The economy is driven by organizations which seek to produce a product or provide a service as required by the users. Organizations can’t exist in isolation hence they must interact with other institutions to access raw materials or supplies which they make into a product and send it out as a finished sample. Each organization is a social entity which comes up with goals and operates on deliberate structures with identifiable boundaries. They seek to respond to and create value to satisfy the human needs in terms of knowledge, values and vision. It is a human creation whose operation and yields are obtained from the ways we govern them and of the social, institutional and political structures within which they operate. To run well, an organization needs to come up with a strategic plan. This plan is useful in governing the operations of a company over a long period of time for instance for about five years before it is reviewed. In that given period, a number of targets are set and they need to be met for the growth of the company. Organizations have adopted different trends in the current economy (Baltzell, n.d.). The open system view of an organization can be described as shown in the illustration below,
This paper seeks to analyze the different theories under organizational strategic and deterministic processes. The theories that are critically analyzed in this research proposal are the resource dependent theory, the population ecology, and the institutional theory. The next section critically analyses the implementation of each theory in the current organization structure. The paper responds to the research question which seeks to find out the author’s perspective on the most compelling strategic choice or determinism with reason. The conclusion restates the main perspective and the response as critically discussed in the next section. The main and most effective theory still applicable in the modern age is the resource dependence theory. Every single organization is set to reduce costs while maximizing profits. All the strategic plans made revolve around this concept. To increase the yields, the resources must be well managed and the organization may need to obtain the raw materials more cheaply. In the business world there are incidences of takeovers, mergers, and acquisitions all the time. All these strategic moves are based on the need to manage resources (Archer, n.d.). Every organization deals with customers, suppliers, distributors, regulatory agencies, competitors, unions, partners, and special interests. The organization deals with uncertainties from the internal and external environments. More uncertainty results when the organization has to deal with complex, changing or poor-quality elements. This paper discusses the theories that handle the environment relationships of an organization to another or others.
One of the main aims of an organization is to minimize its dependence on other institutions. Dependence on other organizations has a cost implication especially when scarce raw resources are being provisioned. The resource dependence theory seeks to explore how an organization can exert influence over others so as to obtain the resources as well as responding to the needs of other institutions in its immediate environment (Bansal, et al., 2011). Organizations can have either symbiotic or competitive interdependencies. They obtain scarce and valued resources form environments. There is a desire in each entity to control resources to minimize the dependencies. The processes and transactions used to obtain resources develop dependencies. The balancing act of maintaining autonomy and recognizing dependencies is a plausible strategy for a given entity. A company can opt to choose an interorganizational strategy that provides the most reduced uncertainty with least loss of control. the organization can maintain a symbiotic interdependence with other organizations by developing a good reputation and co-optation, or implementing strategic alliances. Good reputation and trust are the most common linkage mechanisms in this relationship as well as having the interlocking directorate where a director in one company sits also in the board of another company (Carter, n.d.). The resources refer to the human resource, the raw materials, and the networks that ensure the business cases are relevant at each point in time. There is a trend in the formulation of alliances in the management of interdependencies where formal alliances are preferred and the stronger they are the more prescribed the linkage and tighter control of joint activities. Another strategy employed under the resource dependence theory is takeover and mergers. The implication of such a move is to increase the resources in the newly formed company increasing the market or customer base as well as boosting the share prices. For instances where companies are in hostile competition, takeovers are prevalent where the company with more resources buys out another competitor who may be doing badly in that field or business at the time. This theory has been implemented in different fields and in organizations even in the current world.
