Organizational Theories For Contemporary Business Organizations

Strategic Choice Theory

Question:

Discuss about the Initiation Of The Organizations Theories.

Initiation of the organizations theories is important for the contemporary business organizations due to the reason that, they have to operate in much competitive business scenario. Thus, in gaining the competitive advantages in the market and to stay ahead in the market, business organizations have to initiate the implementation of various organizational theories (Nonaka et al. 2014). However, there are different organizational theories, which are having different purpose for the different organizational situation and environment. One of the two most effective organizational theories being initiated by the contemporary business organizations are the strategic choice theory and determinist theory (Taylor 2012). These theories are being most used by the business organizations.

This essay will discuss about the different dimensions of both these theories applicable for the business organizations. In addition, the effectiveness of these theories be compared in order to identify the most effective one.

This theory refers to the choice of the most effective alternative from the choice of all available alternatives. The choice is being made by the business organizations on the basis of certain criterions (Judge et al. 2015). Thus, this helps the organizations to effectively identify the most effective option from all the available alternatives. According to Hill, Jones and Schilling (2014), initiation of the strategic choice theory will help the business organizations to making the most effective choice from all the available options. Moreover they have also stated that, initiation of the strategic choice theory is more beneficial and helpful for the contemporary business organizations due to the reason that, contemporary business organizations have to consider various diversified aspects to stay ahead in the competition. Thus, it is important for the business organizations to select the most effective option for their business operation.

For instance, there are various market entry strategies being available for the business organizations in operating in the global business environment. In this case, initiation of the strategic choice theory will be helpful for the business organizations to select the most effective one. Volkswagen is one of the most prominent and leading carmakers in the world. However, they follow different market entry strategies in different countries. In some countries, they have followed the route of direct investment and in some other countries; they have followed the route of import. However, by having these diversified entry mode strategies, Volkswagen is gaining competitive advantages in the market. This is due to the initiation of the strategic choice theory by them (Grunig and Morschett 2012). It helped them to identify the most effective strategy for a particular market.

Determinist Theory

As discussed earlier, strategic choice theory involved some steps that should be followed by the business organizations to identify the most effective option. According to Eden and Ackermann (2013), there are three steps being involved in the initiation of the strategic choice theory. According to them, the first step is to identify the viable alternatives for the particular issue or requirement. This step involves matching the requirement of the organization with that of the aspects of the alternatives. The next step involves the evaluation of the chosen alternatives. In this step, all the chosen alternatives are being evaluated in order to identify the most effective one. The last step in this theory involves the identification of the most effective option and implementing it in the business organization (Trinh and Koh 2012).

This theory is being stated by Meyer and Rowan regarding the benefits of following the formal structure in the organizations. As stated by Hatch and Zilber (2012), initiation of formal structure and standards in the internal management of the organization will help them to gain competitiveness in the market. According to them, maintaining the formal structure in the organizations help to have effective leadership role. This is due to the reason that, the more formal structure will be followed in the organization, the more effective will be the organizational structure. Thus, the communication among the internal stakeholders will be more effective. On the other hand, implementation of the change management will also be effective due to having formal structure in the organization.

Contemporary business organizations depend on various source and types of resources to effectively operate in the market. These resources include natural resources to human resources. Thus, every organization is being depended on the different types of resources. The more access they will have to the strategic resources, the more competitiveness they will gain in the market. According to Wry, Cobb and Aldrich (2013), the dependency on the resources by the organizations changed over time. In the current business scenario, organizations are having the requirement of more diversified resources. Accordingly, this theory states that, the allocation of the available resources for the different departments along with the access to the strategic resources will determine the competitiveness of the organizations.

For instance, TechnologyOne is a software organization in Australia. They are hugely depended on their human resources. Thus, the more skill and expertise their human resources will possess, the more competitive advantages they will gain in the market. Thus, according to resource dependency theory, they should manage the maintenance and supply of the skilled human resources effectively in order to enhance their effectiveness.

Resource Dependency Theory

Population ecology theory states the competition in a particular business sector along with determining the various aspects such as the similarity of the products being offered by the organizations and number of similar firms operating in the same field (Vandermeer and Goldberg 2013). As discussed earlier, the contemporary business state of affairs is much more competitive than it was a decade ago. More number of organizations is operating in the similar sectors and thus the level of competition among the organizations is high. In this case, it is important for the business organizations to effectively determine the competitiveness in the market. Accordingly, they have to initiate business level strategies to stay ahead in the competition. Thus, the more effective will be the determination and initiation of the theory of population ecology, the more effective will be the organizational strategy in the market.

