Root Causes of Organizational Crisis: Resource-Based View and Industry-Based View

Running Head: CASE STUDY 1
Case Study
Name:
Institution

Case Study 2
What are the root causes of this organizational crisis? (Write a brief description of the
following theories discussed in class and apply at least 2 of them to better understand GM’s
predicament: resource-based view, industry-based view, institutional based view, corporate
governance, a stakeholder management view of the firm).
The resource-based view is a strategic management tool that views resources as key to
the competitive advantage of an organization. This view looks at the internal environment of an
organization in establishing a competitive advantage (Day, 2014). The resources can either be
tangible or intangible. Tangible resources are the physical things that exist within the
organization such as machines, equipment, land, capital, and buildings. However, these resources
are of little competitive advantage to the organization as they can be acquired by the competition.
Intangible resources are assets that do not have a physical presence such as patents, intellectual
property, brand reputation, and trademarks. Such assets like brand reputation are built over time
and they provide sustainable competitive advantage since other firms cannot easily acquire them.
Resourced based view leads to two critical assumptions. The first one is heterogeneous
which means that resources, skills, and capabilities differ from one organization to the other. If
organizations had similarities in these resources, the competitive advantage would not have
existed. Heterogeneous assumptions enable an organization to employ different strategies to
achieve competitive advantage (Ismail & Haddaw, 2014). Another assumption is that resources
are immobile. Due to this, organizations cannot replicate the resources of the competitor or
implement the same strategies as the competitor.
The industry-based view is used in determining the strategy and performance of an
organization. In order to maintain a competitive advantage, an organization has to analyze the

Case Study 3
external environment in which it operates on and try to develop opportunities that will guarantee
a sustainable competitive advantage. This strategy locates an opportunity for high-level returns
and develops the assets of the organization in implementing the strategy.
The institution-based view focuses on the range and dynamic relations of institutions in
the organization. Strategic choices are not only determined by organization capabilities or
industry situations but informal and formal constraints of institutions. The institution-based view
is a combination of both the industry based and resource-based view. It incorporates the society
and the state in the formulation of the strategy.
Corporate governance is a set of rules and practices that determines how an organization
is running. It involves the balancing of the interests of the stakeholder. Corporate governance
involves every sphere of management from action plans, internal controls, performance
measurement, and corporate disclosure. The modern shareholder is not only interested in
profitability but also how the organization is displaying ethical behavior, good corporate
citizenship, and sustainability. Bad governance affects the reputation, integrity, and reliability of
the organization. Tolerance to cut cost and miscommunication can result in scandal search as the
one which faced General Motors.” The Elusive search for the root cause,” as it came to be
known unearthed corporate misconduct such as poor communication and putting profits ahead of
safety. GM lead engineer, Ray DeGiorgio had approved the change in sizes of the ignition
switches and springs and this lead to a faulty ignition system that did not meet torque
specifications (Domański, Guzik, Gwosdz & Dej, 2013). The company was also reluctant in
following the recommendation of investigations and the US Congress probed them as to why
they had taken such a long time in recalling the faulty cars. This indicates bad governance in
General Motors.