Situational Influences, Diversification, & Organizational Strategy

This essay examines the impact of situational influences and diversification strategies on business performance. It discusses the contingency approach to management, highlighting its evolution and importance in addressing organizational challenges. The essay explores how situational factors, both internal and external, affect decision-making and organizational development. Furthermore, it analyzes the diversification strategy, its risks, and its potential impact on organizational performance, considering factors like market competition and customer perception. The study emphasizes the need for organizations to adapt to changing environments and leverage diversification effectively to achieve strategic goals. Desklib provides a platform for students to access similar solved assignments and study resources.

Running head: BUSINESS STRATEGY
Business strategy
Name of the Student
Name of the University

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Author note

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Table of contents
Introduction................................................................................................................................2
Question 1..................................................................................................................................2
Question 2..................................................................................................................................6
Conclusion................................................................................................................................10
References................................................................................................................................11

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Introduction
Adoption of proper business strategy has become very important in order to bring the
organizational development (Alexander, 2017). Managing the situational factors have
become very important in the current business industry. The term situational analysis
indicates the temporary condition of an organization, which influences the purchasing
behaviour of the customers. These situational factors can be influenced by the social, physical
and time factors. In the case of marketing, the situational factors are considered as the
external factors of the business organization. Here the study has discussed the how the
situational influences impact on the overall business performance of an organization. In the
next question, it has also shed light on the relationship between diversification, competitive
market condition and the organizational strategies. Through this process, the global business
industry and its external influences have been identified in this study. Through this study, it
has been identified that how customer perception influences the decision making procedure
of an organization.
Question 1
According to Fiedler (2015), Contingency approach is an important management
theory that indicates the management style. This influenced by the behaviour and particular
situation faced by the organization. Hence this can be said that development of contingency
approach in an organization has become very important. On the other hand, it has been
identified that organizational environment also gets influenced by the contingency approach.
Taylor, A., & Taylor (2014), argued that it plays an important role in the case of decision
making by the financial experts of an organization. Therefore, this can be said that through
this process the quality of decision making gets improved. If the current business scenario is
analysed, it will be identified that after the modification of this approach, it has brought

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revolution in the business industry. Different challenges and rises faced by the business
organizations are being managed by this approach. Hence, this can be said that this approach
can be implemented in the case of both large and small business organizations. By solving the
challenges and issues of an organization this helps to meet the goals and objectives of the
company (Furlan Matos Alves et al., 2017). In the current business scenario, the contingency
approach is being used fir increasing the pressure on the management. Through this process,
the managers of the company take effective decision for achieving the ultimate goal without
delaying.
As opined by Miner (2015), the contingency theory is being used in the case of
managing the challenges of an organization. Therefore, this increases the responsibility of the
managers to appoint right employees in the proper position so that the productivity will not
be compromised. Skill and situational strategies development are influenced by this
approach. As the modern contingency approach has brought various changes in the strategical
management process of a business organization, therefore, it controls over the ability of the
organizational employees. The internal environment development is interconnected with the
contingency approach (Skinner, 2014). This process indicates the different organizational
behaviour, employee satisfaction and decision making process related challenges. As the
modern contingency approach believes in the employee engagement in decision making
process. Therefore, as per the modern contingency approach, the employees are being
involved in the process of decision making. Through this process their engagement and
loyalty towards the organization are being increased.
Before the year 1960, contingency theory only concentrated on the unique
circumstances in an organization (Cohen & Olsen, 2015). Decision making process,
employee engagement, job satisfaction and employee empowerment were not included in the
theory. By following the general management rules, the approach mainly focused on solving

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the external challenges for bringing organizational development. In the words of Yorio,
Willmer & Moore (2015), due to rapid transformation in the business industry, the rate of
both the internal and external challenges have increased. On the other hand, due to employee
conflict in the organization hampers the overall productivity. In order to manage the situation,
modern contingency approach has been introduced in the organization. By which the
responsibilities of the higher authorities have been cleared to them. The responsibility of the
managers towards employee engagement has been increased. The situational influences
handling procedure has changed in the current business scenario. As opined by McCleskey
(2014), in order to manage the challenges, the financial advisors have decided to appoint right
employees to right place rather than giving pressure to the existing employees. This plays an
important role in increasing the performance quality of the company as well as this also
influence the employees to increase their dedication towards the organization. The dedicated
employees will be more concern about their performance quality, which will bring the
advantage for the company.
According to Alexander (2017), the by bringing the specification in contingency
theory, Kubick and Kubick have brought huge development in the management procedure of
business organizations. Through this practices, the formal roles of the managing body of the
organization have been analysed. Another way Oreg & Berson (2015) argued that after the
development of contingency theory in 1960, the situational influences in an organization have
become transparent. The most important part of this approach is it has highlighted the
contextual factors of an organization, which highly influences its organizational
performances. These contextual factors are influenced by the environmental effectiveness of
the business industry. If the situational influences are analysed, it will be identified that how
the organization can experience the challenges from both the external and internal
environment.

