Session 4: Org Environment & Lifecycle

What Comprises an Organization’s Environment? Forces or institutions that surround an organization and impact its
performance, operations and resources at disposal.

Internal:

1. Employees: The individuals working within the organization, including their skills, knowledge, and attitudes.
For example, the expertise and dedication of a company's employees can greatly impact its performance and
success.

2. Leadership: The individuals who hold leadership positions within the organization and their style of
management. Effective leadership can inspire and motivate employees, while poor leadership can result in
low morale and inefficiency.

3. Organizational culture: The shared values, beliefs, and practices within an organization. For instance, a
company with a culture that promotes collaboration and open communication may have a more positive and
productive work environment.

Task:

1. Industry: The specific sector or market in which the organization operates. For example, a company in the
technology industry will face different challenges and opportunities compared to one in the healthcare
industry.

2. Markets: The target customers or client base of the organization. Each market segment may have unique
preferences, needs, and demands that influence the organization's products, services, and strategies.

3. Customers: The individuals or organizations that purchase the products or services offered by the
organization. Understanding customer preferences and meeting their expectations is crucial for business
success.

4. Human resources: The availability and quality of the workforce in the labor market. Factors such as the
supply of skilled workers, competition for talent, and labor laws impact an organization's human resource
management.

General:

1. Sociocultural forces: The social and cultural factors that influence an organization's operations and strategies.
These may include demographic trends, social values, consumer behavior, and cultural norms.

2. Government: The laws, regulations, and policies set by the government that affect the organization. This
includes taxation, labor laws, environmental regulations, and industry-specific regulations.

3. Economic conditions: The overall economic climate, including factors like inflation, unemployment rates, GDP
growth, and consumer spending. Economic conditions can impact an organization's financial performance
and strategic decisions.

4. Technology: Advances in technology and their impact on the organization's operations, products, and
services. For example, the adoption of new technologies can lead to improved efficiency, product innovation,
and changes in customer behavior.

It's important for organizations to continuously monitor and adapt to changes in their environment to remain
competitive and successful.

Why is The Environment Important? No organization is 100% self-sufficient. Every organization requires some level of
support from the environment. Environment is the source of goods and resources that an organization needs to
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succeed. Environment offers opportunities and threats for organizations to capitalize on. It shapes strategic decisions
that executives may make to implement organizational strategy.

Indeed, the environment plays a crucial role for organizations, and here are the reasons why it is important:

1. Resource Dependency: Organizations rely on the environment as a source of inputs such as raw materials,
capital, information, and human resources. The availability and accessibility of these resources impact the
organization's operations, productivity, and overall success. Organizations need to establish relationships
with suppliers, partners, and stakeholders in the environment to secure necessary resources.

2. Opportunities and Threats: The environment presents both opportunities and threats to organizations.
Changes in the market, customer preferences, technology, and regulations can create new opportunities for
growth and innovation. On the other hand, economic downturns, industry disruptions, or competitive
pressures can pose threats to an organization's stability and profitability. Understanding and adapting to
these external factors is crucial for strategic decision-making.

3. Strategic Decision-Making: The environment shapes the strategic decisions made by organizational leaders.
Executives need to assess the external environment to identify trends, anticipate future developments, and
make informed decisions about the direction and focus of the organization. By understanding the
environment, organizations can align their strategies with market demands, anticipate changes, and gain a
competitive advantage.

4. Stakeholder Expectations: The environment consists of various stakeholders such as customers, investors,
regulators, communities, and interest groups. These stakeholders have expectations and demands that
organizations must consider. Meeting customer needs, complying with regulations, addressing social and
environmental concerns, and maintaining positive relationships with stakeholders are critical for long-term
success and reputation.

5. Adaptation and Survival: The environment is dynamic and constantly evolving. Organizations need to adapt
to changes in the environment to survive and thrive. This may involve adjusting strategies, innovating
products and services, adopting new technologies, or entering new markets. Failure to adapt to
environmental changes can lead to obsolescence and decline.

In summary, the environment is important for organizations because it provides necessary resources, presents
opportunities and threats, influences strategic decisions, shapes stakeholder expectations, and necessitates
adaptation for survival and growth. Organizations that effectively understand and respond to their environment are
more likely to achieve sustainable success.

