The case of supplier relationships at Nokia

The case of supplier relationships at Nokia: 

On the basis of DiMaggio and Powell’s mechanisms that drive isomorphic institutional change, I will show how Nokia and its Chinese supplier strive for legitimacy in different ways.

This blog post is based upon the information extracted from the movie “A Decent Factory”, which explores the way Nokia conducts its audit of a Chinese supplier in regards to corporate social responsibility.

According to DiMaggio and Powell, organizations not only compete for resources, but more importantly institutional legitimacy. In this case, the way the two parties strive for this legitimacy is quite different.

Nokia should be categorized as using mimetic isomorphism. In the past decades, the perception of the role of the firm has changed in the eyes of the consumers and society as a whole. It appears as if Western societies have formed an overriding ideal of firms that is centered around ethical conduct and corporate social responsibility. The more morally sound a firm’s actions, the better.

Just as greyhounds chase after a lure, firms strive to go above and beyond in order to approach an ideal of a responsible firm. This pressure is not instilled by another tangible organization but rather by a trend in the marketplace that forces them to adapt in order to survive. Uncertainty is an important driver of this mimetic isomorphsism. In this case, however, the role model are not successful, but rather unsuccessful firms. Ultimately, Nokia needs to have a flawless corporate social responsibility in order to ensure that it is not scrutinized for shortcomings. A firm knows that any minor mistake can cause public outcries similar to the Nike incidents in 1998, which can have tremendous adverse effects.

For the Chinese supplier, however, the case is very different. Its legitimacy is dependent on coercive isomorphism. Nokia as well as the Chinese government instill demands and rules upon them, which are supposed to guide their behavior. Interestingly enough, it appears as if legal compliance in itself is only of marginal importance to them. The representatives do not acknowledge any coercive power of the Chinese government, by openly claiming legal disobedience. As it turns out, Nokia had strong coercive power, as the supplier actually changed their behavior, following the demands of Nokia. The driver of this coercive isomorphism was the dependence of the Chinese firm on Nokia. It can be assumed that Nokia was a big customer and that they received a lot of money from them. Losing them could possibly put them in a grave financial situation. Due to their dependence on Nokia, the Chinese supplier could be coerced into changing their habits according to what was desired.

In my opinion, Nokia’s approach to diffusing sustainability is quite effective. As an external organization, they will not be able to consistently monitor the business practices within the firm. Any information acquired through audits might be skewed due to the presence of the auditors. A few possibilities to improvement could be to initially involve the government in the search for suppliers. Maybe they can make recommendations to the performance of firms in terms of legal compliance. Furthermore, Nokia could negotiate for a representative to be present in order to consistently monitor the events in the firm.

Nokia could possibly change towards a self-governance coordination mechanism. Within this special category, Nokia could enforce standards, rules and a code of conduct that would be enforced by them. Any violation would swiftly lead to severe consequences such as contract termination. As long as these rules are communicated clearly to the supplier, Nokia could improve its coercive power. 

Source: 

 DiMaggio, P. and Powell, W. 1983. The Iron Cage Revisited: Institutional Isomorphism and Collective Rationality in Organizational Fields, American Sociological Review, 48(2): 147-160.

Comments added to other blogs

Comments to other posts:

Week 1:

Joan Wildenberg:
I can see that you put a lot of thought and effort into this segment. I really like the way you explain the model. By providing the reader with definitions, you make it easy for everyone to understand the correlation and to relate to what you are trying to say.
Overall, the puzzle is well chosen and you do a very good job of providing the reader with well chosen explanations. Well done.
Side note:
-A puzzle (not an puzzle) → use an only if it is followed by a word that begins with a vowel
-If something increases it is a growth in demand, not a grow

Business (profits):
-In general, I like the short, poignant blog post. In terms of structure, I would maybe rearrange the paragraphs in order to give them more structure.
-Now you start with:
-Business may also have personal goals → not only profit
-Business is there to provide for society
-Sustainable character
Why don’t you start with the last two paragraphs and then use the last paragraph to close the blog entry? I like the idea of putting in your personal motivations. I do believe though that you should start more generally and then maybe end with your personal motivations.
Also (some short notes):
Maybe it would be helpful to have an example of a business that makes “the overall good” of society their mission and also makes high profits with that?! That way you make a bridge between the CSR aspect and that businesses can still exist. Maybe use B-corporations?!

Raissa:

In general, I really like your writing style. It is concise, to the point and is very convincing.

Business of business:

-Sentence: Thus, after all, no matter what?! Rework, missing word!

-So you’re arguing in favor of the statement?

            -The way I understand it, you’re in favor. Profit = Revenue – Costs

-since efficiency is a cost reduction, it is also a method of profit maximization.

