Example of Interorganizational Conflict

Conflicts often arise between organizations. After all, business entities often compete with one another for customers and employees, engage in negotiations and collaborate with one another on projects. It’s only natural that organizations that interact in the free market will occasionally find conflict unavoidable.

When companies compete with one another for customers, conflict almost always occurs. While this type of competition can be friendly and professional, it can become destructive and lead to the circulation of negative rumors about competing firms and unethical behavior to lure customers away from rivals. Corporate espionage and copyright infringement are examples of destructive interorganizational conflict that crosses the line of legality.

Companies that provide similar services often compete for employees. For example, when a new manufacturing facility enters the market, that organization often sets wages higher than the going rate for the area to lure the most skilled workers away from similar businesses. This results in conflict between the new organization and the ones that are trying to retain their valuable employees but may not be able to increase wages.

When a client company negotiates with a vendor company for products and services, conflict can occur. Though both companies want to do business with each other, their objectives may not coincide completely. The vendor organization wants to secure the contract but also desires to maximize profits while ensuring repeat business. The purchasing organization likely wants the lowest possible price while maintaining freedom to purchase elsewhere in the future. Give and take on both sides is necessary to work through the conflicting objectives to reach mutual agreement.

When multiple companies work together on projects, conflict is likely. If, for example, disputes arise over a newly constructed house, it may be difficult to determine who is at fault. The customer is likely to blame the builder, but the builder may assert that the problems lie with materials suppliers, the architect or others involved in construction. All of the organizations involved in designing and building the property might butt heads before matters are settled.