Environmental change occurs in two dimensions: stability and complexity. Let's explore each dimension further:
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 1. Stability: Stability refers to the level of dynamism or volatility in the environment. It reflects how predictable
or stable the external factors influencing organizational operations are. There can be simple and complex
environments:

a. Simple Environment: In a simple environment, there is a small number of predictable external factors that impact
the organization's operations. The business environment is relatively stable, and changes occur at a slower pace.
Organizations operating in simple environments may have a clear understanding of their market, limited competition,
and stable customer preferences. For example, a local grocery store in a small town may operate in a relatively simple
environment.

b. Complex Environment: In a complex environment, there are multiple and complex technologies, changing
government regulations, significant impacts of global events, and competition for scarce resources. The business
environment is dynamic and characterized by uncertainty and rapid changes. Organizations operating in complex
environments face challenges in anticipating and adapting to changes. For example, a multinational technology
company operating in a highly competitive and rapidly evolving industry operates in a complex environment.

2. Complexity: Complexity refers to the number and heterogeneity of external elements that impact an
organization's operations. It reflects the diversity and interrelatedness of factors in the external environment.
Examples of factors contributing to environmental complexity include:

a. Multiple Markets: Organizations may operate in multiple markets with different customer segments, regulatory
frameworks, and cultural contexts. Managing diverse markets adds complexity to an organization's operations.

b. Globalization: The interconnectedness of markets and the global flow of goods, services, and information increase
the complexity of the business environment. Organizations need to consider global economic trends, geopolitical
factors, and cultural differences in their operations.

c. Technological Advances: Rapid advancements in technology introduce complexity by creating new opportunities,
disrupting industries, and changing customer expectations. Organizations need to adapt to technological changes to
remain competitive.

d. Stakeholder Diversity: Organizations interact with various stakeholders such as customers, employees, suppliers,
communities, and governments. Each stakeholder group has its own interests, demands, and expectations, adding
complexity to organizational management.

Managing environmental complexity and stability requires organizations to continuously monitor and analyze the
external environment, anticipate changes, and develop strategies to adapt and thrive. Organizations that can
navigate complex and dynamic environments effectively gain a competitive edge and ensure their long-term success.

Framework to Assess Environmental Uncertainty, explain with examples for each quadrant of stable, unstable ,
simple and complex and explain how uncertainty related to this with example of each quadrant

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The framework to assess environmental uncertainty is often depicted using a matrix with two dimensions: stability
(dynamism) and complexity. This matrix helps organizations understand and evaluate the level of uncertainty they
face in their external environment. Let's explore each quadrant and its relationship with uncertainty, along with
examples:

1. Stable and Simple Environment:

 This quadrant represents a predictable and stable environment with a limited number of external
factors impacting the organization.

 Uncertainty is relatively low as the external factors are consistent and easy to anticipate.

 Example: A small, local bakery operating in a small town with a consistent customer base and
minimal competition. The bakery operates in a stable and simple environment with low uncertainty.

2. Unstable and Simple Environment:

 This quadrant represents a simple environment that is prone to rapid and unpredictable changes.

 Uncertainty is high due to the dynamic nature of the external factors, making it challenging for
organizations to anticipate and respond effectively.

 Example: A tourism business operating in a coastal area that is highly vulnerable to weather
conditions and natural disasters. The unpredictable nature of these external factors creates high
uncertainty in the business environment.

3. Stable and Complex Environment:

 This quadrant represents a stable environment with a high number of diverse external factors
impacting the organization.

 Uncertainty is moderate as the organization deals with a complex set of factors, but they are
relatively consistent and known.

 Example: An established multinational corporation operating in multiple markets with different

regulations, cultural nuances, and customer preferences. While the company faces complexity in
managing diverse markets, the stable nature of these factors allows for some level of predictability
and reduces uncertainty.

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 4. Unstable and Complex Environment:

 This quadrant represents a complex environment that is also highly dynamic and unpredictable.

 Uncertainty is the highest in this quadrant as organizations face multiple diverse and rapidly changing
external factors.

 Example: A technology startup operating in a fast-paced industry characterized by disruptive

innovations, changing customer demands, and intense competition. The organization deals with a
complex landscape of technological advancements and market dynamics, making the environment
highly uncertain.

