design. Porters Competitive Strategies discusses on
Differentiation which may reflect a design which is organic and Low Cost Leadership Strategies that
reflects a mechanistic design. Miles & Snows Strategy Typology which is Prospector reflects characteristics
of an organic design; Defender strategy reflects a mechanistic design; Analyzer reflects a combined
organic & mechanistic design; Reactor has characteristics which is more organic.

Daft (2010) in his text emphasises that the essence of formulating strategies is
choosing whether the organisation will perform different activities than its
competitors... (p. 109). Critically evaluate this statement by drawing on the
theories for formulating strategies. (2013-2014)
=> Question 1: Students need to discuss the concept of strategy and the theories used to formulate strategy which are
Michael E. Porters Model of Competitive Strategy and Miles and Snows Strategy Typology. Porters strategies focus on low
cost leadership, differentiation, focused low-cost leadership and focused differentiation. Miles and Snows model describes the
prospector, the defender, the analyzer and reactor strategies in organisations.

Lec 4:
Organizational Design: Arrangement of tasks and job relationships that comprise the organizational
structure.
Mechanistic
Organic
From Vertical to Horizontal structure
From Routine task to Empower Roles
From formal control system to shared information
From Competitive to Collaborative Strategy
From Rigid to Adaptive Culture
Organizational Structure: Formal system of task and job reporting relationships.
o Organizational structure: Allocation of tasks and responsibilities, relationship among
employees, department, systems.
o Structural dimensions [Factors of structure]:
1. Formalisation [Degree of standardization, amount of documentation],
2. Specialisation [Degree to which jobs are subdivided into separate tasks]
3. Hierarchy of authority [Span of control]
4. Centralisation/Complexity [Especially at the top]
5. Professionalism [Education and training]
6. Personnel ratios [Deployment of people to various functions and departments].
o Contextual dimensions:
1. Size
2. Organizational technology
3. Environment
4. Culture
5. Goals and strategy.
1. Functional structure [Activities are grouped together by common function from the bottom to
the top of managers]
Strength

Weaknesses

1.Allows economies of scale [the same place

and share facilities]
2.Enables in-depth knowledge and skill
development
3.Easy to accomplishing functional goals
4.Is best with only on or a few products

1.Slow response time to environment

changes[due to lack coordination]
2.Decisions pile up, &overload[due to lack
coordination]
3.Poor horizontal coordination among
departments
4.Less innovation
5.Restricted view of overall goals

Example: Blue Bell Ice Cream is the third best-selling brand of ice cream in United States, with
over $400 million annually. It is followed by functional structure with departments of sales,
quality control, production, maintenance, and distribution.
Functional structure with horizontal linkages.
2. Divisional structure [Product structure/Strategic business units

For Example: United Technologies Cooperation (UTC), which is among 50 largest U.S
industrial firms, has numerous divisions, such as Carrier (air conditioners & heating), Otis
(elevators &escalators), Pratt & Whitney (aircraft & engines)].
Differences between functional structure and divisional structure [(1) Department vs.
Products, (2) Coordination, flexibility and adaptation, (3) Centralize vs. Decentralize, (4)
Economies of scale].
Strength

Weakness

1.Suit to unstable environment

2.Customers satisfaction
3.High coordination
4.Adapting to differences in products,
regions, customers.
5.Best in large organization with several
products
6.Decentralize decision making

1.Poor economies of scale

2.Poor coordination in products line
3.Lack
of
competency
and
specialization[employees
identity
with
products line rather than functional specialty]
4.Makes integration and standardization
across product lines difficult

