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5.

What interorganizational strategies might work most successfully as a company

expandsglobally? Why?

The key to this question is to make sure that students understand that to manage the
environment, theymust match the strategy needed with the level of complexity in the
environment. For example, a startingpoint for expanding globally is to build a good
reputation. A more complex situation may call forsomething much more complex, such as a
long-term contract or a joint venture.
ORGANIZATIONAL THEORY IN ACTIONPracticing Organizational Theory: Protecting Your
Domain
Small groups of students are entrepreneurs who have marketed a new kind of root beer.
Each groupwants to widen its geographical regions. Students decide how to protect and
expand the company’sdomain. Students consider the types of strategic alliances and
recommend a way to carve a niche in thesoda market.
The Ethical Dimension
This case deals with organizations that purchase products from organizations that employ
women andchildren is sweatshops. They generally work long hours for only a few dollars
per day. This was alsodealt with in Chapter 2 (Insight 2.5). Have students debate and discuss
this again, but make the basis fordiscussion the environmental principles discussed in this
chapter, such as resource dependency.
1.

When and under what conditions is it right for companies to buy their inputs from suppliers
that do employ women and children
?This is a complex question. On the surface it seems easy to simply not do business with
these types of organizations. When students say this, start a discussion about competition
and remaining competitive ina global economy. In other words, if an organization refuses to
do business with these sweatshops, andthen can’t remain competitive, has the right decision
been made?
2.

What kinds of interorganizational strategies could U.S. companies use to enforce

any ethicalcodes that they develop?
This also is a complex question because each culture has different norms and values. A good
example touse is Johnson and Johnson and their ethics credo (from Chapter 2).
Making the Connection
Students find an example of a company using a specific interorganizational strategy, such as
a jointventure, and explain why the company selected the mechanism, using resource
dependence theory ortransaction cost theory.
ANALYZING THE ORGANIZATION
Students define their organization’s domain, analyze the factors of uncertainty, and
determine if thestructure is designed to reflect environmental uncertainty. They list the
interorganizational linkage

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mechanisms and use resource dependence theory and transaction cost theory to explain
why themechanisms were chosen.
CASE FOR ANALYSIS
How Ford Manages Its Environment
This case illustrates the various ways in which Ford has managed its environment over the
years.
1. List the various ways in which Ford has attempted to manage its environment over time.
This is a good illustration of the many different ways that the environment can be
managed. Early on,Ford used contracts. As the environment got more complex, they began
producing their own parts. Thisis a good application of resource dependency theory in that
they managed their environment by reducingtheir dependency on suppliers. When the
environment became even more complex in the 1980s, Forddeveloped some keiretsu-type
arrangements in order to manage this.
2. Why did Ford change the methods it used to manage the environment?
The key here is to make sure students understand that the management strategy needs to fit
theenvironmental situation. They didn’t just change from contracts to keiretsu’s because it
was a newmanagement technique, but rather they did this in response to the environment,
or, in this case, thecompetition.To manage these environments, AT&T participated in
strategic alliances and engaged in acquisitions; iteventually split into three divisions.
TEACHING SUGGESTIONS
1. The class is divided into three groups who work for a grocery store, a
telecommunicationscompany, and a large auto manufacturer. Each group defines
its organizational domain and lists theforces in its specific and general environments.2. Co-
optation can manage symbiotic forces as seen in a role play with four students. Three
studentsform a management team of a manufacturing plant. One is the local union
president who complainsabout rules, wages, and benefits and tries to influence employee
opinions. What can themanagement team do? It can bring the union president inside the
organization through a jointunion-management
discussion committee.3. In five groups, students represent organizations that
vary in size and complexity. Each group selectsan interorganizational strategy and explains
its choice of strategy.
•
Group I: A small grocery store with products from two or three suppliers. This group
managesrelationship through trust; owners know suppliers well.
•
Group II: A medium-sized pharmaceutical manufacturer with many distributors. This
company needslong-term contracts or networks. Joint ventures and mergers may be too
costly.
•
Group III: A large telecommunications company. This company forms joint ventures
and alliances toshare risks and costs of developing new technology.
•
Group IV: A company that wants rapid growth but lacks capital or resources to run its
organizations.This company considers franchising.

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•
Group V: A hotel with competition. This hotel joins a trade association to manage its
competitiveinterdependencies.Groups must weigh the cost of the strategy against the
benefits.4. Students review the strategies that allow organizations to minimize transaction c
osts withoutincurring bureaucratic costs:
keiretsu
; franchising; and outsourcing.5. Point out that Japanese stakeholders take a long-
term view and deal with people they know andtrust. Ford has developed long-term
relationships with suppliers and has other companies, such as arental car company, in its
network.6. Students can compare the business environment of the 1970s with that of today.
The auto industryis a good example because of both the dramatic changes that occurred,
and the fact that we all driveautos.7. Have students look at Ford’s web site
and assess changes in its organizational environment.