-If you add a final concluding sentence in which you voice your opinion, your post will be much easier to understand. As a reader, I just had the feeling that it needed to be wrapped up better.

Puzzle:

I really like your puzzle and the explanations that you were able to provide for them. I believe that they are well thought of. Especially your last argument is very plausible and convincing. I personally don’t think that you have to change anything about this part of your blog entry. Good job.

Week 2:

Suzanne:

Hi Suzanne,

This is concerning your post about the IS in Iraq. Correct me if I am wrong, but I understood our assignment as explaining a decision from a viewpoint of full rationality and bounded rationality. The way that I read your post, makes it seem as if you are merely analyzing the decision and then drawing conclusions on the rationale behind it. So, maybe take a second look at that.

Furthermore, I would appreciate it if you would structure the post a bit better by using more paragraphs etc. Other than that I think you outline the problem swiftly and accurately. Content wise I would only maybe like for you to hear maybe how the decision is also boundedly rational. Do we really have all the information? Do we know what the outcome of our actions are? Maybe comparing it to past conflicts in the region isn't a bad idea.

Thank you though for an enjoyable read. Well done. If you have any further questions, let me know!

Best,

Carl 

Cenyang:

Hi, first of all. Make sure to follow English grammar and spelling rules. You were already informed by the other comments. Make sure to change these mistakes, they divert the intention away from your content.
Regarding content, I would appreciate it if there were more information. Outline in a brief case description, where it is located, who us in charge of the project, when it was constructed, what were the alternatives, why was the decision made to locate it where it was. Try to use these questions as the skeleton of your post. Go through it step by step.
You do a nice job of explaining what the theory is, but I would like a better application. Make sure to really explain how and why the decision is made.

In case you have troubles with writing, don't worry. No one is perfect! I would suggest reading through the posts of the others, get a feeling for how they structure their posts and then go from there. Good luck! If you want any feedback on changes that you made, let me know!

Best,

Carl

Week 3:

Koen:

Dear Koen,

1^st part:

You frame your post very well by meticulously outlining the problem that you are focusing on and giving boundaries to your analysis. That way the reader can follow your argumentation better. In your analysis, you refer back to the idea of self-organization, which is in line with the text from Ostrom. After reading through your post I actually feel like I have to go back in order to change mine again, so thanks.
Maybe it would be helpful to outline self-organization and its hallmarks again for the reader to fully understand your criteria. I would recommend of course either the Ostrom paper or the one by Boons on “Self-organizing and Sustainability”. Furthermore, I felt that you could possibly talk about the problem of self-organization in your example by referring your argumentation to the paper of Hardin. I think the tragedy of the commons could be used very well in your argumentation and could even further solidify your point.
Otherwise, I have to say that I really enjoyed reading this post. It is clearly structured and very easy to follow. Good and solid argumentation.

2^nd part:

Good argumentation. By referring to Friedman, you give your analysis more depth. Your argumentation is logical and in my opinion needs no further improvement.

Best,

Carl

Weiwen:

Dear Weiwen,

For the assignment on the SES, in general, I like your case. It is not a very usual example. In terms of the structure, I would maybe try to really identify the actors, the problem and the system. That way you would give your post more structure. Right now, you dive directly into the different subsystems (RS6, etc) without first identifying the main actor groups.
Furthermore, I think that we had to relate this also to self-organization and how that can be attained within the system. I have also made that mistake of not centering my blogpost around that idea. Take a look at the post of Koen, I think he does a very good job of incorporating that premise into his post!

Lastly, I was a bit confused because I didn’t find the additional question about Friedman. Make sure to look into that and add that.

Best,

Carl

Week 4:

Ozkan:

Dear Ozkan,

You review the movie very well and in general make it easy for the reader to imagine what happened in the movie. Also, I appreciated the several summaries within the text that help direct the reader and create structure.

If I remember correctly, the supplier was actually a German company producing in China. Shouldn’t then their company “ethos” as you call it be more western as well?

The rhetorical questions that you pose are all interesting, but it is hard to come up on a sound judgment. Maybe you could go back to the Powell paper and outline the different kinds of ways that legitimacy can be obtained. I think that doing that would give your post more direction and would make it more substantive.

The part about power has good thoughts in it. I would maybe like some more substantive argumentation. Again, the paper will be a valuable resource for that.

Best,

Carl

Elke:

No post available - 30.12.2014


Week 5:

Stephany Lie:

Dear Stephany,

I think that you apply the theory very well to the case. Your outline of the network lays a strong foundation for your following analysis and helps, especially in the resource dependency part of your blog. In general, I find your writing style very clear and would tend to agree with your use of Gordon's classification. Nothing else to add.