3. Geographic structure: Bases on specific regions

4. Matrix structure: Multi-focus on product, function, & geographic
Strength
Weakness
1.Coordination (dual demand)
1.Conflict from dual authority
2.Flexible sharing HR across products
2.Need good interpersonal skills and
3.Suited to complex decisions and unstable extensive training
environment
3.More time for meetings
4.Supports for the development of function 4.The system will not work if there is no
and skill
adaptation to information and power sharing
5.Conflict in leadership decision (power
5.Best in medium-sized organizations with balance)
multiple products
Condition for Matrix: (1) Pressures exist to share scare resource, (2) Environmental
pressure exists for two or more critical outputs, (3) Complex and uncertain
environmental domain.
5. Horizontal structure: A redesign of a vertical organization along its vertical workflows and
processes(Business Process Reengineering) [Organic Design]
Strengths
1.High responsibility and response
2.Focus on production and delivery value
3.Broader view of organizational goals
4.Teamwork and collaboration
5.Quality of life

Weaknesses
1.Difficult and time-consuming to identify
core processes
2.Required changes in culture, job design,
management philosophy, information and
reward system
3.Not suit with traditional management
4.Required significant training
5.linit in-depth skill development

Lec 5: Organizational Culture and Ethics.

Manaan (1985): A culture is expressed only through the actions and words of its membersCulture is not itself
visible, but is made visible only through its representation.
How culture begins? The organizational culture is generally begin with a founder who articulates and
implements particular ideas and values like vision of what co-operate should be, philosophy or business
strategy. For example, Microsofts culture is a reflection of Bill Gates co-founder and current CEO.
[FURTHER READING] Group and Organization do not form accidentally or spontaneously. Essential
steps how culture begins (Schein, 1983):
1.
2.
3.
4.

A single person (founder) has an idea for new enterprise.

Founder brings one or more people to create group and share vision and belief in the risk.
Founding groups act in concert, raises funds, incorporating.
Others members are brought to group => history begin.

=> founder will have major impact in this process to solve internal problem or external survival.
=>Culture elements embeded is a teaching process.
How culture elements is embeded:
1. Formal statements of organizational philosophy, charters, creeds, materals used for recruiment
and selection and socializations.
2. Design of physical spaces, facades, buildings.
3. Deliberate role model, teaching, coaching by leaders.
4. Explicit reward and status system, promotion criteria
5. Stories legends, myths, aout key prople and events.
6. What leaders pay attention to, measure and control.
7. Leaders reactions to critical incidents and organization crisis ( when organizational survival is
threatened)
8. How organiztion design and struture ( organic / mechanic)
9. Organizational systems and procedures.
10. Criteria used for recruiment, selection, promotion, level off, retirement, excommunication of
people. (leader use these criteria to determines who fit or unfit key slots in organization)
3,6,7 are most important because they helps leader to decipher (gii m) how members of
organization learned the right and what model of reality theyre adopt.
To interpret culture, there are some important visible artifacts:

Managers hold rites and ceremonies, activities or special events to reinforce specific values, create a
bond among people for sharing important understanding as well as celebrate heroes => help employee
feel more appreciated and offer an enjoyable workplace experience.
For example,

Stories are narrative based on true events and shared among members within organization while
myths consistent with value and belief but not support by facts. Such stories help to shape the
organizational culture and inculcate the core value as well as share understanding among people.

Symbol is defined as something to represent other things: ceremonies, stories, rites, physical artifacts.

Organization structure design reflects its culture: rigid mechanistic or flexible organic.

Nordstroms structure is a good case in this point when they encourage employees to treat customers as the
way they like, everyone in organization support sale staff first.

Hire the smile, train the skills: hire people who are already nice and already motivated to
do a good job.
When in doubt, follow THE GOLDEN RULE: treat people as u would want them to treat
u. Always think: How will it affect my customer? If I was in the customers, how would I
feel? Do whats right for the customer and you have done whats right for the
organization.
Encourage teamwork and team competition: every employee be a team player and
everyone compete in a playing field.
Dump( vut b) the rules and be innovative: use good judgment in all situations.
Publicity celebrate your heroes.

=> To interpret cultures, we also look at control systems which focus on inner systems of control on people,
operations, resources, quality, finance, reward systems and how decisions are made.

