The organizational theory provides scope to the organizations for identifying the structures as well as patterns in order to solve problems, maximize efficiency as well as meet stakeholders’ expectations. It helps in putting substantial emphasis on the people of organizations and the way they are treated. The theory’s overview, its drawbacks and strength, focus areas and measurement, helps leaders, for applying principles in practice (Yang & Taylor, 2014). These theories offer large amount of existing, relevant as well as highly relevant untapped explanations of complex interaction among organizations and its environment. In this context, resource dependency theory is the study of resources acquisition impact on the organizational behavior. This theory highlights number of the strategies, which can be utilized for dealing with the problematic relationships of dependence. The fundamental assumptions of resource dependency theory is that the dependency on important and critical resources influences organizational actions and the explanation of actions, depends on particular situation of dependency (Yeager et al. 2014). Hence, this assignment includes the discussion regarding using of resource dependency theory by the managers for developing framework to understand organization.
The resource dependence occurs when one organization relies on another organization for the resources. It is because of resource dependence, the organizations with resources are given power and influence over organization without resources. Through the influencing power over others, organization can influence prices as well as encourages structures of specific organization (Yang & Taylor, 2014). The development of concept of Resource Dependency Theory was done in 1970s. This theory explains organizational behavior by linking resources and power. The foundation of resource dependence is based on two approaches. The first one explains that external environment of organization consists of other organization in which each of them is having their own objectives as well as interest. Moreover, second one explains that organization holds over the focal firm, which may constrains its behavior, if resources are controlled. Resources are considered vital for the ongoing operations and it cannot be acquired anywhere else except the firms who have power to control the resources (Ye & Kankanhalli, 2015).
The principle of resource dependency theory is based on fact that organization should engage in the transactions with other organizations and actors in their environment for acquiring resources. These transactions might be advantageous as it might create dependencies. The resource dependency theory states that the organization requires resources for sustaining their existence in long run (Yang & Taylor, 2014). It states that organization obtains resources from the environment and there exist other organization, who wants similar resources in this particular environment. In this relation, power is referred as capacity of actor for acquiring control over resources required by the others within resource dependency theory framework. The emergence of disproportionate power, which is the result of relationship based on resources, helps in creating pressures on organizations that is dependent on resources and it brings requirements for accepting demands (Walker et al. 2015). The major difficulties faced by the organizations are uncertainty of resources and resources interconnectedness. It consists of dimensions of authority and power that is widespread in environment, uncertainty regarding availability of resources as well as resources interconnectedness (Vanhaverbeke & Cloodt, 2014).
The organization, who works with the issues of sustainability, is more resource dependent because their focus towards sustainability is more in comparison to the pure success of economy. The major resource dependence sources for sustainability organizations is the local government that often helps in providing required financing for the organizations in order to initiate their work. The major problem of the organizations for dealing with the issues of sustainability to have greater dependence of resources is its impact on their work (Thomson, Perry & Miller, 2014).
The resources dependency causes certain organizations for having power over others and the sustainability organizations are vulnerable specifically towards resource dependence that influences their work. In order to reduce the resource dependence, sustainability organizations tries multitude of things. Some organizations manage to avoid the resource dependence by avoiding reliance upon the other organizations for the resources. If the organizations lack the required resources, then it hinders their work and ultimately they are unable to achieve their goals. Some firms collect the fees from their member that gives power to their members in comparison to the outside firms. What the firms is going to do is largely dependent upon their goals as well as types of work, which they wish for accomplishing (Thomas & Autio, 2014).
The resource dependency theory’s basic assumptions is consists of making active choice to achieve goals by responding towards demand of other actors in the environment and trying to minimize their resource dependence, on which firm is highly dependent. The managers use the resources, which are both in human and physical form, for achieving organizational goals. The company’s management aims to achieve organizational goals to ensure most effective resources uses in best interest of society. The framework of resource dependency strategizes in relation to the sustainability and survival of organization. Moreover, survival of the organizational is underpinned by their resource acquisition abilities in uncontrolled environment (Schuster & Holtbrügge, 2014). There is linkage between organization and the environment for their dependency of resources of one organization to the other. The organizations require to be prepared enough for adapting to the changing as well as turbulent situation or environment. The understanding of action execution by firms could be understand in the better way, with the help of analyzing organizational effectiveness level, environment of organization and problem created by it to obtain resources, along with constraint and the contingencies, which are derived from environment (Sandström, Berglund & Magnusson, 2014).