Another strategic choice and deterministic theory discussed is the institutional theory. Some of the institutional pressures involved are coercive, normative, and mimetic. When the organization structure is bound to make decisions, some of the strategic responses are compromise, avoidance, defiance, manipulation, and acquiescence (Wuthnow, n.d.). The institutional theory brought a revolution in the social, economic, and political spheres. It sought to address issues such as which area would shape or channel the economic behavior and under what conditions were participants forming the organizations (Pettigrew, 2011). The theory sough to emphasize the integration of the organizations within a wider political, legal, and cultural context. The theory is driven by the problematic state of different organizations that operate in different environments while maintaining the same structures. The theory is concerned with the processes by which the structures and routines are established as authoritative guidelines for social behavior. It seeks to find out how the elements of the organization are generated, assimilated, and adapted over time in a particular realm (Joyce, n.d.). The theory suggests that the activities occur due to influences on the individual, organizational, and inter-organizational levels. However, the theory has been stretched beyond its core purpose in a bid to understand how the organizational structures and processes acquire meaning and continuity beyond their technical goals. The existence of a business is generally determined by the statutory commitments, the number of employees and the resources amassed (Friedland, et al., n.d.). The societal institutions are powerful forces for ensuring control and order. In response to the institutional pressures, entities tend to develop isomorphic strategies, structures, and systems with the aim of obtaining the social legitimacy. Some of the fields where the institutional theory is well applied are the banks, universities, and the various discount stores.
Every organization is affected by the population ecology. The theory suggests that there is need to address the demographics and the population behavior within a given market share. The theory prompts the organization to describe its population or customer base in terms of the density, dispersion, and demographics. It figures out how the density dependent and density independent factors can control population growth. The theory states that the population cannot be considered stable and the fluctuation affects organizations. There are complex interactions between the biotic and abiotic factors that can cause the variation in the size of a population. Demographics studies the statistic information of populations so as to allow predictions to be made about how a population will change. An organization will be interested in knowing the size of the population in a given area, the measurement or population per unit area or the population density as well as the migration factors. For instance, if the organization wishes to set up premises in a given area, it is important to know if they will have a good stable customer base in the given region. Frequency of migration especially where people are moving away from a given region, tends not to be good for an organization. Most organization look at such factors when setting up shop. The growth rate of a region is also key in determining whether the population is suitable for an entity or not. Where the population is not growing, a business will not survive long enough.
The three theories analyzed give a good background of all the factors that are considered when making deterministic decisions as opposed to the normal operational or transactional decisions. The strategic decisions require in-depth research into how the organization will survive and grow over a period of about five years, ten years, or even fifteen years. The theories are relevant but the resource dependence theory is key. Companies are moving from the classical structure of full employment to outsourcing. Outsourcing saves an organization a lot of costs especially those regarding employee management. Resources determine whether an organization will succeed in the given strategic planned period or not. The theory may not be implemented in isolation of the other three but it stands out as the most deterministic theory. Many decisions are made based on it. Several organization have taken over other organizations to acquire more resources or infrastructure or supplies. The takeovers and mergers are done horizontally, vertically, or even laterally. The organizations can merge on the same level to increase the size of the organization. The entities can merge vertically to have direct access to the raw materials instead of obtaining them from a middle man such as a distributor. Others merge to have a wider customer base for their products and goodwill in that regard. Organizations are becoming more dynamic and the systems are not as rigid as they used to be hence there is a great move to improve the organizations as stipulated in the strategic plans listed. Some of the common symbiotic interdependencies that profit an entity are joint ventures, mergers, acquisitions, and takeovers, licensing, consortia, marketing or distribution agreements, and franchising. To obtain such interdependencies, the business entities require a good reputation, co-optation, interlocking of directorates, strategic alliances, long-term contracts, and the equity ownership in other firms.
In a nutshell, there are several theories that govern the strategic plans in an organization. The deterministic theories discussed in this research proposal are the institutional theory, the population ecology, and the resource dependence theory. The theory is relevant in the fact that the organizations must be concerned about the population that comprises their customer base or their supply chain. The business entity must also be an institution in legal, social, and economic terms. The entity must be recognized and a lot of marketing goes into advertising the business for the population to know of its existence. similarly, the organization requires resources to yield products. the resource dependence theory has superseded all other theories in its implementation in the modern day. The resources in an organization determine the organization size and the business prosperity. The organization effectiveness can be assessed based on the resources acquired over a given period of time as stipulated in the strategic plan.
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