Successful organization should have a right culture in order to support and reinforce strategy
and design to be more effective in its environment. There are four categories of culture which
relate to fit the culture values, strategy, structure and environment.
To determine the fit between appropriate culture and strategy & fit, two specific dimensions could be used
1) extent to which the competitive environment requires flexibility or stability; and 2) extent to which the
organisations strategic focus and strengths are internal or external

Adaptibility culture :
Focus on employees on the changing needs of customers and other stakeholders, and supports
initiative and leadership to keep pace with these changes. Culture values innovation, creativity,
risk-taking for quick adaptation to environmental changes and create changes.
Focused outwardly rather than inwardly: senior executives are more interested in the
satisfaction of customers and others than in their own well-being.
Organization will survive and succeed through continuous change

In addition, technology industry is a fast changing industry and some e-commerce companies
like Amazon.com need to change quickly to adapt customer demands.

In 20 years the mobile phone company Nokia has grown from being a manufacturer of toilet
paper to a leader in the fast changing world of global telecommunications.

Mission culture:

Clear vision of organizations purpose and on the achievement of goals, such as sales growth,
profitability, or market share, to help achieve the purpose. Suitable for an organization
concerned with serving specific customers in the external environment, but without the need for
rapid change. It has independent value and individuals can pursue their financial goals and
shape behaviors by envision and communicating a desire future.

For example, PepsiCos mission is to be the worlds premier consumer products company,
focused on convenience foods and beverages. They seek to produce financial rewards for
investors as provide opportunities for growth and enrichment for their employees, business
partners and the communities in which they operate.

Clan culture:

Focus on the involvement and participation of the organizations members and on rapidly
changing expectations from the external environment.
Focus on the needs of employees as the route to high performance.
Taking care of employees and make sure that they have whatever they need help them to be
satisfied and productive.
Offer various form of training which help employees feel they are part of companies and raise
loyalty, from that, members understand that contributions to the organization exceed any
contractual agreements; unity with a long and thorough socialization process;
Share feelings of pride, as well as feelings of personal ownership of a business, a product, or an
idea.
For example,
Bureaucratic culture

Focus on consistency orientation for a stable environment with low personal involvement, high
level of consistency, conformity and collaboration among members.

Managers roles are good coordinators, organizers, enforce of written rules and standards;
tasks, responsibilities, rules, and processes are clearly defined.

1. Discuss how an organisations culture should be designed to support

strategy and respond to environmental demands. Illustrate your answer
with examples. (11-12)
=>

Question 4 requires discussion that successful organisations have a right culture in place to

support strategy. In this instance culture creates on organisation identity that generates in
employees a commitment to beliefs, values different types of culture. Organisations need to
focus on cultural attributes that would support the overall strategy. 1. Adaptability: 2.
Mission: 3. Clan: and 4. Bureaucratic

2. Critically evaluate how different types of culture can fit an organisations

strategic focus and the environment in which the organization operates. (1213)
Question 3 requires students to argue that successful organisations have a right culture in place to
support strategy and structure. In this instance culture creates an organisation identity that generates in
employees a commitment to belief and cultural values. Organisations need to focus on cultural attributes
that would support the overall strategy. 1. Adaptability: Entrepreneurial values, innovative, providing
new and unique products and rapid growth; individual initiative, and freedom to foster growth and well
rewarded. 2. Mission: clear vision of organisations purpose and goals; independence valued and
members encouraged to pursue own financial goals and shape behaviour by envisioning and
communicating a desired future state.; does not exert much social pressure on an organizations
members, but when it does, members are expected to conform. 3. Clan: primary focus is involvement,
participation; members understand that contributions to the organization exceed any contractual
agreements; unity with a long and thorough socialization process; share feelings of pride, as well as
feelings of personal ownership. 4. Bureaucratic: long-term concerns of efficiency, and stability; low
personal involvement, conformity and collaboration among members; managers roles are good
coordinators, organizers, using methodical approach to do business; tasks, responsibilities, rules, and
processes are clearly defined.