Best,

Carl

Anne van Bruggen:

Dear Anne,

your analysis is very in-depth and rigourous. Your application of the theory is on point and very clear. I have no ideas for changes on this blog post concerning the Maasvlakte network.

Best,

Carl

Week 6:

Jason Kiem:
Dear Jason,

Strong introduction. By giving the reader an outline of the problem and setting the context with the case example of overfishing in the Ijsselmeer you visualize the tragedy of the commons and what its impact is. Also, you did a good job of summarizing the original game. Nevertheless, I miss concrete game rules. You describe the problem well and also how it could be solved in theory, however, I would appreciate concrete game rules. I still have to go back to my own game design to come up with concrete rules, so I know that this is not particularly easy. Nevertheless, I think that your ideas would gain clarity by doing so. I hope that this helps!

Best,

Carl

Kjell Wansleeben
Dear Kjell,

I have to say that I am very impressed with the amount of thought and insight that has gone into your post. You reflected well upon the game and what its problems were when we played it. Furthermore, you offer three concrete changes to what should be done to solve the tragedy of the commons. Nevertheless, I miss concrete game rules where you outline exactly how the new organization will be structured and what rules for punishment there will be. In general, it would be great if you could also provide actual game rules (just like in risk or monopoly). That way you could go even further in-depth and add to the ideas that you already had. Good luck!

Best,

Carl

Week 7:

Hans-Peter:

Dear Hans-Peter,

Good idea for the game. I can see that you put some thought into the game and how it could possibly help explain the creation of industrial symbiosis. In general, I find the instructions to be very well structured. You explain everything in a crisp and clear manner so that the instructions actually read like an actual game manual. The two phases are very well thought out, but I think a slightly more detailed "step by step" outline will help users actually play the game. Nevertheless though, well done!

Best,

Carl

Bob Dubbeldam:

30.12.2014 - No post available

Social-ecological system: Saxon Switzerland

Ostrom’s framework applied: National park Saxon Switzerland (Germany)


This summer, my brother and I hiked through the Saxon Switzerland national park. Since the reunification of Germany, it has resurrected from its former poor state and become one of the country's most iconic nature reserves. How was the park able to sustain itself so well?
In order to arrive at a conclusion to this answer, I will apply Ostrom's framework, which helps analyze the sustainability of complex, social-ecological system (SES), such as Saxon Switzerland.

The SES framework is a multi-level framework that shows the relationships between social, economic and political settings. Furthermore, it helps identify and analyze the relationships among the multiple levels of these complex systems at different spatial and temporal scales. In the following analysis, I will first explore the first-level core subsystems and then the deeper nested second-level and deeper level variables.

Lastly, I will try to conclude why the SES is able to sustain itself and what the probability of self-organization is. This ultimately depends on whether the expected benefits of managing the resource exceed the perceived costs of investing in better rules and norms for most users and leaders.

The Bastei  -  (Picture: Carl Kuehl)

Resource system
Saxon Switzerland is a land-related resource system with a small mountain range and large forest areas around it (RS1). It is 95.3 km² (RS3) large and clearly marked on maps and roads by signs (RS2). While large size is not conducive to self-organization due to the high costs of boundary definition and monitoring, I believe this not to be the case with Saxon Switzerland, since it is only the 12th largest national park in Germany (BFN). In terms of size, I would therefore rather consider it moderately large.

The most noteworthy of all human facilities apart from hiking and climbing trails is “the Bastei” (RS4).  It is an old medieval bridge, running over a steep rock formation and the most iconic landmark of the park.

Source: Ostrom, E. (2009). A general framework for analyzing the sustainability of social- ecological systems, Science 325, 419-422.

Resource units
The resource units in Saxon Switzerland (mountain ranges and forests) are very immobile. In terms of self-organization, the lack of mobility makes self-organization easier compared to mobile resource units (RU1). There are, however, also more mobile resource units. The lynx, is one of the parks most famous wildlife attractions.
In terms of the growth and replacement rate (RU2), it is slightly higher for the lynx population than for the trees, but care has to be taken of both. Especially the lynx population is recovering from near extinction just a few decades ago and still remains in a fragile state. They are highly protected within the park.
The low mobility of trees and rock formations is conducive to self-organization, while the wildlife's (lynx) mobility, might cause potential problems. Especially for wildlife protection (RU2), I see potential problems for self-organization, due to the fragility of the lynx population.

