Theories of management seek to present methods of managing organization through establishing the way manager approach managerial issues in the organization. As theories kept on being developed, they postulated different strategies for managers to follow when handling organizational related issues. Management theories are fragmented since they offer different explanations and justifications on how the management approach needs to be taken. Deterministic theories see the marketplace as taking care of itself thus everything that happens is predetermined and exists on cause and proof. This means that businesses are forced to respond to changes in the marketplace since these changes keep on occurring and shape the nature of the organization. This means that the business operations that exist and the nature of competition and management issues that organizations face are predetermined thus organizations only need to align their business goals and objectives on survival and generating of profits (Mandrinos & Mahdi 2017, p. 37). On the other hand, the strategic thinkers argue that businesses have control over the marketplace and consumer behavior thus giving them the ability to strategize and put mechanisms in place to address their business needs. This essay analyses the theories of resource dependency theory; Institutional theory and population ecology theories to justify which approach between the deterministic and the strategic approach meets the needs of the organization by using one theory.
The resource dependency theory focusses on how external resources affect the nature of business operations in the organization. Since organizations rely on these resources to survive, then the way the resources are procured shapes the strategic and tactical nature of the organization. According to Prijcke, Manigart, Collewaert, & Vanacker (2017, p. 4) the organization relies on resources that emanate from the external environment that it operates in (Coupet & McWilliams 2017, p.7). Since the environment contains others organizations that compete for the same resources, then the way these resources are acquired and managed can lead to competitive advantage or can create competitive disadvantage making it difficult for the firm to operate. Having these resources and developing the ability to compete with other organizations becomes the source of power that firms rely on. Since power is directly linked to resources, then it means that having enough resources leads to strategic advantages that the organization has in controlling the area that it operates.
According to Schuster & Holtbrügge (2014, p. 11) one strength of the theory is that organizations with the same resources and power can depend on each other and foster business operations to favor their survival. Power and resources are situational, relational and potentially mutual to meet the needs of the organization. Since resources are multidimensional, then management has to prioritize the resources that it requires most and put proper strategies in place to manage the resource (Malatesta & Smith 2014, p. 7; Drees & Heugens 2012, p. 5). This leads to the establishment of relationships with other actors within the business environment to obtain the resources that the organization lacks control of to increase its competitiveness. The strategic role of this approach is to harness enough resources that lead to power which is used to control the business environment and develop strategic advantage.
By altering dependence relationships organizations are seen as coalitions alerting their structure and behavior patterns to acquire and maintain the needed behaviors. This means that every resource that the organization acquires is used to play the strategic role in developing a competitive advantage. Hillman, Withers & Collins (2009, p. 3) adds that since external resources are regulated and control by other players like the government, then organizations rely on forming of coalitions in the areas that they lack the control to have complete leverage on the resources in the external environment.
However, this theory has been criticized for failing to explain the performance of the organization. The theory also fails to explain why organizations put mechanisms for increasing organizational autonomy and legitimacy through mergers, joint ventures, and alliances as a way of dealing with market forces within the environment that they operate in.
This theory views the organization as an institution with different values and beliefs that form the way management decisions are made in the organization. The theory developed as an interest to understand organizational behavior and the strategies that organizations adapt to achieve superior performance. The theory addresses the macro organizational environment and identifies the rules, beliefs, and values created in the business environment through social interactions and routine activities within the organization (Marquis & Tilcsik 2016, p. 1328). This means that organizations are not autonomous rather exist in a social web of norms and expectations that they seek to fulfill. The purpose of these interactions is to interpret situations and prescribe the collective purpose taken by all employees. Since the institutional environment sees organizations as being constantly in the process of adapting to the changes within the environment, then it means that organizational structures and institutional forces work in a circular way guided by environmental forces. For example, organizational culture is used to define how employees interact and share different issues within the organizational context. This means that the actions of employees or management are not unfitted actions but rather guided by the established rules and norms within the organization.
To ensure that the whole organization adapts these institutionalized social norms, they are transmitted through agencies like the professional institutes, the state, consultants, the media or any other carrier of such beliefs. By being institutionalized, then there is a code of ethics that all members have to follow when engaging in business on behalf of the organization (Garridoa, Gomez, Maicas, & Orcos 2014, p. 91). For example, there are accounting and procurement bodies that have standards for their profession to follow when conducting business within the organization. This means that organizations have to conduct themselves in a manner that fits within the requirements of the industry they operate in. such requirements can be legal, professional or requirements that define the way business is to be carried out.
