Literature Notes Organization and
Technology
Chapter 1: Organizations and Organizational Effectiveness
What is an Organisation?
People have a casual attitude toward organizations, because organizations are intangible.
Organisation: A tool people use to coordinate their actions to obtain something they desire or value.
New organizations are spawned when new technologies become available and new needs are
discovered and organizations die or are transformed when the needs they satisfied are no longer
important.
Entrepreneurship: The process by which people recognize opportunities to satisfy needs and then
gather and use resources to meet those needs.
How does an Organization create value?
Organizational environment: The set of forces and conditions that operate beyond an organization’s
boundaries but affect its ability to acquire and use resources to create value.
The amount of value an organization creates is the function of the quality of it’s skills, including the ability
to learn and respond to the environment.
1. Organization’s Inputs 2. Organization’s Conversion Process
an organization obtain inputs from its environment organization transforms inputs and adds value to
them
Raw materials
Machinery
Money and capital
Computers
Human resources
Human skills and abilities
Information and Knowledge
sales of outputs allow organizations to obtain new organization releases outputs to its environment
supplies of inputs
Fineshed goods
Customers
Services
Shareholders
Dividends
Suppliers
Salaries
Distributors
Value for stakeholders
Government
Literature Notes Organization and Technology 1
, Competitors
Why do Organizations exist?
People who work in organizations may become more productive and efficient at what they do than people
who work alone.
The use of an organization allows people jointly to:
Increase specialization and the division of labor
Use large-scale technology
Economies of scale: Cost savings that result when goods and services are produced in large
volume on automated production lines.
Economies of scope: Cost savings that result when an organization is able to use underutilized
resources more effectively because they can be shared across different products or tasks.
Manage the external environment
Economize on transaction costs
Transaction costs: The costs associated with negotiating, monitoring, and governing exchanges
between people.
The organizations ability to control the exchanges between people reduces transaction cost.
Exert power and control
Because employment, promotion and increased rewards are important and ofter scarce,
organizations can use them to exert power over individuals.
All of this points together increases the value an organization can create.
Organizational Theory, Design, and Change
Organizational theory: The study of how organizations function and how they affect and are affected by
the environment in which they operate.
Organizational structure: The formal system of task and authority relationships that controls how
people coordinate their actions and use resources to achieve organizational goals.
The principal purpose of organizational structure is to control the way people coordinate their actions,
to achieve organizational goals and to control the means used to motivate people to achieve this
goals.
Organizational culture: The set of shared values and norms that controls organizational members’
interactions with each other and suppliers, customers, and other people outside the organization.
It influences how people respond to a situation and how they interpret the environment surrounding
the organization.
Organizational design: The process by which managers select and manage aspects of structure
and culture so that an organization can control the activities necessary to achieve its goals.
Organizational structure and culture are the means the organization uses to achieve its goals;
organizational design is about how and why various means are chosen.
Literature Notes Organization and Technology 2
, Organizational change: The process by which organizations redesign their structures and cultures to
move from their present state to increase their effectiveness.
Organizational design and change have important implications for a company’s ability to deal with
contingencies, achieve a competitive advantage, manage diversity effectively, and increase its efficiency
and ability to innovate.
Contingency: An event that might occur and must be planned for.
Competitive advantage: The ability of one company to outperform another because its managers
are able to create more value from the resources at their disposal.
Core competences: Managers’ skills and abilities in value-creating activities
Strategy: The specific pattern of decisions and actions that managers take to use core competences
to achieve a competitive advantage and outperform competitors.
How do managers measure Organizational Effectiveness?
Efficiency means developing modern production facilities Justin new information technologies that can
produce and distribute a company’s products in a timely and cost-effective manner. It also means
introducing techniques to improve productivity.
Approach: Description: Goals to set to Measure Effectiveness:
Lower costs of inputs
1. External resource approach: Evaluates the Obtain high-quality inputs of raw
A method managers use to organization’s materials and employees
evaluate how effectively an ability to secure,
Increase market share
organization's manages and manage, and
controles external environment. control scarce Increase stock price
and values skills Gain support of stakeholders such as
and resources government or environmentalists
Cut decision-making time
2. Internal system approach: A
method that allows managers to Increase rate of product innovation
evaluate how effectively an Evaluates the
Increase coordination and motivation
organization functions and organization's
of employees
resources operate. ability to be
innovative and Reduce conflict
function quickly
Reduce time to market
and responsively
3. Technical approach: A method
managers use to evaluate how Increase product quality
efficiently an organization can Reduce number of defects
convert some fixed am out of Evaluates the
organizational resources into organization's Reduce production costs
finished goods and services ability to convert
Improve customer service
skills and
resources into Reduce delivery time to customer
Literature Notes Organization and Technology 3
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