Resource supply and allocation mechanisms

Organizational Resources

All organizations must secure resources, and securing resources is critical to an organization's success.

Competition for Resources

Late 60s -- early 70s organizations viewed as open systems

Four critical functions for open systems to survive

Transform inputs into outputs

Interact with environment iii. Regulate performance

Adapt to conditions

Acquiring resources allows organizations to replenish themselves

Organizations must compete for resources and not become dependent on suppliers

Externally, organizations compete for resources with other organizations

F. Countries also compete for research (Kangas, 2007)

G. Conglomerates result in small, specialized firms with new access to freed resources (Dobrev, 2007)

Consequences and costs of obtaining resources

A. Direct costs include purchase costs of resources

Affected by a variety of factors

a) quantity of a resource purchased,

b) an exclusivity agreement with a supplier,

c) the demand level for that particular resource by both competitors and other organizations utilizing the same resource for a different output,

d) the time frame in which an organization needs the resource.

B. Hidden costs include

i. Long lead time

ii. Warehousing of resources iii. Lost productivity if a resource is unavailable

C. External consequence is the resource is no longer available to others.

D. Political relationships between companies may be a consequence

E. Internal consequence is financial resource are devoted to one resource and not another.

F. Internally, this sets a priority within the organization for resources

IV. How Resource Attainment Varies

A. Sole proprietorship is simplest for resource attainment

B. Growing organizations result in more people involved in tasks and a more complex decision-making process for obtaining resources

C. Traditional bureaucratic style organization has resource attainment decisions made at the top of the pyramid.

D. Organic organization style is more challenging due to complex network of departments.

E. Slack (1997) research on resource competition in sport organizations show challenges similar to those found within large organizations

F. The bargaining power of the supplier also affect resource attainment

G. Level of competition also correlates to the importance of attaining resources efficiently and effectively

H. Inception stage of organization does not need resources; however, start-up acquisition of resources is critical to success

I. Input resources must have been obtained per business plan for launch phase to be successful

J. As the company matures, supplier relationships mature and efficiencies of scale improve resource attainment

V. Conclusion

A. Recap of findings

Organizational Resources

The continual securing of organizational resources is a critical factor in an organization's success. If these are not secured efficiently and effectively, this can negatively impact the organization's competitiveness. In an increasingly competitive, globalized world, this can lead to organizational failure. How the initial mix of resources is mobilized when the organization is created is critical, because this often sets a structural pattern that is imprinted on organizational members. As such, this paper explores several issues centering on organization resources. An explanation of how all organizations compete for resources is presented. A description of the consequences and costs of obtaining resources is discussed. How resource attainment varies with the type of organization, environment and stage of development is overviewed.

Competition for Resources:

In the late-1960s and early 1970s, organizational scholars began to explore the external forces that affect organizations. The realization that organizations were open systems came through the understanding that organizational systems cannot be fully explained without taking into effect the environmental relationships that affect the systems. This change in considering organizations as open systems rather than closed systems resulted in further study in the dynamics and effects of the organizational environment, as well as how organizational systems and the environment interact (Blegen, 1968; Hickson, 1973; Kast & Rosenzweig, 1971). With the perspective of an open system, attention is drawn to how an organization exchanges information, as well as how it exchange resources with the environment. How the organization and the environment influences one another is also a focus of attention. Through the open system perspective, an appreciation is found with how an organization is able to maintain their functional autonomy, while still being able to influence and adapt to the external forces to which they are subjected.

There are four critical functions that organizational open systems must perform in order to not only survive, but also to prosper. These include:

1. Transform inputs and information to produce desired outputs;

2. Interact with the environment to obtain the organization resources needed and dispose of the outputs;

3. Regulation of the organization's systems to reach stable performance; and

4. Adaptation to the conditions that are continually changing.

Organizations, as open system, strive to maintain an activity cycle which takes inputs of resources and information that is received from the environment and transform these inputs into organizational goods and services, which are then exported back into the environment. As long as there are sufficient resource and information inputs and the organization is able to dispose of their goods and services outputs, through this cycle, the organization is able to continually replenish themselves.