3. Managers should concentrate more on strategy and structure rather than

corporate culture. Discuss with reference to literature on culture and
illustrate with appropriate examples. (13-14; Mix with Lec 3,4)
Question 6: Successful organisations have the right culture to support and reinforce the strategy and structure.
Managers should examine the fit between culture, and the right strategy & structure. This can be assessed by
drawing on the different categories of organisation culture, e.g. adaptability culture, mission culture, bureaucratic
culture and clan culture. To determine the fit between appropriate culture and strategy & fit, two specific
dimensions could be used 1) extent to which the competitive environment requires flexibility or stability; and 2)
extent to which the organisations strategic focus and strengths are internal or external. Therefore corporate
culture cannot be ignored but the correct relationship among the cultural values, strategy, structure and the
environment improves organisation performance.

Lec 6: Organizational Change and Innovation.

Change is pervasive influence; we are all subject to continual change of one form or another. It is an
inescapable part of both social and organizational life (Mullins, J.L). Organizational change usually refers to
modifications in an organizations structure, goals, technology and work tasks attitudes and cultural values
(Linstead, S.). Change also means the movement of an organization away from its present state and toward
some desired future state to increase its effectiveness (George and Jones).
One can distinguish change from innovation:

Organizational change: Adoption of new idea or behavior by the organization.

Organizational innovation: Process of taking creative ideas and making a useful product, service or
method of operation.

There is likely a close link between change and innovation. The company may have ideas of improving
something or making a change for something better; however, how well do they respond to these new ideas or
new practices, how do they translate these ideas into reality (= products or services), and how do they ensure
the products or services acceptable to customers, all are determined by the innovation ability.
There are five identifiable stages/elements in the change process:

Ideas: New way of doing things, new product/service, new management concept, new procedure to
work together. It can come from within or outside the company.
Need: A need for change occurs when managers see gap between actual and desired performance.
Sometimes crisis provides a need for change.
Adoption: Decision makers choose to go ahead with proposed idea, where there is an agreement to
support change.
Implementation: Organization members use a new idea, technique or behavior.
Resources: Human energy and activity, time and resources needed to bring about change.

Depending on the degree of stability of the environment, an organization can adopt incremental change or
radical change:

There is a number of environmental forces drive the need for major organizational change (external
environment):

Four types of change may give an organization a competitive edge (internal environment):
Strategy & Structure
Authority relationships
Coordinating
mechanisms
Job design
Spans of control

Technology &
Equipment
Work processes
Work methods
Equipment

People
Adtitudes
Cultures
Expectations
Perceptions
Behavior
Values

Products & Services

Change in output
Creativity and
innovation
New product
development

There are two theories explained for the factors driving the movement of an organization toward change. The
first one is Classical Approach to Phases of Growth and Change of Larry Greiner 1972-1998 which
describes phases that organizations go through as they grow. Each growth phase is made up of a period of
relatively stable growth, followed by a "crisis" when major organizational change is needed if the company is to
carry on growing. Dictionaries define the word "crisis" as a "turning point", but for many of us it has a negative
meaning to do with panic. While companies certainly have to change at each of these points, if they properly
plan for there is no need for panic and so we will call them "transitions".

Phase 1: Growth through Creativity.

