SOW II pt. 2

comparative advantage

something a firm does better than competitors

Porter’s 3 comparative advantages

cost leadership, differentiation, focus/segmentation

cost leadership

organization has the product at a lower price than competitors

differentiation

organization has a unique product offering from competitors

focus (segmentation strategy)

organization targets a niche (ex. geographic or demographic focus)

virtual organizations

temporary partnership between independent companies (like suppliers, customers, competitors) who work together using technology (ex. US fashion company + textile producer in India + factory in Vietnam + designer from Italy)

subcontracting

outsourcing, or hiring of other organizations to complete certain non essential business operations

vertical disintegration

business functions are moved to an external firm rather than keeping production in house

horizional disintegration

when business functions are moved to an external firm but reporting relationships are perserved

offshoring

sending business operations to a different country with the same or different company

supply chains

cover various steps of manufacturing and delivery process that spans different firms (large power imbalances between lead suppliers and firms)

platform capitalism/sharing economies

economic system where assets/services exchanged between private individuals via facilitating platform (ex. Uber, Airbnb)

organizational culture

system of shared meaning held by members that guides action and distinguishes an organization from others, includes values, beliefs, norms that have worked to be valid, taught to new members as the correct way to behave

formalization

hierarchy/reporting relationships + instructions for behavior (formal control), extrinsic rewards to desired behavior

organizational culture/social control

unspoken code of communication among members, conventions to help with coordination; inert (change resistant) and widely accepted

culture levels of aggregation

macrocultures, organizational cultures, organizational subcultures, microcultures

Primary characteristics of organizational cultures

innovation/risk taking, attention to detail, outcome orientation (focus on process or results?), people orientation (does mgmt care for employees?), team orientation, aggressiveness, stability (continuity or change?)

to create and sustain culture

founder philosophy→selection criteria→top mgmt→socialization

socialization

institutional practices (org. control): formal, serial (training), divestiture (stripping away your former qualities)

individual practices

informal, random (employees figure it out themselves), investiture (confirm newbie qualities)

Scheins Model of Organizational Culture 3 levels of culture

artifacts (what you observe), espoused values (what you are told), basic underlying assumptions (what people take for granted)

visible artifacts

visible/feelable features of a setting, visible products of a group, often ambiguous, easy to observe but hard to decipher, surface cues may = many meanings

espoused beliefs/values

ideals/goals; ones sense of what ought to be/could be diff from what is, org. beliefs/values can = assumptions even if unrelated to outcome, many not be aligned with artifacts or underlying behavior

basic assumptions

unconscious, taken for granted beliefs and values, determine behavior, perception, thoughts/feelings; consistent among group members→consensus, usually non-negotiable

poorly aligned culture can be a

barrier to change (culture = highly inert), barrier to diversity (cultural fit→cultural reproduction can minimize diversity), barrier to mergers/acquistions

internal environment

elements and features within the organization; inert

task environment (specific env.)

external groups directly relevant to achieving organizational goals (ex. customers, suppliers, pressure groups, labor, competitors)

general environment

broad factors that shape market features (& uncertainty for orgs.) (Ex. economic conditions, political/legal conditions, tech conditions)

Porter’s Five Forces

rivals, new entrants, buyers, substitutes, suppliers

rivals

competitors may undercut firm. Larger # of competitors can force a firm to lower prices

new entrants

ease at which new rivals may enter the market. High barriers to entry can limit this threat

buyers

size of a customer base, their switching costs & price sensitivity

substitutes

the alternatives existing to the focal firms offerings

suppliers

suppliers may hold power over firm. Do substitutes exist? are the prices reasonable? are they reliable?

contingency theory

organizations have a technical core (essential tasks, tech, etc.) key to its competitive advantage but internal and external disturbances can disrupt it

to protect the technical core, an organization can:

create barriers to seal off technical core, differentiate inputs/outputs (supply/sales), stockpile essential resources/grow in size, maintain alternatives and minimize dependence on other actors

resource dependence theory (RDT)

organizations may depend on external actors (like suppliers, governments, or funders) for key resources (like money, materials, or legitimacy). Because of this dependence, those external actors can hold power over the organization and influence its decisions.

strategies to address dependence:

buffering and bridging

buffering

organizations seek to resist or control changes in the task/general environment

types of buffering

forecasting/stockpiling (track necessary inputs and anticipate resource availability), adjusting scale (ex. downsizing), leveling/smoothing (attempt to raise supplier production or demand for firms offerings)

bridging

building relationships with powerful outsiders (task/general environment) to manage your dependence on them and stay strong as an organization.

types of bridging

negotiating (bargaining with suppliers or coordination efforts), pooling of resources (joint ventures, alliances), merging (purchasing orgs. with key resources like via vert/horiz integration)

isomorphism

isomorphic forces→ orgs. to adopt similar forms and practices (since they’re under the same pressure)

coercive isomorphism

pressure from powerful external actors (ex. political, laws, regs)

mimetic isomorphism

imitation of peers in response to uncertainty

normative isomorphism

prevailing rules, beliefs, customs deemed legitimate (ex. Bluray vs HD DVD)

isomorphic forces characteristics

strong expectations, legitimizing acceptable forms/practices; if products fail to confirm, then = illegitimate

Institutionalism (Institutional theory)

organizations are shaped not just by efficiency or competition, but by what’s seen as acceptable or “normal” in society. They follow rules, traditions, and expectations—even if it’s not the most efficient way—because it helps them look legitimate and gain support.

Neoinstitutionalism

organizations follow rules, norms, and traditions mainly to appear legitimate—not just to be efficient. They often adopt practices because everyone else is doing it, even if those practices don’t improve performance.

decoupling

gap between espoused policies and actual policies (ex. fake CSR program)

National Comparative Advantage

variation in an orgs. general environment; made up of factor conditions, demand conditions, related/supporting industries, firm strategy

factor conditions

resources a country has to help businesses compete (ex. skilled workers)

demand conditions

how demanding local consumers are (ex. want high quality products)

related/supporting industries

strong nearby industries support and improve each other

firm strategy

how companies are set up/how many competition they face at home; more comp = more innovation/quality

incremental innovations

capital goods- consumer durables, engines, transport tech

radical innovations

quickly evolving tech’s- biotech, semiconductors, software