Organizational Dynamics - Explained
What are Organizational Dynamics?
Written by Jason Gordon
Updated at April 7th, 2022
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What are organizational dynamics?
An organization can be divided into two environments:
- Internal environment - The internal environment is made up of (1) goals and values, (2) resources and capabilities, and (3) structure and systems.
- External environment - The external environment is made up of economic, legal, political, and social factors comprised of competitors, customers, and suppliers.
The dynamics of the organization can be attributed to the objectives of creating value for customers, and transforming part of that value into profit for the firm or its stakeholders.
Back to: STRATEGY & PLANNING
Stakeholders include employees, customers, society, etc) and/or the shareholders (the owners).
Grant (2008b) suggests that the balance in the distribution of value.
As for the internal environment, resources can be leveraged by concentration, accumulation, complementation and conservation.
Capabilities instead, can be leveraged by creation (of new capabilities), exploitation (of experience), acquisition (merger), and accession (alliances).
In the external environment, consistent with Porter’s Five Forces of Competition, the profit to be earned by the organization is determined by at least three factors:
- The value of the product to customers
- The intensity of competition
- The bargaining (dealing) power of the producer among its suppliers
Firms seek to establish an advantage over competition (competitive advantage) through one of the following:
- Cost advantage (lower cost structure)
- Differentiation advantage (unique value or benefits of product/service)
- Focus (Differentiation or cost advantage in a niche market)
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