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Interrelationships: Definition & Explanation Video

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  • 0:04 What Are Interrelationships?
  • 0:48 Implication for Business
  • 3:34 Lesson Summary
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Lesson Transcript
Instructor: Shawn Grimsley
A successful manager can detect and affect interrelationships to the advantage of his or her organization. In this lesson, you'll learn what interrelationships are and some related concepts. You'll also have a chance to take a short quiz after the lesson.

What Are Interrelationships?

Interrelationships are the connections and interactions between people, groups of people, or parts of a system within the system or outside the system. They can often explain events such as success or failure of a business venture. A system is a set of distinct parts that interact with each other to form a distinct whole. A business or other type of organization is a system with parts such as organizational structure, management structure, resources, information, and employees. Something outside the system is part of the system's external environment.

Implication for Business

Understanding how interrelationships work is an important part of strategy formation and is a primary component of some theories of management, including systems theory and the concept of a learning organization. Let's take a closer look at each of these.

Strategy Formulation

A key step in formulating any strategy is to identify the strengths, weaknesses, opportunities, and threats facing an organization - often referred to as SWOT analysis. Many times there is no simple explanation of a weakness or strength, but rather they arise out of interaction of various components of your organization as well as the outside environment. For example, imagine you are a book publisher who sees a weakness due to declining market share. The weakness is actually related to the external threat of electronic books, which also provides an opportunity for the company to enter the electronic book market.

Systems Theory

This is a management technique that treats a business as a system. In open-system theory, you view the business as a system that interacts with its outside environment through inputs (such as raw materials), throughputs (such as the manufacturing process), and outputs (the finished products) that are released back into the business' external environment. Understanding the interrelationships of inputs, throughputs, and outputs is crucial to effective management under the systems theory technique.

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