Competition The Organisation Needs Information example essay topic

Information is power. Discuss What is power? Power is hard to define, as most definitions are circular, they do not really tell you anything. Power takes different guises and is therefore difficult to pin down. One definition is: "The ability of a firm (or an entrepreneur) to own and control critical assets in markets and supply chains that allow it to sustain its ability to appropriate and accumulate value for itself by constantly leveraging its customers, competitors and suppliers". Emerson states that, "Power resides implicitly in the other's dependency" That is, that A has power over B because it has control of resources that B cannot obtain from elsewhere.

B is therefore relying on A for resources, which gives A power to get B to do what it wants. Obviously, the greater the dependency of B on A, the more power that A has over B. Is this however saying that information is power? It seems that scarce resources are more powerful, but A needs the information that B wants or needs these resources to enable A to have power over B. If B denies his dependency on A for these resources, it may significantly reduce this power, but if A knows (has the information) that these resources are scarce, power is not reduced. The aim of organisations should be supply innovation leading to one or more power advantage in order to make a profit. This is based on the fact that a product is made using resources, which are highly valued by buyers or suppliers and are either scarce or unique. What needs to be focused on is what these resources are and how they can be used to obtain power.

The main focus in this essay will be on information and structure as a tool for gaining power. This will no doubt include other issues such as utility as all these resources are linked. Power can either be used in a negative or positive manner, which will also be discussed later. One of the key elements in a power relationship is conflict. This can be demonstrated using the dependency relationship.

In the relationship, there is a conflict of interest. B wants resources from A who wants something different from B (something not in its goals). Resolving these differences involves one side winning due to power. Saying it is due to power is a bit ambiguous, as it depends on how much B wants or needs the resources and what it has to do to get them.

This is illustrated in the four key structures of power (Buyer dominance, Buyer dependence, buyer-supplier interdependence, buyer-supplier independence). This shows that if either the buyer or supplier has all the resources, then they will dominate the market, that is that they have power over the other. If there is buyer-supplier interdependence then they will deal somewhere between the two (each is dependent on the other for resources). This is what occurs in a normally competitive market. Power is a relative concept. In this case, it is the interaction between buyer-supplier resources and buyer-supplier management whereby each tries to maximise its power resources.

The power dependency relationship theory may also be significant in the structure of the firm. An employee who has a rare skill, or is very skilled will be paid more in the workplace, due to the fact that the organisation will be more dependent on that employee as they would be harder to replace than someone less skilled would. This can also be looked at the other way round. According to Martin, an employee may be forced to do something against their will, due to their fear of losing their job. This is known as coercive power.

It is the ability to punish, or it may just be the threat of punishment to obtain power. Martin notes however, that this is unlikely to be found in the organisation as it destroys trust and the cost of replacing a member of staff is very high. The replacement staff will probably have to be trained, which is one of the major costs involved in replacing staff. Rather than threatening the work force, it is better to trust them so that they feel a sense of belonging and will therefore be more motivated to do their job. Of course, there are some instances where the management may have no other option than using threatening behaviour but I think that it is a very extreme approach to handling a situation. Job descriptions help define how much power is given to employees.

If they are narrow, detailed, specific and unambiguous, the employees have little power over what they do; they are simply limited to what is specified in their job description. On the other hand, if the job description is general, vague and ill defined, the employees have more power to do what they want and are in this way given more responsibility. Information is needed in order to help reduce uncertainty. Uncertainty is one of the key problems in organisations; it means more risk-taking for the firm and therefore a higher chance of failure. Information can be used to reduce uncertainty and therefore reduce the risk involved in decision-making. Less uncertainty could also mean more accurate sales forecasting which would aid in planning.

There is a lot of information, which would be very useful to the seller, which is not usually available such as, 'What is the buyer's utility?' The instant that the buyer tells the seller how much they can afford or willing to spend, the seller knows how much the buyer has to spend and that they can get up to that amount. This information gives the seller a lot of power over the buyer, but in reality, it is unlikely that the buyer would actually state how much they can afford as they would be trying to get the product for as little as possible. In this case, information may well be power, but it is very unlikely that the supplier would be able to get accurate information to influence the amount of power that they have. It therefore arises that resources are the key to power.

