Chapter 4 Relationships Between Organizations

Chapter 4Relationships Between

Organizations

Members:Melody, Bonnie, Vincent, Paul

2

Outline

• The changing• Interorganizational Framework

Resource DependenceCollaborative NetworkPopulation EcologyInstitutionalism

• Case ─ Foxconn.

3

The changing

Recent

Future

PastFocus on their own business area, and seldom make the relationships with the other companies

Increasingly dense web of relationships among organizations

A web of horizontal relationships across organizations

4

Organizational ecosystem

• A system formed by the interaction of a community of organizations and their environment

Business Retailers

Non-profit OrganizationsGovernment

5

Organizational ecosystemEXHIBIT 4.1

6

Is Competition Dead?

• The number of corporate alliances has been increasing at a rate of 25 percent annually.

GMFord

7

The Changing Role of Management

Traditional Managers

Operations Roles•Have traditional vertical authority•Accountable for business results

ModernManagers

Collaborative Roles•Be highly flexible and proactive•Achieve results through personal communication•Assertively seeking out needed information and resources

8

Managers need to learn

• Learn to move beyond traditional responsibility of corporate strategy and designing hierarchical structures and control systems.

• Think about horizontal processes rather than vertical structures.

9

Interorganizational Framework

Resource Dependence

PopulationEcology

CollaborativeNetwork Institutionalism

Dissimilar Similar

Competitive

Cooperative

Organization Type

Orga

niza

tion

Rela

tions

hip EXHIBIT 4.2

10

Interorganizational Framework

Resource Dependence

PopulationEcology

CollaborativeNetwork Institutionalism

Dissimilar Similar

Competitive

Cooperative

Organization Type

Orga

niza

tion

Rela

tions

hip EXHIBIT 4.2

11

Resource Dependence

• Organizations try To minimize the dependence on other

organizations for important resources To influence the environment to make resource

available• To adapt or alter the interdependent relationships

to lock in necessary resourcesPurchasing ownership in suppliersLong-term contractsJoint ventures

12

Resource Dependence

13

14

Resource Dependence

• Organizations try To minimize the dependence on other organizations

for important resources Ex: Nestle increases the source and can minimize the

dependence on original coffee bean supplier To influence the environment to make resource

availableEx: Nestle helps farmers plan good quality and quantity

coffee beans

15

Resource Dependence

• Supply Chain Management Supply chain is a network of multiple business that

are connected through the flow of products or services.

Supply Chain Management refer to managing the sequence of supplier and purchaser

Helping use resources more efficiently and improve the performance

16

A Basic Supply Chain Model

Product Flow

EXHIBIT 4.3

17

Interorganizational Framework

Resource Dependence

PopulationEcology

CollaborativeNetwork Institutionalism

Dissimilar Similar

Competitive

Cooperative

Organization Type

Orga

niza

tion

Rela

tions

hip EXHIBIT 4.2

18

Resource Dependence

PopulationEcology

CollaborativeNetwork Institutionalism

Dissimilar Similar

Competitive

Cooperative

Organization Type

Orga

niza

tion

Rela

tions

hip EXHIBIT 4.2

Interorganizational Framework

19

Collaborative Network

• Collaborative Network is an emerging alternative to resource dependence theory

• Companies join together to become more competitive and to share scarce resources

• Why ?Sharing risk when entering new marketsCooperation is a necessary for greater innovation,

problem solving, and performance

20

Changing Characteristics of Interorganizational Relationship

EXHIBIT 4.4

Traditional Orientation: Adversarial New Orientation: Partnership

Low dependence High dependence

Suspicion, competition, arm’s length Trust, addition of value to both sides, high commitment

Detailed performance measures, closely monitored

Loose performance measures; problems discussed

Price, efficacy, own profits Equity, fair dealing, both profit

Limited information and feedback Electronic linkages to share key information, problem feedback, and discussion

Legal resolution of conflict Mechanisms for close coordination; people on site

Minimal involvement and up-front investment, separate resources

Involvement in partner’s product design and production, shared resources

Short-term contracts Long-term contracts

Contract limiting the relationship Business assistance beyond the contract

Changing Characteristics of Interorganizational Relationship

EXHIBIT 4.4

Traditional Orientation: Adversarial New Orientation: Partnership

Low dependence High dependence

Suspicion, competition, arm’s length Trust, addition of value to both sides, high commitment

Detailed performance measures, closely monitored

Loose performance measures; problems discussed

Price, efficacy, own profits Equity, fair dealing, both profit

Limited information and feedback Electronic linkages to share key information, problem feedback, and discussion

Legal resolution of conflict Mechanisms for close coordination; people on site

Minimal involvement and up-front investment, separate resources

Involvement in partner’s product design and production, shared resources

Short-term contracts Long-term contracts

Contract limiting the relationship Business assistance beyond the contract

22

Interorganizational Framework

Resource Dependence

PopulationEcology

CollaborativeNetwork Institutionalism

Dissimilar Similar

Competitive

Cooperative

Organization Type

Orga

niza

tion

Rela

tions

hip EXHIBIT 4.2

23

Resource Dependence

PopulationEcology

CollaborativeNetwork Institutionalism

Dissimilar Similar

Competitive

Cooperative

Organization Type

Orga

niza

tion

Rela

tions

hip EXHIBIT 4.2

Interorganizational Framework

24

Population Ecology

• Because it focuses on organizational diversity and adaptation within a population of organizations.

