Contemporary Management Issues: Causation and Effectuation in Business Management

This essay discusses contemporary management issues in business management, specifically the concepts of causation and effectuation. It explores the challenges faced by companies in today's business world and how effective management strategies can be formulated to gain a competitive advantage. The essay also highlights the importance of innovation in meeting customer expectations and mitigating negative impacts of uncertainties in business.

Contemporary
Management Issues

Contents
INTRODUCTION...........................................................................................................................3
TASK...............................................................................................................................................3
CONCLUSION................................................................................................................................7
REFERENCES................................................................................................................................8

INTRODUCTION
The term contemporary management can be defined as the process of controlling varied form of
resources along with bringing innovation within the process of organisation so as to accomplish
pre-set objectives and goals in a time frame period (Grégoire and Cherchem, 2020). Adding to
this, there are various challenges faced by companies while operating business whether it is a
small, medium or large firm. There are various contemporary issues faced by organisation which
relates to organisational behaviour. The concept of causation and effectuation facilitates
entrepreneurs in emphasising predefined goals as well as target for materialising into objectives
which are not pre-defined. The core aim of this project essay is to briefly discuss about causation
and effectuation along with explanation of varied artefacts that requires for venture creation.
This project essay will emphasise on the concept of causation and effectuation as well as
critical discussion of statement in order to gain insight of varied issues in business management
in international business environment.
TASK
In today’s business world, there are various challenges and barriers that limits success of
business. It is important for organisation to formulate effective management strategies so that
competitive advantage can be taken. In addition to that, newly establish venture has to face
different challenges such as low employee morale, poor employee engagement and level of
motivation. All these factor collectively influence on the operations of company. Start-ups are
based on various uncertainties and have to deal with influencing forces which may directly or
indirectly affect functioning of company. The concept of effectuation and causation consist of
main interest within venture creation as it facilitates in providing insights of decision making.
Causation can be termed as the action of causing which leads to an effect at which
effectuation is totally opposite of previously mentioned. There are various businesses that targets
to share ideas along with allocating key resources in an effective and efficient manner. Causation
is an approach which contributes in emphasising on pre-defined goals as well as opt and
implement all steps which helps in fulfilment of objectives. It is important to follow steps in a
sequential and well-structured manner so that it becomes easier for company to attain goals.
While on the other hand, effectuation encompasses with goal oriented, competitive analysis and
many more which positively contributes in fulfilment of objectives. The term causation consists

of four principles which are commitments, affordable loss, flexibility and experimentation. But
on the contrary, causation model consists of pre-commitment only. There are several business
management issue in contemporary business environment such as management of global tem
which belongs to different counties and they have different language, difference in time zone and
cultural difference. In addition to that, it becomes difficult for company to manage all aspects
and brings them collaboratively in order to attain predefined objectives (Shirokova and et al.,
2021). For a business, it is important to have a healthy relationship with its team so that they can
work with peak potential and contributes in meeting objectives effectively and efficiently.
The another issue that global businesses are adversely affected by change in rules and
regulations. Every country has different set of laws and legislations that company has to comply
with in order to make business process smoother. Government may impose penalty, in case of
non-compliance with framed rules and regulations. Decision of creation of new business venture
is based on tax rules, educational system, raw material for manufacturing firms and
transportation (Ruiz-Jiménez and et al., 2021). While on the other hand, it is imperative for
company to monitor inflation rates and makes decision accordingly so that it can serve better
price to its customers. Inflation rate would affect price of raw material, product and labour. The
value of dollar is not equal in another country due to difference in exchange rate.
Within contemporary business environment, causation relates to entrepreneurs so as to
understand changeable business management issues as this approach implies consideration of
entrepreneur on pre-set objectives. This concept is based on logic of prediction and it takes
particular effect along with drawing of clear picture of reasons. It encompasses with maximum
opportunity and relates to business issue of competition as well as constrain task relationship
with its external stakeholders and with suppliers.
Causation facilitates managers in guiding in creation of new product along with venture
(Matalamäki, 2017). The STP process of Kotler specifies the causation which defines that
marketers of company segments the whole market, identifies varies attractive segments and
position its products so that it can influence targeted customer. It is important for business to
correctly segment audience, target with effective business tool and position in such a manner,
where it can be accessible to its customers. International entrepreneurship can be considered as
the outcome of globalisation and rapid advancement in technology. The concept of STP analysis
is based on presumption which states that there is an existing market having defined demand

