Question

«The general environment of an organisation consists of five elements: economic, technological, sociocultural, political-legal, and international. The task environment can be rather vague but generally may be thought of as six elements: competitors, customers/clients, suppliers, regulators, employees/unions, and associates. To be a successful open system, an organisation must get good input from all of these areas.» [Systems Theory: A holistic approach to ömng, William Todd] Thinking in terms of systems theory, which challenges are companies functioning as open system facing? ( answer using terms of systems theory.)

Answer 1

Thinking in terms of systems theory, which challenges are companies functioning as open system facing?

Companies operating in an open system set up are rather compelled to act under restrictions and low flexibility as they are bound by a lot of external stakeholders. These include customers, suppliers, regulators etc. which exercise significant control over the firm. Despite the fact that the firm depends on the external environment for a lot of resources, the external domain can be considered as unreliable as it is beyond the administrative control of the firm. In order to reduce the uncertainty, these firms have to build relationships with a lot of external stakeholders, which increases the possibility of interdependence.

Interdependence can be termed as an event where the outcome of a planned action is dependent on two or more external agents. This further complicates things as each external agent might have his/her preferences and biases, which can lead to conflicts and negotiations. As the organizations are in control of a particular resource/commodity and perform different activities compared to the firms with which they have an interdependence relationship, no one company can be said to have complete control.

Although the interdependent firms operate together to pursue a mutual benefit, there is always an overlap of conflicting demands. Inadvertently, the relationship among the entities rely on the kind of specialized value they have to offer in the network. With time as values culminate, one firm gains the upper hand and might exercise control over the other actors in the network, resulting in an internal competitiveness, which might not always prove to be fruitful.