The above sections discussed about various organizational theories, which will have diversified benefits in different situation for the business organizations. However, among all the theories being discussed above, there are differences between the determinist theories and the strategic choice theory. One of the key differences is approach. Strategic choice theory is having holistic approach compared to the singular approach of the determinist theories. This is due to the reason that, according to the strategic theory, organizations have the options to choose from the all the available alternatives. This theory also not stated any particular business scenario. On the other hand, resource dependency theory states the importance of only the resources for the organization, institutional theory states the importance of having the formal structure in the organization and population ecology theory states the importance of determining the competition and the characteristics of the competitors in the market.

According to Roughgarden, May and Levin (2014), population ecology refers to the determination of the competition in the market but it do not states the importance of the determination of the appropriate strategies to counter the competition. However, on the other hand, according to the Yarger (2012), strategic choice theory states the importance of the choosing the most effective strategy from the available ones. Thus, strategic choice theory acts as the secondary theory of the population ecology theory. In addition, there are various limitations being identified for all the above discussed theories. One of the key limitations being identified on the determinist theories is the lack of proper strategies to overcome the identified issues. For instance, in the case of the institutional theory, the importance of determining the competition in the market is being stated.

Population Ecology Theory

However, the strategies that should be initiated by the organization to overcome the threat of increased competition in the market have not been stated. However, on the other hand, in the case of strategic choice theory, it is being stated that various alternatives should be chosen and the most effective one should be selected. However, in the practical situation, different business organizations have different scenario or environment and thus, the effectiveness of the available alternatives will be different (Rowlinson, Hassard and Decker 2014). Thus, from the above comparison, it is being identified that, strategic choice theory will be the more effective that the determinist theory. This is due to the reason that, strategic choice theory is flexible enough for different organizational requirements. On the other hand, determinist theories talks about specific organizational criterion and is less flexible than the strategic choice theory. Thus, strategic choice theory will help the organizations to select the most effective option from all the alternatives.

Conclusion

Thus, it can be concluded that, all the above discussed organizational theories are having their own set of effectiveness and limitations for the diversified business scenario for the organizations. Strategic choice theory is being selected as the most effective among the discussed theories due to the reason that, it is being identified as the more flexible option compared to the determinist theories.

Reference

Eden, C., & Ackermann, F. (2013). Making strategy: The journey of strategic management. Sage.

Grünig, R. and Morschett, D., 2012. Evaluating market entry modes. In Developing International Strategies (pp. 123-148). Springer Berlin Heidelberg.

Hill, C. W., Jones, G. R., & Schilling, M. A. (2014). Strategic management: theory: an integrated approach. Cengage Learning.

Judge, W.Q., Hu, H.W., Gabrielsson, J., Talaulicar, T., Witt, M.A., Zattoni, A., López?Iturriaga, F., Chen, J.J., Shukla, D., Quttainah, M. and Adegbite, E., 2015. Configurations of capacity for change in entrepreneurial threshold firms: imprinting and strategic choice perspectives. Journal of Management Studies, 52(4), pp.506-530.

Nonaka, I., Kodama, M., Hirose, A. and Kohlbacher, F., 2014. Dynamic fractal organizations for promoting knowledge-based transformation–A new paradigm for organizational theory. European Management Journal, 32(1), pp.137-146.

Roughgarden, J., May, R.M. and Levin, S.A. eds., 2014. Perspectives in ecological theory. Princeton University Press.

Rowlinson, M., Hassard, J. and Decker, S., 2014. Research strategies for organizational history: A dialogue between historical theory and organization theory. Academy of Management Review, 39(3), pp.250-274.

Taylor, R., 2012. Determinism and the Theory of Agency. Ethical Theory: An Anthology, 13, p.308.

Trinh, T.N. and Koh, C.G., 2012. An improved substructural identification strategy for large structural systems. Structural Control and Health Monitoring, 19(8), pp.686-700.

Vandermeer, J.H. and Goldberg, D.E., 2013. Population ecology: first principles. Princeton University Press.

Wry, T., Cobb, J.A. and Aldrich, H.E., 2013. More than a metaphor: Assessing the historical legacy of resource dependence and its contemporary promise as a theory of environmental complexity. Academy of Management Annals, 7(1), pp.441-488.

Yarger, H.R., 2012. Strategic theory for the 21st century: the little book on big strategy. Lulu. com.