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According to O’Grady & Lowe (2016), financial crisis, political outbreak, the sudden
announcement of war, decreasing rate of GDP, the living standard of people, employment
rate, sudden introduction of international and national rules and regulations and many more.
In the case of internal challenges, employee conflict, issues regarding the employee
empowerment, increasing manufacturing cost, improper relationship between the managers
and the employees can bring various complication in the organizational development. These
all factors are influential in the case of measuring the organizational performance. Hence, in
order to manage this situation, people introduction of contingency theory in the organizations
is needed. By following this practices, decision making process can be developed. If the
employees are involved in organizational decision making process, this will help the
organization to motivate the employees towards their company (Arrfelt et al., 2015).
On the other hand, it has been identified that job satisfaction is an essential factor in
employee motivation. In the case of increasing the job satisfaction in the organization, the
theory has suggested providing different motivational rewards for improving their interest
towards the organization.it has also identified that if the managers of the company will
maintain healthy relationship with the employees, this will help them to discuss their
demands and needs with them (Furlan Matos Alves et al., 2017). By following this strategy,
the productivity will be increased. Depending on the productivity, the financial condition of
the organization will be improved. Therefore, this can be said that contingency theory is very
important in the case of developing the organizational structure as well as increasing its
profitability rate.
In the case of this study, it has been identified that in the previous business
management practices the uses of contingency theory was very less (Taylor & Taylor, 2014).
It was only being used in the case of situational analysis. In the previous contingency theory,
the employees were not being involved in any decision making process. Hence, the

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individuals' suggestion regarding the development of the organization was not being used.
However, Fiedler (2015) argued that in the current business scenario has introduced the
theory by adding more flexible policies in which individuals get the chance to give their
suggestion in organizational development. Therefore, this can be said that this is very
important for the organizations to adopt this theory in order to bring the development in
strategic management. In this study, it has been discussed that different situational factors
which have a higher level of impact on the business can be reduced by following the
contingency approach. It has been suggested in this study that if the organization will focus
on the structural adoption, it may bring the changes in organizational design. By making the
organizational structure more organized, the internal environment of the company can be
improved.
After analysing the above study, this can say that in the current business scenario,
development of contingency theory has become very important. As stated by McCleskey
(2014), if the previous contingency theory will be compared with the modern contingency
approach, this will be identified that the uses of contingency theory have become very
common in the case of organizational development. On the other hand, this has also been
identified that in the case of 1960s contingency theory, it highlighted the only situational
factors, the employee engagement and motivational factors have not been discussed. In the
case of current contingency approach, it has been identified that involvement of employees in
decision making process, the company needs to be more polite towards their employees. This
will help the organization to provide job satisfaction to the employees. Hence, this can be
said that the modern contingency theory is more useful than the previous one in the case of
bringing the organizational development.

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Question 2
According to Lievens et al., (2018), diversification is a corporate strategy that helps
the organization in order to enter in the new business market. By following this strategy the
organization gets the chance to operate unknown market. In this case the organization
introduce new product for a new business market. In the current business scenario, the
strategy of diversification has become very popular (Chrisman & Su, 2017). In this practice,
the business activities are being expanded for following the business trend of that particular
market. In the case of product diversification strategy the business organizations introduce
the new product or existing product by adding more facilities and features in it. In this study,
it has been highlighted that the competition in the market and impact of organizational
strategies on the organizational development procedure.
In the case of developing new product in new market, the customers purchasing
behaviour gets influenced. As stated by Ardizzon, Cavazzini & Pavesi (2015), it has been
identified that the customers always prefer the product which has strong brand image in the
market. On the other hand product value also plays an important role for influencing the
consumer behaviour. People mostly being attached the products which can influence them
emotionally. Therefore, in order to introduce new product in new market the organization
needs to focus on understanding the needs and demands of the customers of the area. In the
other hand, the standard of living is also very important to be understood by the organisation
to develop its reasonable pricing strategy. Therefore, this can be said that he company needs
to focus on the development of the company. On the other hand, it has been identified in this
study that depending on the customers' perception the organizational development is being
influenced. In order to develop a product in new market, the organization focuses on market
analysis (Shen, Au & Yi, 2018). Through this process the cultural preferences of the people
of that are being analysed. On the other hand, the organization always tries to develop its