There has been a significant amount of research that has focused on understanding how information and resource flows are managed by organizations (Dobrev, 2007; Kangas, 2007). Specifically, research has concentrated on how an organization must compete for resources through the management of key resource dependencies. Organizations have the challenge of how to garner access to the needed resources to produce their outputs, without becoming too dependent on the suppliers of these resources. Both internally and externally, organizations must compete for resources.

Externally, organizations must compete for a finite number of resources with other organizations. These organizations may be direct competitors utilizing the same inputs for the production of similar outputted products and services. Efficient and effective acquisition of these resources often leads to a competitive advantage for the organization. Even organizations that are not competitors can be involved in the competition for resources, by using similar inputs to produce different products or services.

As Kangas (2007) notes, even entire countries compete for resources. Thanks to globalization, when changes take place in one region of the world, the effects of these changes are felt in other areas of the world. Today, countries and regions are now inextricably comnected with one another. Kangas surmises that this is particularly true of the Greater Middle East region. In particular, the European reaction to and relation with the Greater Middle East, in regards to energy resources has been of concern. Programs such as the European Union's 'dialogue with Islam' and NATO'S 'Mediterranean Dialogue' demonstrate how Europe must maintain their engagement with this region, because of their need for the resources the Greater Middle East controls. This is true for the Far East as well as these growing countries have to evaluate their resource needs and capabilities. Political concerns play a factor in this competition for resources as well. The competition for resources between countries also affects the organizations within those countries, resulting in situations such as increased costs for energy resources.

In addition, as more companies merge to form increasingly large, multi-national conglomerates, this too affects the competition for resources. As Dobrev (2007) notes, although it may seem unorthodox, as large firms are consumed by even larger ones, they are replaced by smaller specialized entrants. Even though consolidation means that some firms get to grow very large, the overall combined area in resource space controlled by such dominant firms decreases somewhat because utilizing all available resources likely leads to diseconomies of scale. The resources availed following consolidation provide staying power to firms that get to deploy them so long as they avoid direct competition with dominant scale producers. So, some firms can thrive on unexhausted resource patches that open up once consolidation drives out existing firms in the market center. (These) organizational exits lead to reduced competition and partitioning (of resources), which makes the position of incumbents and new entrants alike more viable (p. 1271).

Consequences and Costs of Obtaining Resources:

There are consequences and costs that organizations encounter as they obtain the resources needed to produce their goods and services. These costs can be direct and obvious or hidden. Actual purchase costs of input resources are a direct cost organizations face each time they obtain a resource. This cost may be affected by a variety of factors. These include the quantity of a resource purchased, an exclusivity agreement with a supplier, the demand level for that particular resource by both competitors and other organizations utilizing the same resource for a different output, and the time frame in which an organization needs the resource. The more demand there is for a particular resource, the higher the cost to the organization. Even in instances where there is little demand from other organizations, if the organization has a strong and immediate need for the resource, the cost will typically be higher. Likewise, if there is only one, or a very limited number of, suppliers and there are few or no choices for alternatives, the supplier power for the product is significantly higher. This results in higher organizational costs typically.

Hidden costs are also often present when an organization obtains resources. These costs are less obvious than direct costs, but can be an important factor in organizational competitiveness ("Project managers," 2003). As an example, long lead times for hard-to-find, specialty resources can result in additional hidden costs. These include the costs of warehousing extra resources, to compensate for these long lead times. If production runs short of these resources, and they are not readily available, this can result in stopped production. The lost productivity results in increased overhead costs as a percentage of production. This can then lead to reduced competitiveness, resulting in reduced revenues, and an inability to continue to take advantage of economies of scale, for not only that particular resource, but also all other resource inputs for that product or service.

The consequences of obtaining resources for an organization are both external and internal. Externally, the primary consequence is that that resource is no longer in the environment for other organizations to acquire. This can further positively impact the organization's competitiveness that was able to obtain the resource, if the other organizations vying for the resource are competitors.

This consequence also affects other organizations outside of the competitive sphere of the one organization that acquired the resource. Even if another organization isn't a competitor regarding the final product or service, they too will be negatively affected by the removal of the resource from the environment. This consequence resulting in higher demand and scarcer availability will directly impact the cost of the resource to the rest of the organizations who need the resource as an input, no matter what their output, in the end, is.