Here, the entrepreneurs who founded the firm are busy creating products and opening up markets.
There are not many staff, so informal communication works fine, and rewards for long hours are
probably through profit share or stock options. However, as more staff join, production expands and
capital is injected, there's a need for more formal communication. This phase ends with a Leadership
Crisis, where professional management is needed. The founders may change their style and take on
this role, but often someone new will be brought in.
Phase 2: Growth through Direction.
Growth continues in an environment of more formal communications, budgets and focus on separate
activities like marketing and production. Incentive schemes replace stock as a financial reward.
However, there comes a point when the products and processes become so numerous that there are
not enough hours in the day for one person to manage them all, and he or she cannot possibly know as
much about all these products or services as those lower down the hierarchy. This phase ends with
an Autonomy Crisis: New structures based on delegation are called for.
Phase 3: Growth through Delegation.
With mid-level managers freed up to react fast to opportunities for new products or in new markets, the
organization continues to grow. Top management just monitors and deals with the big issues. Many
businesses flounder at this stage, as the manager whose directive approach solved the problems at the
end of Phase 1 finds it hard to let go, yet the mid-level managers struggle with their new roles as
leaders. This phase ends with a Control Crisis: A much more sophisticated head office function is
required, and the separate parts of the business need to work together.
Phase 4: Growth through Coordination and Monitoring.
Growth continues with the previously isolated business units re-organized into product groups or
service practices. Investment finance is allocated centrally and managed according to Return on
Investment (ROI) and not just profits. Incentives are shared through company-wide profit share
schemes aligned to corporate goals. Eventually, though, work becomes submerged under increasing
amounts of bureaucracy, and growth may become stifled. This phase ends on a Red-Tape Crisis: A
new culture and structure must be introduced.
Phase 5: Growth through Collaboration.
The formal controls of Phases 2-4 are replaced by professional good sense as staff group and re-group
flexibly in teams to deliver projects in a matrix structure supported by sophisticated information systems
and team-based financial rewards. This phase ends with a crisis of Internal Growth: Further growth can
only come by developing partnerships with complementary organizations.

The second theory is Force Field Analysis of Kurt Lewin 1947 which states that every behavior is the result
of equilibrium between driving and restraining forces (= clash between an organizations strategies and
structures with the environment). The performance that emerges is a reconciliation of the two set of forces:

Unfreezing: Prepare for the needed change by increasing the driving forces that direct behavior away
from the status quo and decreasing the restraining forces that push behavior towards the status quo.
Changing: Move to another equilibrium (desired state).
Refreezing: Make change permanent (= stabilize the new situation).

Finally, the implementation of change can be difficult. A number of barriers to effective change exist, including
excessive focus on costs, failure to perceive benefits of change, lack of coordination and cooperation, and
individual uncertainty avoidance and fear of loss. Managers can increase the likelihood of success by
thoughtfully planning how to deal with resistance. Implementation techniques are to identify a true need for
change; establish a powerful coalition to guide the change; formulate a vision and strategy to achieve the
change; and overcome resistance by aligning with the needs and goals of users, including users in the change
process, providing physical safety, and, in rare cases, forcing the innovation if necessary.

Lec 7: Decision Making.

Daft (2009): Oganizational decision making as a process of identifying and solving problems and chooses
the one that has the highest probability of success or effectiveness and best fit with our goals, desires values,
lifestyles. It involves problem idetification and problem solution.
2 types:
Programmed decisions are repetitive and well-defined, well-structure by using pre-determined
decision rules. A good case in this point is daily activities.
Non-programmed decisions are novel and poorly defined, ill-structured, no procedures exists for
solving problem. They are used when organization has not seen a problem before and do not know
how to respond. Managers nowaday are dealing with higher percentage of non-programmed decision
because of rapid change of environment.

Well-structured problems: happen previously, many solutions available, problem can be broken down into
specific components that you can find solution => programmed decision, used systemetic process to solve
problem.
Ill-structured: difficult to identify problems, difficult to broken down to components => non-programmed
decisions => have to find solutions ( have not tried before, something new, high risk)

Individual decision making:

1. Moniter the decision environment: deviations from planned or acceptable behavio.
2. Define the decision problem: identifying essential details by asking where, when, who was involved
and how current activities are influenced.
2. Specify decision objectives: determine what outcomes should be achieved by decision can be called
as One point should be considered in this step is that managers should have more than objective.

Furthermore, Hammon (1998) addressed some criteria for manager to follow to identify objectives:
1.
2.
3.
4.

Writing down all concerns you hope to address through decision.

Convert your concern into brief objectives.
Separate ends from means to establish your fundamental objectives.
Clarify and explain every objectives.