In each quadrant, the level of uncertainty varies based on the combination of stability and complexity. Organizations
must assess and understand the degree of uncertainty they face to develop appropriate strategies and responses.
High uncertainty requires organizations to be agile, adaptable, and proactive in monitoring and responding to
environmental changes. Conversely, low uncertainty allows organizations to focus more on optimization and
efficiency.

By analyzing the stability and complexity of their environment, organizations can gain insights into the level of
uncertainty they confront and make informed decisions to navigate and thrive in their specific business context.

Organizations’ focus around managing environments has evolved 18th-19thcentury The Present 20thcentury

The focus of organizations around managing environments has evolved over time, reflecting the changes in the
external landscape and technological advancements. Here's a breakdown of the evolution in different time periods:

18th-19th Century:

 During this period, industrialization was taking place, and organizations were primarily focused on
establishing factories and production systems.

 The environment was relatively simpler, with limited technological advancements and fewer external factors
impacting organizations.

 The emphasis was on optimizing production processes and achieving efficiency through the division of labor
and scientific management techniques.

20th Century:

 The 20th century witnessed the second and third industrial revolutions, which brought significant
advancements in technology and increased the size and complexity of organizations.

 Scientific management principles, such as clear roles and responsibilities for managers and line workers,
were widely adopted to improve organizational efficiency.

 The focus was on streamlining operations, improving productivity, and achieving economies of scale.

Present - 4th Industrial Revolution (Industry 4.0):

 The present era is characterized by the 4th Industrial Revolution (4IR) or Industry 4.0, which is driven by
advancements in digital technologies.

 The business environment has become more complex and volatile, with the emergence of a BANI (brittle,
ambiguous, nonlinear, and incomplete) environment.

 Blurring physical and digital boundaries, organizations are leveraging technologies like artificial intelligence
(AI), the Internet of Things (IoT), and big data analytics to transform their operations and create new business
models.

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  The focus has shifted towards leveraging technology to adapt to the chaotic and rapidly changing
environment, staying competitive, and embracing smart megatrends such as smart cities, smart
manufacturing, and smart healthcare.

Overall, the evolution reflects the increasing complexity of the external environment and the need for organizations
to adapt to the changing times. While efficiency remained a significant focus in the past, the present emphasizes
managing chaos and leveraging technology to navigate the uncertainties of the BANI environment and capitalize on
new opportunities.

What a BANI environment means for organizations

A BANI environment poses unique challenges and implications for organizations. Let's break down what each
characteristic means and its impact:

Brittle:

 Shorter product lifecycles: In a BANI environment, products and services have shorter lifespans due to rapid
technological advancements and changing customer preferences. Organizations need to be agile and
adaptable to continuously innovate and bring new offerings to the market.

 Stress and burnout among workers: The fast-paced and unpredictable nature of the BANI environment can
contribute to increased stress and burnout among employees. Organizations need to prioritize employee
well-being and provide support systems to manage the pressures of the environment.

 Absence of interpersonal work relationships from virtual working: With the rise of remote and virtual work,
the traditional face-to-face interactions and relationships may be reduced. Organizations need to find ways to
foster virtual collaboration and maintain a sense of community and connection among employees.

Non-linear:

 Tested solutions are ineffective; need to build new knowledge: In a BANI environment, tried-and-tested
solutions may no longer be effective. Organizations must embrace a culture of continuous learning,
experimentation, and innovation to develop new knowledge and approaches that can address complex and
evolving challenges.

 Cause and effect relationships no longer work: The dynamics of the BANI environment make it difficult to
establish clear cause-and-effect relationships. Organizations need to adopt a systems thinking approach and
consider multiple factors and variables when making decisions and implementing strategies.

Anxious:

 Restlessness from unpredictable world events: The BANI environment is characterized by unpredictability
and volatility, fueled by global events like the COVID-19 pandemic or geopolitical conflicts. Organizations
need to be adaptable and responsive to the changing landscape, making timely and informed decisions to
mitigate risks and seize opportunities.

 Slow decision making, hesitation to commit: Due to the uncertain nature of the BANI environment,
organizations may experience decision-making challenges, with a tendency to hesitate or delay
commitments. It becomes crucial to foster a culture of agile decision-making, empowering teams to make
informed decisions quickly.