Further, Battilana & Dorado (2010, p. 1421) state that organizations use this institutional approach as a strategic element for seeking approval from the public, the state or any other relevant bodies that matter. For example, by honoring ethical standards of doing business, organizations strategically place themselves in a position that makes them more competitive and acceptable in the eyes of the public. In this era of transparency, public approval is an important element of organizational success. Mohamed (2017, p. 153) adds that the organization benefits through social acceptance, approval, support, and endorsement which increases legitimacy. This is seen in areas of social responsibility where organizations are accepted through their acts of good faith and compliance with institutional and industry requirements. As organizations conform to the requirements of institutional theory, they achieve efficiency and economic measures of performance by creating long-term chances of survival. This means that organizations working together can develop similar strategies and managerial arrangements to survive within the industry they operate in.
This theory views the organization as existing in an ecological system that defines the way decisions are made and relationships between the organization, the population and the community. According to Salimath & Jones (2011, p. 881), the population ecology theory divides the organizational environment into the community, the population, and the organization. The community level involves the integration of populations, the population level entails a set of organizations that interact in the business environment while the organization level focuses on the individual organization. The theory analyses how social forces or the community create new organizations, make some organization forms dead and how change is formed within organizations (Braha, Stacey, & Bar-Yam 2011, p. 222). By organizational mortality, the theory explains how the environment that an organization operates in supports its rate of growth or decline. This means that organizations that have failed to prosper or died did not get enough environmental support from the community which rendered their business obsolete. The forces combine to form organizational mortality which defines the survival of the organization.
On the other hand, Braha, Stacey, & Bar-Yam (2011, p. 225) argue that inertia and change forces make organizations accountable and reliable to survive the natural selection process in the ecological system. Therefore, negative products increase the degree of inertia and resistance to change which increases organizational mortality. This means that the speed and direction of the social changes that take place in the organization are defined by the dynamics of the organization (MacMillan & Komar 2017, p. 381). Therefore, when responding to issues that affect the ecology, the population prepares conditions that determine whether the organization will survive or will suffer imminent death. The organizations that survive better in such environments are more diverse which creates varied opportunities that make it easy for the organization to survive the ecological challenges faced.
In my opinion, I pick the institutional theory from a strategic point of view as the one that explains organization actins well. According to the theory, organizations respond strategically to pressures within the environment that operate. This means that organizations operate in institutional environments that are defined by a set of rules, regulations or norms that define the way business is carried out. This implies that organizations operate in an environment with rules that guide the way businesses operate and the decisions that managers make. According to Garridoa, Gomez, Maicas, & Orcos (2014, p. 89), when working within a particular industry, managers and employees are guided by the definition of how business needs to be run and the rules and regulations that form a culture of operation. For example, most professionals are guided by codes of ethics set by their professional bodies. Such rules do not operate within one organization but are rather institutionalized to affect all organizations that utilize the services of such professionals.
Therefore, the role of institutions within the society is to set rules that define the way players within the industry engage each other. When developing business operations and strategies, organizations are guided by rules of engagement that form the way such issues can be approached and how management ensures that such strategies are met. This means that the institutional approach views organizational strategies s genuine ways of ensuring the business survives but limited within specific needs of the field that the organization operates (Marquis & Tilcsik 2016, p. 1329). When employees and managers make decisions, they are required to operate within the institutional framework that has been defined. This is thus the belief in structures that exist to define the level to which organizations can go to avoid harming others and even the consumers that use them. For example, in issues of global warming, lack of proper institutional frameworks made it impossible to control carbon emissions in the environment which had led to environmental challenges. However, today there are environmental management mechanisms that require organizations to work within a certain framework. Therefore, the institutional theory best explains the nature of organizational actions by defining how these actions are controlled and regulated to fall within institutional requirements.
Conclusion
Organization action has been defined by different theoretical perspectives to justify how the actions and activities that take place within the organizational environment can be justified. Strategic approaches view management decisions as calculated processes to increase business competitiveness while at the same time working within industry requirements. Therefore, the institutional theory of strategic management is the one that best explains organizational processes and how these processes are guided by environmental requirements set by relevant institutions within the external environment. Unlike deterministic approaches, strategic management views organizational actions as decisions for organizational competitiveness.
References
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