5. Test objectives to make sure they capture your interest or not.

3. Diagnose problems: managers should gather more information to dig below the surface to analyze the
cause of problem to find appropriate treatment.
4. Develope alternative solutions: ?anager needs a range of potential choice to pursue their objectives:
this step requires manager must have clear understanding of the various options are available to
achieve desires objectives. Hammon (1998) suggest some following techniques like ask how your
objectives can be achieved, be creative and expand your research to find more alternatives and know
when to stop.
5. Evaluating alternatives: uses statistical techniques or personal experiences to measure probability of
success. Managers should consider some criteria to evaluate like feasibility, acceptability and
desirability.
6. Choosing the best alternative which has the best chance to success after analyzing problem,
objectives, and alternatives. Finally, managers use managerial, administrative, persuasive abilities and
give direction to ensure decision can be implements.

[FURTHER READING] Mintberg and Westleys research shows some limitations of rational decision
making that process keep cycling back, always interupt by new events and divert by new
opportunities which lead to decision making going around and around till solution emerged
However, Mintberg and Westley (2001) states that sometimes, decisions defy purely step-by-step logic.
In addition, companies should embrace intuitive and action-oriented froms of decision making to
achieve success. Seeing first means decision may be driven as much by what is seen as by what
is thought. It follows these steps: preparation => incubation => illumination => verification. Doing
first means managers should try and do various things, find out which workds, try to make sense
and repeating successful behaviors while discard the rest.

Use rational decision processes when possible, but recognize that many constraints may impinge on decision
makers and prevent a perfectly rational decision. Apply the bounded rationality perspective and use intuition
when confronting ill-defined, non-programmed decisions.
Bounded Rationality is how decisions actually have to be made under severe time and resource constraints.
When managers are unable to follow the ideal procedure. Caused by limited time, information, resources to
deal with complex, multidimensional issues.

Organizational decision making:

Canergie Model helps formulate the bounded rationality approach to individual decision making and provide
new insights about org decisions. In this model, organization level decisions involved many managers and final
decision are made based on coalition among those managers. Coalition includes managers from line
departments, staff specialists, and external groups like powerful customers, bankers or union representatives.
There are two reasons why decision making process should need coalitions. First of all, managers must
bargain about problems and build coalition around questions which to solve when goals are ambiguous and
inconsistent. Secondly, managers do not have time, resources or mental capacity to identify all dimensions and
process all related-information although they intend to be rational. Such limitations lead to coalition-building
behavior.
Decisions are made to satisfice, rather than optimize. Search behavior is just sufficient to produce a
satisfactory solution and managers typically adopt the first satisfactor solution that arises. The Carnegie model
is particularly useful at the problem identification stage.
Coalition: an alliance among several managers who agree about organizational goals and problem priorities.
Satisficing: organizations accept a satisfactory rather than a maximum level of performance, enabling them to
achieve several goals simultaneously
Problemistic search: managers look around in the immediate environment for a solution to quickly resolve a
problem, without it being a perfect solution if situation is ill-defined.
Use a coalition-building approach when organizational goals and problem priorities are in conflict. When
managers disagree about priorities or the true nature of the problem, they should discuss and seek agreement
about priorities.

Lec 8: Conflict, Power, Politics & Control.

Conflict: The process in which one party perceives that its interests are being opposed or negative affected by
other party.
Functional conflict vs. Dysfunctional conflict
o Benefit of functional conflict: (1) Improved problem solving, (2) Enhanced morale and cohesion, (3)
More opportunities to communicate, (4) Stimulation creativity, (5) Facilitation of change.

Source of conflict

When conflict is
low,
Rational
model describes
Organization

When Conflict is High,

Political Model describe
organization

1. Goal Incompatibility
The achievement of one
departments
goals
interferes with another
departments

Consistent across
participants

Goal

Inconsistent,
pluralistic
within the organization

Centralized

Decentralized,
Power and coalitions
and
Control
groups

shifting
interest

Orderly, logical,
rational

Decision
Process

Norm of efficiency

Free play of market forces,

Rules and conflict is legitimate and
Norms
expected

Extensive,
systematic,
accurate

Information

2. Differentiation
Differences in cognitive
and emotional orientations
among
managers
in
difference
functional
department
3. Task interdependence
The dependence of one
unit
on
another
for
materials, resources or
information