Incomprehensible:

 Complex events defy existing logic: The BANI environment presents complex and interconnected challenges
that may not fit into traditional frameworks or logical models. Organizations need to embrace complexity
thinking, leverage data analytics, and develop a deep understanding of the dynamics at play to navigate and
make sense of the environment.

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  Increased focus on analytics-based HR: In this environment, HR departments are increasingly relying on data
analytics to understand workforce trends, predict future needs, and make informed decisions. For example,
organizations are using people analytics to optimize talent acquisition, enhance employee engagement, and
improve workforce planning.

In summary, a BANI environment demands organizations to be adaptable, innovative, and responsive. It requires a
shift in mindset, embracing complexity, leveraging technology, and fostering a culture of continuous learning and
agility to thrive in the face of uncertainty and change.

Interorganizational Networks and Ecosystems Long-term resource transactions, flows and linkages occurring among
two or more organizations. Organizational ecosystems are built when interorganizational networks interact with their
environments. Conflict and collaboration coexist in organizational ecosystems.

Interorganizational networks and ecosystems play a significant role in today's business environment. Let's explore
these concepts further:

Interorganizational Networks: Interorganizational networks refer to the relationships, transactions, and collaborations
that occur between two or more organizations. These networks involve the exchange of resources, information, and
expertise to achieve shared goals. Examples of interorganizational networks include supply chains, strategic alliances,
joint ventures, and industry collaborations. Organizations form these networks to gain access to resources, expand
their market reach, share risks and costs, and leverage each other's capabilities.

Organizational Ecosystems: Organizational ecosystems are formed when interorganizational networks interact with
their external environments. An organizational ecosystem encompasses a network of organizations, along with their
stakeholders, such as customers, suppliers, competitors, government agencies, and communities. These ecosystems
are characterized by complex relationships and interdependencies among multiple organizations.

Conflict and Collaboration in Organizational Ecosystems: Organizational ecosystems are dynamic and complex, where
conflict and collaboration coexist. On one hand, organizations within an ecosystem compete for resources, market
share, and customer attention. This competition can lead to conflicts and rivalries. On the other hand, organizations
also collaborate and cooperate within the ecosystem to address common challenges, share knowledge and
resources, and create synergies. Collaboration in an ecosystem can lead to innovation, collective problem-solving,
and mutual benefits for participating organizations.

For example, in the technology industry, companies like Apple, Microsoft, and Google form interorganizational
networks through partnerships, acquisitions, and collaborations. These networks enable them to combine their
strengths, share technologies, and create new products or services. At the same time, these companies are part of a
larger organizational ecosystem that includes suppliers, app developers, customers, regulatory bodies, and other
stakeholders. While they may compete in certain areas, they also collaborate through standards development,
industry associations, and joint initiatives to advance the industry as a whole.

In summary, interorganizational networks and ecosystems are vital for organizations to navigate the complexities of
the business environment. These networks facilitate resource sharing, collaboration, and innovation, while
ecosystems provide a broader context where organizations interact, compete, and collaborate with other
stakeholders. Understanding and effectively managing these networks and ecosystems is crucial for organizations to
thrive and adapt in an interconnected and rapidly changing world.

Four approaches to interorganizational relationships are cooperative, competitive, similar, and dissimilar. Let's
explore each approach with examples based on organization types:

1. Cooperative Relationships: Cooperative relationships involve organizations working together towards

mutually beneficial goals. These relationships are characterized by collaboration, resource sharing, and joint
efforts to achieve common objectives. Examples include:

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  Strategic Alliances: Two or more organizations form a cooperative partnership to pursue shared goals. For
instance, when automakers like Toyota and BMW collaborated to develop hybrid technology, they shared
resources, knowledge, and manufacturing capabilities to bring innovative products to the market.

 Joint Ventures: Organizations pool their resources and expertise to create a new entity and pursue a specific
business opportunity. A notable example is the Sony Ericsson joint venture, where Sony and Ericsson
collaborated to develop and market mobile phones.

2. Competitive Relationships: Competitive relationships involve organizations that compete against each other
in the marketplace. While they may be competitors, they still maintain some level of interaction and rivalry.
Examples include:

 Rival Companies: Organizations operating in the same industry or market often engage in competitive
relationships. For instance, Coca-Cola and PepsiCo are fierce competitors in the beverage industry. They
continuously strive to outperform each other through marketing campaigns, product innovations, and
market share dominance.