The effectiveness of the organization leads towards achievement of company’s goal. The organizational view of goal-orientations is consists of combination of individual efforts that altogether leads towards achieving something that otherwise could not be achieved with the help of individual actions. Further, achievement of organizational effectiveness is possible through the avenues such as designing of strategic planning efforts to assess and measure specific objectives and outcomes. This helps in evaluating output usefulness as well as appropriateness of activities (Pugliese, Minichilli & Zattoni, 2014).
Typically, the companies adjust their strategies of business for adapting to changes in the power relationships with the other companies. The resource dependency theory is based on the assumption that uncertainty clouds the control of organizational resources and makes the choices of strategies for lessening dependence. If there is increase in uncertainties as well as dependence then requirement of linking with the other organizations also increases. It can be explained with the example that decline in profits may lead towards expansion of business activity by the help of diversification as well as strategic alliances with other organizations (Mayer et al. 2014).
The determination of resource dependency theory is done not only by competitive position of the company with various markets but the theory is determined by resources, which makes it superior rather than other existing competitors. Hence, it is obvious that the company has to maintain their quality resources and competencies for maintaining competitive advantages. The resource is not narrow concept but it is having broader sense. It is consists of organizational knowledge, capabilities, processes and much more that is controlled by organizations (Malatesta & Smith, 2014). This enables company to formulate and implement strategies, which in-turn improves company’s effectiveness and efficiencies. The company on continuous basis, does monitoring regarding existence of opportunities and threat. This creates balance of power and market dynamics for maintaining and ensuring continuous resources flow. The major purpose of this action is to increase level of control and coordination processes. They seek opportunities to decrease uncertainty and manage dependency by purposefully structuring relationship of exchange and establishing formal and semi-formal links with the other business organizations (Kozlenkova, Samaha & Palmatier, 2014).
The framework of resource dependency is used to determine strategic resources that could be used by companies for exploiting to achieve sustainable competitive advantages. In this context, business strategy specifies scope and defines base of every business, based on which company would be able for achieving and maintaining competitive advantages over others within the industry. In most of the situation, strategic decision-making is dependent upon decision-maker and on the availability of internal and external resources to organization. The organization has direct control over internal resources. They make effective utilizations of these resources for gaining competitive advantage. Moreover, external resources are managed by the organization (Kembro, Selviaridis & Näslund, 2014).
The resources are most crucial aspect of any organization. In the absence of which, survival of the company can be put in threat in competitive environment of business. The resources scarcity may leads towards the appearance of power relations in between company and external environment as well as results in creating basis for control over certain resources. The company needs to make sure that the company is competitive enough in terms of their resources for long-run survival (Cavusoglu et al. 2015).
The theory of resource dependency has sought to observe adaptations of organizations to the dependencies. The adaptation is consists to align elements of internal organization with the pressures of organizations. The organization adapts by the help of attempting to alter environment. These strategies sharply contrast with organizational classic conception that treats organization as the closed systems (Cai & Mehari, 2015). The framework of closed systems holds the fact that the rational resources uses, personal motivation as well as capabilities of individual, determines the success of organization and that the actors are figured minimally in environment. On other hand, framework of open-system stresses environmental impact that consists of the other institutions, professions, institutions and state. The perspective of open-system assumes that the firms will be effective to the extent that it helps in recognizing the changes in environment and accordingly adjusts itself to the contingencies (Bleiklie, Enders & Lepori, 2015).
Conclusion
Therefore, this report concludes that organizational theory focuses on dimensions of organizational designs, structures and relationships in respect of level of specialization, standardization, formalization, sizes, complexity, hierarchy of authority as well as goals and strategy. Moreover, it is analyzed that resource dependency theory, helps in promoting efficiency by seeking for constructing power between firms as unit of the analysis. As the open system, organizations transact necessarily with the other organizations in its environment to obtain necessary resources for survival. It is analyzed that relationship of power and dependence, subjects focal firm to the potential constraints. It is influence by those, who holds power. Further, managers’ uses resource dependency theory for ensuring sustainability as well as long-run survival of organization. In addition, it is analyzed that competitive advantage is achieved, if the company’s resources dependency is competent enough in comparison to the competitors. The theory of resource dependency helps to recognize external factors influence on the organizational behavior. Therefore, manager plays key vital role in shaping of the organizational outcomes by reducing dependency and uncertainty of environment and power of the other organizations over them.
References
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