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Managing Inter-Organizational Relationship

Essay by   •  May 2, 2012  •  Research Paper  •  816 Words (4 Pages)  •  2,253 Views

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Nowadays more and more organizations are willing to collaborate with their competitors in some extent. Managers start to realize that it is difficult to cope with the world's fast changing pace individually, therefore it is necessary to develop relationships with multiple external organizations and it has become a very challenging and complex task for managers to deal with these relationships.


There are several reasons to explain why managers should be conscious of inter-organizational relationships. Firstly, adaptive has been a key word to survive in current environment. Globalization and developing technology are double-edged swords, they bring both opportunities and threats to organizations. Because of them, the external environment has been so complicated and uncertain, hence, it is difficult for any organization to take the opportunities and remain competitive on its own. (Daft, 2010) Building inter-organizational relationships enable organizations maximize competitive advantage via customer relationships and information technology. (Arnold et al, 2009)

Secondly, inter-organizational relationships do create value for the parties within the relationship. As the environment is complex, certain R&D process could be very risky and expensive which will be difficult for an individual organization to achieve. For that reason, developing inter-organizational relationships is considered as a way to share risks and costs. Furthermore, it enables the information and knowledge flow across organizations, therefore to know customer needs faster and better, and meanwhile, open up the potential to enter new markets. (Ranaei, 2010) As such, organizations will be able to generate higher profits, offer production flexibility as well as improved quality. (Ryssel et al, 2004)

Last but not least, being awareness of inter-organizational relationships not only let organizations take advantage of new knowledge and resources, help to maintain competitive advantages, but also a essential condition for manager to manage inter-organizational relationships effectively and efficiently. (Li, 2007)

Inter-organizational relationship is playing such an important role in an organization's survival and success, therefore, it is compulsory for managers to consider the way to deal with these relationships. From a research, executives spend one-third of the management budgets on dealing with the relationships across organizations. Some organizations even hire specialists to manage such complex relationships. (Walden, 2001) 500 world top corporate have put more than 60 percent efforts to manage inter-organizational relationships. (Ranaei, 2010)

Organizations can establish relationships by allocating preferred suppliers, making contracts, establishing business partners, joint ventures or acquisitions. The role of managers now has changed. They should learn how to effectively communicate and corporate with other organizations and need to be flexible as well as forward-looking. (Daft, 2010)

Besides the methods mentioned above, it is considerable for managers to develop collaborative network which needs managers to be good at building personal networks across boundaries. Managers therefore need to find a balance



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