 Price Wars: Competing organizations engage in price wars, where they continuously lower prices to attract
customers and gain a competitive edge. This type of competitive relationship is common in industries such as
airlines and retail.

3. Similar Relationships: Similar relationships involve organizations that share common characteristics, goals, or
strategies. They may collaborate or compete based on their similarities. Examples include:

 Franchise Networks: Franchise organizations, such as McDonald's or Subway, have similar business models
and operating procedures. While each franchise operates independently, they share a common brand
identity, marketing strategies, and quality standards.

 Industry Associations: Organizations within the same industry often join industry associations to collaborate,
share best practices, and address common challenges. These associations bring together similar
organizations to promote industry growth and advocate for common interests.

4. Dissimilar Relationships: Dissimilar relationships involve organizations that are distinct in terms of their
characteristics, goals, or strategies. They may engage in relationships based on complementary strengths or
to leverage differences. Examples include:

 Supplier-Buyer Relationships: Organizations that operate at different stages of the supply chain, such as
manufacturers and suppliers, form dissimilar relationships. They collaborate to ensure a smooth flow of
materials, products, and services. For instance, an automotive manufacturer relies on a network of suppliers
to provide components and parts for their vehicles.

 Outsourcing Partnerships: Organizations may form dissimilar relationships by outsourcing certain functions or
services to specialized external providers. For example, a software development company may outsource its
customer support operations to a call center service provider.

These examples highlight the diverse nature of interorganizational relationships and how organizations can engage in
cooperative, competitive, similar, or dissimilar interactions based on their goals, industry dynamics, and strategic
considerations.

Four Approaches to Interorganizational Relationships:

1. Collaborative Networks (Cooperative & Dissimilar): Collaborative networks involve organizations that are
dissimilar in terms of their products, services, or core competencies but choose to cooperate and work
together towards shared goals. These networks often aim to leverage each other's strengths and resources to
achieve mutual benefits. Examples of collaborative networks include strategic alliances between companies
in different industries, joint research and development projects, and co-marketing initiatives. For instance, an

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 automobile manufacturer partnering with a technology company to develop autonomous driving technology
forms a collaborative network.

2. Resource Dependence (Competitive & Dissimilar): Resource dependence occurs when organizations that are
dissimilar and may even be competitors form relationships to gain access to critical resources or capabilities.
In resource-dependent relationships, organizations rely on each other to overcome resource constraints or
mitigate risks. This type of relationship is often characterized by a power imbalance, with one organization
being more dependent on the other. For example, a clothing retailer may rely on multiple suppliers to
provide a steady and diverse supply of products, even if these suppliers compete with each other.

3. Institutionalism (Cooperative & Similar): Institutionalism refers to organizations that are similar in terms of
their industry or sector and engage in cooperative relationships to uphold industry norms, standards, and
practices. These relationships aim to promote common interests and establish legitimacy within the industry.
Examples include industry associations, trade unions, and professional bodies that bring together
organizations with shared goals and concerns. These cooperative relationships help shape industry
regulations, set industry standards, and facilitate knowledge sharing among members.

4. Population Ecology (Competitive & Similar): Population ecology refers to organizations within the same
industry or sector that compete with each other for resources, market share, and survival. In this approach,
organizations are similar in terms of their products or services and engage in competitive relationships.
Competition drives organizations to adapt, innovate, and differentiate themselves to gain a competitive
advantage. This approach is based on the idea that organizations within a population compete for limited
resources and only the fittest survive. An example would be multiple retail companies competing for
customers in the same market, employing strategies such as pricing, marketing, and product differentiation
to gain a competitive edge.

It's important to note that these approaches are not mutually exclusive, and organizations may engage in different
types of relationships simultaneously depending on their strategic goals and the nature of the industry or market
they operate in.