Governance system
The governing bodies are a mix of local municipalities, state and federal organizations (GS1). They watch over the preservation of the natural habitat as well as the organization of tourism. In terms of financial and technical support the state takes most responsibility with some federal support. 
The management of the park is largely decentralized. All actors involved, from the federal to the municipal level, have specific duties. By giving local users more freedom, the governance system allows for everyone to have a stake in the management of the park and therefore encourages self-organization.


Users
There are many users of the park, including tourists, pension owners, small business owners (U1). In 2011 the park registered close to 350 000 visitors. Since the re-unification of Germany, the region has seen a steep increase in the number of tourists, resulting in the establishment of many small hotels, pensions and other SMEs, which cater towards the needs of the tourists.
In my opinion, the large size of users effects self-organization in two ways. On one hand, this large size of users (tourists) benefits self-organization, since they bring money to the region and thus provide the system with the ability to fund preservation and sustainability measures. 
On the other hand, however, there are significantly higher costs in monitoring tourists and ensuring their proper behavior. In order to overcome this, it will be crucial to develop Norms and social capital (U6) in order to instill the same moral and ethical standards among all users.
I feel that the park achieved this, by informing tourists regularly about nature preservation rules and offering them plenty of freedoms. Overall, I felt that a sense of shared responsibility for the preservation of the national park was created.

Due to the region's dependence on tourism, the livelihood of most locals is highly dependent on the tourists that visit and thus the state of the national park (U8). To them, there is therefore a direct correlation between the sustainability of the park and their income. The better the state of Saxon Switzerland, the higher their potential income. Their attached value to the resource is therefore conducive to self-organization.

Richard Wagner was inspired to compose "Lohengrin" in the Saxon Switzerland (Picture: Carl Kuehl)https://www.youtube.com/watch?v=lSKoGDEuNdE

Interactions
In terms of interactions, the park administration provides good initial information for users (tourists). Upon arrival, tourists are given an extensive package including maps, emergency contacts, pamphlets, and a printout of the park rules. We were told to stick to the rules and make sure that we would respect the natural surrounding as much as possible (I2).

View on to the Elbe River (Picture: Carl Kuehl)

Outcomes

All things considered, I believe that self-organization will not occur in an isolated fashion in the SES. It is currently embedded in clear state and federal laws concerning nature preservation and subsidized by the federal government. These boundary conditions show that there are existing elements of self-governance in the system. Nevertheless, I believe that these boundary conditions offer enough room for local users such as municipalities and small business owners to self-organize and shape the SES in ways that they see fit. Not only do they know the area the best themselves, their dependence on the park also incentivizes them to take actions towards the sustainable development. I felt as if the different actors in the SES, the users (tourists, business owners) and governance systems did a very good job in setting the rules and regulations. At no point during my trip did I notice a major rule violation by users and I also did not hear from any pension owners that were complaining about the rules. On the contrary, I felt as if there was a shared collective belief that the rules were needed to protect the national park. In conclusion, I believe that a mix of self-governance and self-organization occured in Saxon Switzerland.



Friedman's principle applied to the Saxon Switzerland

In his paper, Friedman argues that private firms should solely pursue profit maximization. In order to make the argument of how Friedman’s proposition can be used in this example, we will use Prakash’s elaboration on why firms act in terms of policy compliance.

We will work under the assumption that any measures beyond the compliance of environmental policies will lead to increased profits because of an increase in visitors.

Prakash defines this policy type as a type 1, in which beyond compliance policies are consistent with profit maximization.  Furthermore, we will construct this argument from the perspective of a small pension owner, dependent on tourism.

Small pension owners in the Saxon Switzerland are highly dependent on a steady seasonal stream of visitors. The large majority of these tourists visit the park for hiking/ climbing trips. In order to maximize the number of people that come to the park (revenue), the pension owners are dependent on a healthy ecosystem. There is an intrinsic motivation for pension owners to go above and beyond the environmental policies and contribute as much as possible to a healthy natural park. There is therefore a direct correlation between the state of the natural park and the profits of pension owners, due to the number of tourists that will visit the park.

If all business owners in the region  internalize this correlation the profit maximization principle of Friedman can be put to great use. The reason for this is that there will be mutual benefits for the environment as well as for the business owners. They can rest assured that any expenses for the environment will also benefit themselves. Pension owners thus exist in a symbiotic relationship with the national park and should be interested in its sustainability.

Sources: 

Bundesamt für Naturschutz: http://www.bfn.de/0308_nsg.html

http://www.saechsische-schweiz.de/elbsandsteingebirge.html

Ostrom, E. (2009). A general framework for analyzing the sustainability of social- ecological systems, Science 325, 419-422.

Prakash, A. (2001). Why do firms adopt ‘beyond‐compliance’environmental policies?. Business strategy and the environment, 10(5), 286-299.