What does this theory mean in practical terms? It means that large, established organizations often become dinosaurs.

25

The limitations of organizations to change

• From heavy investment in plants, equipment, and specialized personnel;

• Limited information;• The established viewpoints of decision

makers;• The organization’s own successful history that

justifies current procedures;• The difficulty of changing corporate culture.

26

Managerial Question

• The success or failure of a start-up is largely determined by the smarts and management ability of the entrepreneur?

Disagree. Luck is often as important as smarts because larger forces in the environment, typically unseen by managers, allow some firms to succeed and others to fail. If a start-up happens to be in the right place at the right time, chances for success are much higher, regardless of management ability.

27

The processes of population change

Variation Selection Retention

Large number of variations appear in the population of organization

Some organizations

find a successful niche and

survive

A few organizations

grow large and become

institutionalized in the

environment

28

Strategies for Survival• Generalist

Organizations with a wide niche or domain--- that is , those that offer a broad range of products or services or that serve a broad market--- are generalists.

• Specialist Organizations that provide a narrower range of goods or

services or that serve a narrower market are specialists.Ex: Amazon

29

Interorganizational Framework

Resource Dependence

PopulationEcology

CollaborativeNetwork Institutionalism

Dissimilar Similar

Competitive

Cooperative

Organization Type

Orga

niza

tion

Rela

tions

hip EXHIBIT 4.2

30

Interorganizational Framework

Resource Dependence

PopulationEcology

CollaborativeNetwork Institutionalism

Dissimilar Similar

Competitive

Cooperative

Organization Type

Orga

niza

tion

Rela

tions

hip EXHIBIT 4.2

31

Institutionalism

• Describes how organizations survive and succeed through congruence between an organization and the expectations from its environment.

• The institutional environment is composed of norms and values from stakeholders.

• The institutional view believes that organizations adopt structures and processes to please outsiders, and these activities come to take on rule-like status in organizations.

Three Mechanisms for institutional Adaptation

Mimetic Coercive NormativeReason to become similar

Uncertainly Dependence Duty, obligation

Events Innovation visibility

Political law, rules, sanctions

Professionalism─certification, accreditation

Social basis

Culturally supported

Legal Moral

Example Reengineering, benchmarking

Pollution controls, school regulations

Accounting standards, consultant training

32

33

• Mimetic Forces– Ex: McDonald adds healthier menu items and new

types of beverages.

Three Mechanisms for institutional adaptation

34

• Coercive Forces– Ex: Walmart is requiring its suppliers to calculate

the “full environmental costs’ of making their products (such as water use, carbon-dioxide emissions, and waste) and provide this information for the company to distill into a rating system that shoppers will see alongside the price of the item.

Three Mechanisms for institutional adaptation

35

• Normative Forces– Normative forces are pressures to achieve

standards of professionalism and to adopt techniques that are considered by the professional community to be up to date and effective.

– Changes may be in any area, such as information technology, accounting requirements, marketing techniques, or collaborative relationships with other organizations.

Three Mechanisms for institutional adaptation

36

Managerial Question

• Managers should quickly copy or borrow techniques being used by other successful companies to make their own organization more effective and to keep pace with changing times.

37

Managerial Question

• Answer:Agree. Managers frequently copy techniques used by other, successful organizations as a way to appear legitimate and up to date. Copying other firms is one reason organizations may begin to look and act similar in their structures, processes, and management systems.

38

Case Study

FoxconnThe rise of Foxconn with its relationships among corporations as a flexible and notorious corporate model.

39

• Company Name: Foxconn (Hon Hai Precision Industry Co., Ltd.)

• Chairman and President: Terry Guo• Industry: Electronics• Founded: 1974

Case Study

40

• Employees: Approximately 1.2 million (2011)• Services: Electronics Manufacturing Services (OEM,

ODM)• Revenues: US$ 102.74 billion (2011)• Net Income: US$ 2.64 billion (2011)

Case Study

41

Related Organizations:Apple, Intel, Amazon.com, Kindle, Sony, Playstation 3, Microsoft, Xbox 360, etc …

Case Study

42

Case Study

Supply Chain Relationships of Foxconn:

Supplier Distributor

Manufacturer Retailer

43

Resource DependencePower implication: Large and independent

companies have power over small suppliers.

Case Study

44

Evolution of Foxconn:

Case Study

eCMMS

OEM ODM CEM EMS

45

Population EcologyAdaptation and Selection: In a rapidly shifting

environment, organization, that fails to struggle for existence, dies.

Case Study

46

InstitutionalismCoercive Forces: All organizations are subject to

pressure from other important organizations, especially those on which an organization is dependent.

Case Study

47

Collaborative NetworksWhy Collaboration: Organizations join together to

become more competitive and to share scarce resources.

Case Study

48

Frenemy & CoopetitismNo friends are forever, nor enemies eternal.

Conclusion

49

The End. Thank you !