Resource Dependence Theory Organizations focus on certainty, autonomy and building power by controlling
resources. They attempt to minimize their dependence on other organizations for the supply of important resources
and influence the environment to make resources available. 1. Resource type a. Physical b. social c. technical 2.
Resource value a. Criticality to business, availability 3. Discretion over resource a. Level of control over buyers &
suppliers Explain each points with examples

Resource Dependence Theory suggests that organizations strive to minimize their dependence on external entities
for the supply of critical resources. Here are the key points of the theory and their explanations:

1. Resource Type: a. Physical Resources: These refer to tangible resources such as raw materials, equipment,
facilities, and infrastructure. Organizations seek to have control over physical resources to ensure a steady
supply and reduce the risk of disruption. For example, an automobile manufacturing company may establish
long-term contracts with specific suppliers to secure a stable supply of essential components.

b. Social Resources: These encompass relationships, networks, and social capital. Organizations recognize the
importance of building strong relationships with key stakeholders, including customers, suppliers, government
agencies, and industry associations. By cultivating social resources, organizations gain access to valuable information,
opportunities, and support. For instance, a software development company may establish partnerships with
universities to access top talent and stay updated on the latest technological advancements.

c. Technical Resources: These involve specialized knowledge, expertise, and intellectual property. Organizations invest
in developing and protecting technical resources to gain a competitive advantage and maintain control over unique
capabilities. For example, a pharmaceutical company may invest heavily in research and development to create
proprietary drugs, ensuring a competitive edge and reducing dependence on generic alternatives.

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 2. Resource Value: a. Criticality to Business: Organizations evaluate the significance of a resource to their core
business operations. Resources that are crucial for the organization's survival or key value proposition are
deemed highly critical. For example, a logistics company heavily depends on a reliable transportation fleet to
deliver goods, making it a critical resource.

b. Availability: Organizations assess the availability and accessibility of resources in the external environment. They
strive to ensure a stable and consistent supply of resources to avoid disruptions and uncertainties. For instance, a
food processing company may establish contracts with multiple agricultural suppliers to secure a steady supply of
raw materials, reducing the risk of shortages.

3. Discretion over Resource: a. Level of Control over Buyers & Suppliers: Organizations aim to increase their
bargaining power and control over resources by managing relationships with buyers and suppliers. They may
negotiate favorable terms, establish long-term contracts, or vertically integrate to gain more control over the
supply chain. For example, a retail chain may acquire or establish its own manufacturing facilities to control
the production and distribution of products, reducing dependence on external suppliers.

By understanding the types of resources, their value to the organization, and the level of control over them,
organizations can strategically manage their resource dependencies and reduce the risk of disruptions or
uncertainties in their operations.

Building Power Through Managing Dependencies Interlocking directorates Joint Ventures & Strategic Alliances
Lobbying with government and politicians - oil companies spend millions on climate lobbying. explain. example for
each points

Building power through managing dependencies involves various strategies. Here are examples for each of the
mentioned points:

1. Interlocking Directorates: This refers to the practice of individuals serving as directors on the boards of
multiple organizations. By having interconnected directors, organizations can establish mutual interests and
exert influence over one another. This can lead to shared resources, coordination, and alignment of goals. For
example, if the CEO of Company A sits on the board of Company B, it creates an interlocking directorate,
facilitating collaboration and potential resource sharing between the two organizations.

2. Joint Ventures & Strategic Alliances: Organizations may form joint ventures or strategic alliances to leverage
each other's resources, capabilities, and expertise for mutual benefit. These collaborations can help reduce
resource dependencies and strengthen the power of the participating organizations. For instance, in the
automotive industry, two manufacturers may form a joint venture to develop and produce a new line of
electric vehicles, combining their technological advancements and market reach.

3. Lobbying with Government and Politicians: Organizations may engage in lobbying activities to influence
government policies, regulations, and decision-making processes. By investing in lobbying efforts,
organizations seek to shape the external environment in a way that benefits their interests and reduces
regulatory or legislative constraints. For example, oil companies may spend millions on climate lobbying to
influence climate change policies and regulations, aiming to protect their existing operations, promote
favorable regulations, or shape public opinion.

These strategies help organizations build power and reduce their dependency on external entities. Interlocking
directorates create interconnected relationships, joint ventures and strategic alliances enable resource sharing, and
lobbying activities allow organizations to influence the external environment in their favor. However, it's important to
note that the use of these strategies can be subject to legal and ethical considerations, and organizations must
operate within the boundaries of applicable laws and regulations.

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