1. Organizations exist because of their ability to create value and acceptable outcomes for stakeholders. Describe and explain how organizations create value and influence stakeholders? What is the role of in this process?
Many managers have distinguished themselves by tightly managing their operations, focusing heavily on building in operational efficiencies, while always maintaining a close watch on their budgets. Often they will do whatever it takes to keep costs down while maintaining good service to their customers. Innovation and improved performance come from the investments of managers who are always focused on reinvesting in their organization. In this process problems are identified and solved, defects are detected and fixed and merging trends are pinpointed along with potential opportunities. Investments should be made in four areas: (1) develop your talent through continuous training and development, (2) pay and treat your people well. If you want the best and the brightest, you have to treat them as such, (3) invest in performance management systems and (4) invest in recruitment initiatives.
A stakeholder in any particular organization is any party that has an interest in the success and ongoing operation of an organization such as employees, directors, shareholders, regulators and customers. An organization can influence the stakeholders by clearly defining the tools and resources needed to advance into the future and produce more profits. When the stakeholders are shown that their participation and support are needed for the advancement of the company then it's easier to get them to move and take action. The entrepreneur is responsible for coming up with new ideas and creative strategies to keep the business competitive. These individuals are risk takers and use their skills to convince the stakeholders that taking the risk will yield great rewards.
2. What is the relationship among organizational theory, design, change, and organizational structure and culture?
Organizational theory is the study of organizational designs and organizational structures, relationship of organizations with their external environment, and the behavior of managers and technocrats within organizations. It suggests ways in which an organization can cope with rapid change. Organizational design begins with a strategy setting decision guidelines and from this members will take the right course of action. Strategy unifies the intent of the organization and focuses members toward actions designed to accomplish desired outcomes. Organizational change refers to actions that are taken or actions that are not taken in order to solve pressing problems. The choices made by management will either propel the company forward or cause the company to fall back.
Organization structure defines the formal relationships among people and specifies both their roles and their responsibilities. Organizational culture is defined as the personality of the organization. Culture is comprised of the assumptions, values, norms and tangible signs (artifacts) of organization members and their behaviors. Members of an organization soon come to sense the particular culture of an organization. Corporate culture can be looked at as a system with inputs and feedback. Organizational theory, design, change, structure and culture are all building blocks that allow an organization to thrive and grow, if the concepts are used properly, the members are alert and management is not afraid to take chances in order to excel.
3. Transaction cost theory argues that the goal of organizations is to minimize the costs of exchanging resources in the environment and the costs of managing exchanges inside the organization. What do organizations consider when trying to choose interorganizational strategies in order to minimize transaction costs and bureaucratic costs?
Transactions costs are defined as the costs of negotiating, monitoring, and governing exchanges between people. Environmental uncertainty and bounded rationality are sources of transaction costs. Bounded rationality refers to the limited ability people have to process information. Opportunism and small numbers attempt to exploit forces or stakeholders. Specific assets which are investment that create value in one particular exchange relationship but have no value in any others. In order to minimize transaction costs using interorganizational strategies two things are considered: (1) an emphasis on single-party cost minimization, (2) an emphasis on the structural features of interorganizational exchange, (3) organizations are exchanging non-specific goods and services, (4) uncertainty is low and (5) there are many possible exchange partners. In the case of bureaucratic costs which are internal transaction costs, bringing transactions inside the organization minimizes but does not eliminate the costs of managing transactions. Managers can weigh the savings in transaction costs of particular linkage mechanisms against the bureaucratic costs. It's important to locate the sources of transaction costs that may affect an exchange relationship and decide how thigh the transaction costs are likely to be and choose the linkage mechanism that gives the most transaction cost savings at the lowest price.
4. Why does differentiation occur in an organization? Distinguish between vertical and horizontal differentiation.
Differentiation is the result of efforts to make a product or brand stand out as a provider of unique value to customers in comparison with its competitors. The name of the game is making money and those that want to keep doing that must change and match the wants and desires of the customers. It's also a way to break into new markets with new profit margins and to gain additional new customers . If companies are not able to go head on with other companies in their respective industries it might be possible to challenge companies and products from other industries. Even loyal customers need feel as thought the company appreciates them so advancements or augmentations of products and brands are required. Vertical differentiation occurs in a market where the several goods that are present can be ordered according to their objective quality from the highest to the lowest. It's possible to say in this case that one good is "better" than another. When products are different according to features that can't be ordered in an objective way, a horizontal differentiation emerges in the market. Horizontal differentiation can be linked to differentiation in colours (different colour version for the same good), in styles (e.g. modern / antique), in tastes.
5. Several factors and behaviors can shape an organization hierarchy. How do centralization, standardization, and horizontal differentiation affect the shape of the organization? In what ways can the informal organization and the norms and values of its culture affect the shape of an organization?
Centralized organizations are those in which most of the decision making occurs by a few people at the top of the hierarchy. This typically creates a top-down management structure, in which top-level managers strongly control the direction of the workplace through their decisions and supervision. Conversely, an organization with a decentralized structure allows greater decision-making and authority at lower organizational levels. Highly decentralized companies may have units that operate nearly independently of one another. Standards are a set of guidelines that define how an organization should behave. For instance the employees should show respects to their employer regardless of the type of organizational hierarchy. The questions asked of the managers should be clear and to the point because their time is valuable and limited. In horizontal differentiated organizations the type of hierarchy in place is the same however certain rules withing that hierarchy may change.