When the organization is analysed with the theory of transaction cost, there are three main problems based on the interview with the manager: The sharing of knowledge from international offices has only come about because there was a project that the local Australia offices have no expertise in, on the other hand the domestic employees have been moved around Australia offices not as a matter of cross education, but as a manner of cost cutting. The third problem is that the company has not focussed enough on customer maintenance in the past, only recently has its been realized the importance of maintaining of good clients relation and communication during the projects and also outside projects.
The underlying problem to the three issues identified previously of this company is that they are too reactive. As a company that is tremendously dependent on the customers, what it has been done was trying to minimise the transaction cost, which from my perspective should not be the priority of one organization except it is a non-profit organization. There are two limitations about the traditional transaction cost theory. First, it is essentially a single-party analysis of cost minimization. It only focus on the transaction cost part, but neglect the independence between exchange partners, shown in analysis of transaction cost approach to vertical integration. Second, the transaction cost overemphasizes the structural analysis of inter organizational exchange relationships (Zajac, 1993). However, A successful business mode is supposed to discover the joint value during the transaction process, rather than single firm cost minimization.