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business in those areas where the availability of target market is very high. Therefore this can
be said that by follow in this.
In this study the relationship between the diversification strategy and organizational
performance have been discussed. As opined by Arrfelt et al., (2015), it has been identified
that the impact of these strategies can be different in the case of developed and developing
countries. As the product diversification strategy has higher level of risk in the business
market, therefore this can be assumed in the case of saturated business market the strategy
cannot be applicable (Wu, Straub & Liang, 2015). On the other hand, it has also been
identified in this study that depending on the customers’ perception the organizational
productivity can get affected. In the case of developing countries, it has been identified that
the relationship between the diversification strategy and organizational performance is
moderate. Another way Chen et al., (2014) stated that the relationship between the
organizational productivity and diversification strategy gets influenced by the uses of
physical resources in the organization. In the case of manufacturing unit, the diversification
strategy introduces technological advancement and modern equipment which impacts on the
production report of the company.
On the other hand, it has been identified that due to development of product
diversification strategy, the company needs to focus on creating its strong brand identity to
the people. The brand value of the customers will be helping in the case of attracting the large
number of customers (Essen et al., 2015). Depending on the availability of the customers in
the market, the business revenue of the company will be increased. It has been identified in
this study that before adopting the strategy of diversification, the organization needs to focus
on market analysis practices. As opined by Grant (2016), through this process, organization
will be able to understand the position of competitors in the market. On the other hand, this
process will be helping in the case of understanding the external influences of the market,

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which can create challenges or opportunities in the market. Therefore, this can be said that
understanding the market position, the organization will be able to introduce unique features
in its business model so that the quality of performance can be improved.
It has been identified in this study that product diversification strategy introduces new
product in Newmarket. Therefore grabbing the attention of the customers, the organization
focuses on introducing modern technology so that it will be able to provide unique product or
service to its customers (Su & Tsang, 2015). On the other hand, it has been identified in that
if the technological development can be introduced in the manufacturing unit of the company,
it will play an important role to increase the productivity of that organization. Marketing
capability is another important element which is needed to be analysed in the case of
developing any business strategy. This kind of practices is being influenced by the market
research, supply chain management and product distribution channel.
In the case of product diversification, the organizations always try to focus on the
operational capability, because this factor is very important in the case of increasing
productivity of the company (Short et al., 2016). Therefore, this can be said that through this
process, the organization can influence the purchasing behaviour of the company. On the
other hand, the study has mentioned that in the case of developing management skills in an
organization, the diversification practices are needed. As the study has repeatedly mentioned
that in diversification strategy, the organization will be able to manage the organization to
manage the situation of the company gets influenced. On the other hand. It has been
identified that due to development in management skills the rate of profitability in the
organization increases. Therefore this can be said that diversification strategy and
organizational performance are interconnected to each other.

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Here the study has also highlighted the impacts of competitive analysis on
organizational performance. As stated by O'Brien et al., (2014), by identifying the position of
the competitors in the market, the organization will be able to get information about needs
and demands of the customers. This will be helping in the case of understanding the living
standard and cultural performance of the people. Cultural performance and living standard as
the two important factors which have strong impact on business performance. Therefore, this
can be said that product diversification strategy needs to be developed depending on the
customer purchasing behaviour. Another way Mithas & Rust (2016) opined that depending
on the situation in the external market the organization develops its strategy so that it will be
able to establish its unique position in the market. In the case of developing new product in
the market, the availability of demands needs to be analysed by the company. If customers
get attractive products in the market in lower range, they easily purchase those products.
Once they get satisfied with the company, they also recommend their family and friends.
Therefore this can say that, it is very important for the organisation, to develop proper
strategy which will be able to attract the customers emotionally. It has also been proved in the
study that in order to develop new product in a new market the diversification strategy cannot
be enough step, market analysis and competitor analysis are as important as the strategy,
Conclusion
In this study, it has been identified that after the years 1960, the contingency has
brought various changes in the business industry. If the current business scenario is analysed,
it will be identified that the importance of contingency theory has increased in order to bring
the organizational development. In the current situation, the uses of contingency theory have
changed. It has been identified in this study that the current contingency theory has focused
on the employee engagement and involvement of them in decision making process. It has
also highlighted the job satisfaction as an important part of organizational development. It has