Information is one of these resources another important resource is structure. Structure is important in gaining power. Market structure is influenced by many different things; barriers to entry and exit, competition, substitutes, utility and scarcity. If the barriers to entry and exit are very high and therefore there is only one supplier and lots of buyers (i.e. a monopoly) the supplier has a lot of power, as there is nowhere else that the buyer can go. This is the worst situation to be in. For example, say that the supplier is a manufacturer who supplies a retailer.

This retailer relies solely on the one manufacturer, as there is no other supplier. The manufacturer can therefore dictate the price, delivery times etc. In the worst case, the supplier may end the contract if they get a better offer from another buyer, leaving the current buyer helpless and with no business left. This is quite an extreme case and usually there is some sort of substitute available, which may have alternative ways of meeting consumer's functional requirements. If the barriers to entry and exit are low, however, there will be many firms in the market (if there is potential to make profit) and therefore the suppliers will not have much power. This could be altered if one of the firms become more efficient than the others and can therefore reduce its price.

It could become more efficient through getting information about new technologies, which for example, reduce waste. Once again, this comes back to information. If the structure of the market dictates that the organisation has little or no power, then it needs to look at other resources to try to gain some power. When an organisation produces a product that has a high buyer utility, it has more power over the buyer.

This is due to the fact that there is a high demand for this product, which enables the organisation to have more dominance. The buyer is likely to accept whatever price the organisation sets because he really wants this particular product. If however the product has a relatively low buyer utility and therefore the organisation has little or no dominance over the buyer, then the organisation will be looking to try to increase this utility to try and increase their power in the market. They could do this by trying to make the product more unique, so that there is less competition and increase their power in that manner.

When looking at the internal structure of the firm this may be used to gain power. If the organisation has a hierarchical structure the management will have the power. They will have influence over the entire workforce. Other structures whereby there is less of a hierarchy, so that workforce are more independent are said to work just as well, if no better than the ones where the management dominates. If the workforce has more independence then it may be said that they are more motivated in their job. In this case then it may be seen that structure, although may gain power, the power gained is not necessarily of much use.

As can be seen all the factors, which affect power, interlink and most can be drawn down to the fact that information is the key variable. Without information it is hard to have any influence on the other factors, when trying to increase power. This could be because information has such a wide scope and therefore can be said to have an influence on nearly everything. Information is relevant to an understanding of power. What type of power is the firm trying to achieve? If it is power over the buyer, (which is one of the most important types of power) then information is needed about the buyer.

The firm needs to know product utility, and therefore how much the buyer is willing to pay; competition - the organisation needs information as to whether they can sell the product cheaper and if so, why? And so the amount of information an organisation needs is infinite. Simply thinking about launching a new product needs huge amounts of information - where is should be sold, whether consumers will buy it, the target market, etc. Information and structure are both important in an organisation, but so are many other factors also mentioned.

Telling when one is going to be more important however is much more difficult. I think that information is more important to firms in a highly competitive market, as information could be the key to gaining a competitive advantage over the market. Structure however is important in running an efficient organisation, which may also gain a competitive advantage. Therefore it is impossible to say that one is more important than the other, because they both interlink and are of vital importance.

With no structure, a firm would not be functional and the same with no information. Is power really relevant in the running of an organisation? In a hierarchical structure, discussed before (where members of a workforce have little power over what they de) skill may be autom ised. That is, the employees will simply do what they have been told to do and not put any input in. This input may be valuable to the organisation, but because the management is so powerful, the employees lower down are too afraid to give their opinion. Their opinion could be valuable to the organisation as they may have ideas about improvements, which could be made.

Power may not be as relevant internally as externally. Externally, the organisation seeks to achieve power advantages over consumers, suppliers and competitors in order to dominate the market and become market leader.

Bibliography

Cox, A. Sanderson, J. and Watson, G. (2000) Power Regimes Cox et Al (2002) Supply Chains, Markets and Power Emerson, R (1962) "Power Dependence Relations" in Olsen and Merger Power in Modern Societies Emerson, R (1962) "Power Dependence Relations" in American Sociological Martin, R (1977) The Sociology of Power Williamson, O.
E (1995) Industrial and Corporate Change.