A final external consequence of obtaining a resource is the impact this acquisition can have on the political relationship between two countries, if the resource is located outside of the home country of the organization. An economically advantageous relationship between entities in different countries can help foster a political relationship between the two countries. Profit is a common language around the globe. If resources from a country become scarce, or are withheld for other reasons, this can result in resentment between the two nations and strain political relationships that had formally been on solid ground.

Internally, the primary consequence of obtaining a resource is the financial resources used to make the acquisition are no longer able to be used for other acquisitions. Each time an organization obtains a resource, it is a conscious choice of the organization to allocate those financial resources to that resource, as opposed to something else. The organization, in this way, sets priorities. This establishment of priorities, from early on, sets a precedence for future operations. For example, if an organization makes research and development a priority, and therefore makes the acquisition of resources to facilitate research and development a priority, from the very beginning of the organization, it is likely to continue to be a priority for the organization as it advances through its stages of development.

Furthermore, it is the setting of these priorities that often determines the success of the organization, within its competitive environment. The financial resources of an organization are finite. Selecting their most effective use in the acquisition of resources can make or break the organization's competitiveness. Devoting financial resources to unneeded or ineffective resources can result in lost competitiveness. This can result in the organization paying the ultimate consequence of organizational demise, if the organization is unable to quickly correct their errors.

How Resource Attainment Varies with the Type of Organization, Environment and the Organization's Stage of Development:

Resource attainment varies greatly depending on the type of organization, the environment they operate within and the organization's stage of development. One of the most difficult tasks a business faces is determining how to best organize their people. Business types often are determined by the sheer size of the number of employees performing the necessary tasks within the organization ("Organizational structure," 2008). An organization may exist as a sole proprietorship, with one person in complete control of the organizational processes. This includes resource attainment. With a single person controlling this process, the decision-making of where the resources should be obtained and which should receive priority is far more simple than any other organization type.

As the organization becomes increasingly successful and grows, there is typically more work to perform and, thus, more people who are needed to perform the increasing number of tasks. Utilizing division of work, the individual workers can specialize in a specific job. Due to the fact that there are multiple people that are all working toward a common goal, these people must be organized. This systematic work arrangement results in a more complex organizational structure ("Organizational structure," 2008). These increasingly complex network of responsibilities, functions, relationships, communication lines, and authorities further add to the complexity of resource attainment.

A traditional organizational type, with clear bureaucratic lines that can be demonstrated on a pyramidal organizational chart, does have the advantage of a formalized authority structure, when it comes to obtaining resources. However, lower levels of the organizational chart will be vying for their desired resources, placing the weight of the decision near the top of the chart. For the more modern and more organic organization type, where groups within the organization are organized to interact with one another, the process of attaining resources can be even more difficult. The lines of authority are not as clearly drawn, and therefore the decision-making process may be more tedious. Departments that do not receive the resources they feel they need and deserve may harbor resentment against the other departments. This can lead to the siloing of information and result in a reduced level of cooperation, within the organization. This increased competition for resources can further negatively impact morale, and result in reduced productivity across the organization as a whole. Even within different industries, one can see the difference in how resources are attained.

Slack (1997) applies organizational theory to further an understanding of sport organizations. In this, Slack discusses competition over resources for this specific type of organization. He notes,

When two or more subunits within a sport organization compete for a share of limited resources, they come into conflict with each other. Because sport organizations only have so much money, space or equipment, there is conflict over who is going to get what. Also, since these resources often help subunits accomplish their goals more easily and quickly, managers often use such strategies as inflating budgets or political maneuvers to increase their share.

Conflict over resources can occur horizontally in a sport organization, for example, when the sport studies department within a university has to compete with other departments for increased funding. It can also occur vertically, particularly between owner/managers and workers. The NHL's 2004 to 2005

canceled season (…) is a good example of conflict over resources, in this case, financial resources (p. 223).

This is very similar to the internal competition experienced by many larger corporations, especially those with unions and their competition for organizational resources to be devoted to union members, at the expense of other needs of the organization.

The environment the organization operates within also affects how resources are attained for the organization. If the supplier power is strong in an organization's environment, the organization has very little bargaining power. This occurs when the resource is a specialty resource, with one or a very few number of suppliers offering the resource. This is also true if there is no good alternative resource for the organization to turn to. If there are several suppliers offering a similar resource or there are several alternatives available, then the organization holds more power over the suppliers and thus have a better chance negotiating better terms for acquiring the resource.