Disorderly,
result
of
bargaining and interplay
among interests

Ambitious, information used

and withheld strategically

4. Limited resource
Increasing resource to
achieve goals throw the
potential conflict
Problems from too much conflicts: (1) Communication, (2) Performance and Productivity, (3)
Resource & Effort, (4) Moral issue, (5) Planning and Coordination, (6) Problems & Process, (7) Loss,
(8) Stress and tension, (9) Poor Behaviors.
Negotiation Strategy to manage the conflicts: Both parties must willing to negotiate
Win-Lose Strategy

Win-Win Strategy

1. Define the problem as a win-lose situation.

1. Define the conflict as a mutual problem.

2. Pursue own group outcomes.

2. Pursue joint outcomes.

3. Force the other group into submission.

3. Comming up agreement that satisfying both

groups.

4. Be deceitful, inaccurate, and misleading in (-)

communicating the groups needs, goals,
and proposals.
5. Use threats (to force submission).
6. Communicate strong rigidity regarding ones
position.

4. Be open, honest, and accurate in (+)

communicating the groups needs, goals, and
proposals.
5. Avoid threats.
6. Communicate flexibility of position.

Typical example: Marketing department vs. Manufacturing department.

Authority vs. Power:

Authority

Power

Authority is narrower than power.

Ability to influence others, to bring about

desired outcomes & the importance of
handling uncertainty in acquiring power.

Authority
can
identify
by:
(1)
organizational position, (2) Acceptance of
subordinate, (3) The vertical hierarchy.

Source of vertical power: (1) Formal

position, (2) Resources, (3) Control of
decision premises, and information [Top
managers place constraints on decisions
made at lower levels. Today, information
is opened and broadly shared], (4)
Network centrality, (5) People.

Source of individual power: (1)

Legitimate power [Link to the position],
(2) Reward power, (3) Coercive power
[Power
to
take
action
against
employees-also links to the positions],
(4) Expert power, (5) Referent power
[High performance].

Empowerment (the powerful motivating tools): The delegation of power. Involving 3 elements:
information, knowledge, & power. Ex: SEMCO company lets the employees control working hours,
location, and even pay plans.
Strategic contingencies: The departments are the most responsible dealing with resource issues
become the most powerful. Both inside and outside activities are essential ==> Pfeffer & Salancik; the
powerful department should be dependency, financial resources, centrality, non-substitutability,
coping with uncertainty.
Politic in organization:
Tactics for increasing power: (1) Enter area of high uncertainty, (2) Creates dependency, (3)
Provide scare resource, (4) Satisfy strategic contingency [Some elements of external and
internal environment are important in organization success].
Political tactics for using power: (1) Building coalition and expands networks [Network can
expand by reaching out to establish contacts with additional managers, and coopting dissenters],
(2) Assign loyal people to key positions, (3) Control decision premises [To constrain the
boundary of decision], (4) Enhance legitimacy and expertise [Ex: Basing on the project evaluation
firing the HR managers], (5) Make a direct appeal [Ex: In Drugstore.com, Jessica Morrison
researched on PaySchale.com, and approached her boss].
Tactics for enhancing collaboration: (1) Creating integration devices [Spanding the boundaries
between departments, bringing together to solve the conflicts], (2) Using confrontation and
negotiation [Directly engage another, and try to work out differences Bargaining process], (3)
Schedule intergroup consultation [Top managers bring the third party to solve the conflict], (4)
Practice member rotation [In rotation, staff works from one department to another], (5)Creating
share mission and super-ordinate goals [Required cooperation among departments].
Control: A process for detecting and correcting unintentional performance errors and intentional
irregularities, such as theft or misuse of resources (Mullins L.J, Management & OB, 2002).
5 essential elements of control: (1) Planning what is desired, (2) Expectation, (3) Actual
performance, (4) Comparison, (5) Rectifying and taking correct actions.