along with supply curve. For example, James Dyson has to understand dynamics of business
issues which is rapid change in market demand and this issue can be addressed by STP which
assist in increased marketing efficiency by directing employee’s efforts towards a particular
segment (Roach, Ryman and Makani, 2016). It will help company in reducing overall cost and it
can offer better price to its customers that eventually helps in fulfilment of goals. In addition to
that, it will also help entrepreneur in gaining maximum efficiency in its process.
Creation of new venture can be considered as journey in which entrepreneur engages in
practices and processes for turning fresh venture opportunity into effective value (Guo, Cai and
Zhang, 2016). By doing this, there are various challenges faced by company. In relation to
Dyson, the major contemporary issue faced by is resource constraint. It is imperative for
company to allocate resources in such a manner that it yields higher return. Causation can be
referred the result of varied occurrence which depends on another event. Both the events are
interrelated that helps in increasing or decreasing of both factors.
The concept of effectuation implies as problems solving skills of individuals which
advocates that future is full of uncertainties and it can be deal with effective management
strategies (Hauser, Eggers and Güldenberg, 2020). He defines that this term is taken mistakenly
taken as a form of management. By doing various experiments, professor observed that
managers can be considered as casual thinkers that they act by keeping end in mind which assist
in finding best way to find. There are various experiments which are given to MBA students so
as to contrast between management and entrepreneurship.
U-Haul can be defined as the process of sharing or exchanging of company’s resources as
well as machineries with different establishments. It can be done through contractual basis and
facilitates in lowering down of functional and fixed cost of company. This approach is very
effective and helps entrepreneurs who has less capital but wants to set up business at large scale.
By minimising overall cost, company can offer best available price to its customers. They tend to
buy quality product but by paying minimum amount. Company can lower down overall cost by
allocating resources in an optimal way and with effective usage of workforce.
The causation approach can be referred as the casual thinking of manager in which they
focus on accomplishing pre-set objectives by finding and opting best reliable source (Ortega,
A.M., García and Santos, 2017). While on the other hand, effectuation approach states that the
thought process of an entrepreneur has to concentrate on varied ways which are similar in terms

of similarity. Both the terms are propounded by Professor Saraswathy so as to describe
entrepreneurship in a well-structured manner.
Professor Saraswathy had propounded five principles so as to simplify concept of
effectuation. The principal of bird in hand advocates that entrepreneurs are aware of their
competencies and expertise in finding effective means so as to start certain job. While in
affordable loss, this principle states that entrepreneurs are rationale enough to evaluate and assess
their risk and they only focus on taking calculative risk. Lemonade principal suggest that
entrepreneurs should be taken as surprise box and they are very flexible and adaptive in their
respective approach which assist in making alteration in their operation in order to gain
competitive advantage.
Patch work quilt advocates that entrepreneurs have to bring innovation in product,
process and services and convince potential investors with their unique business idea along with
innovative practices (Karami, Wooliscroft and McNeill, 2020). They have potential to create
partnership with well-known business so as to me more competitive within market place. By
making alteration in existing strategies, company can bring get benefitted in various aspects such
as higher profitability, more revenue and low cost. Adding to this, it will help company in
gaining competitive edge as well as creates brand equity of firm.
Sir James Dyson, a British entrepreneur and inventor who majorly deals in making
innovative household appliances. With extensive research, it manufactures vacuum cleaner in its
first invention and sold to a Japanese company which assist company in getting best designer
award. After this, he got an idea of manufacturing innovative and creative design vacuum cleaner
and carry this idea right to investors. After making its first design, it brings innovation and
modifies its design so that its competitors could not copy. In addition to that, it also launched
new products which aids in gaining success along with creation of goodwill in competitive
market. James Dyson believes in making modification in its products and the only reason behind
company’s success is its urge to bring changes which provides convenience to firm’s customers.
Rapid change in technology in today’s business world contributes company in meeting customer
expectation and in decision making process. It will also help company in effective operations and
management of company can make effective decision. By analysing market, company can assess
needs and wants of customer and based on that produce product which has potential to meet
customer expectation.

There can be seen link between effectuation and James Stoner decision making process.
James Stones states decision process as identification and choosing of best alternative so as to
make critical decision. In this, an individual seeks various alternatives and opts suitable option
which can meet personal or professional expectation. Whereas effectuation can be stated as
thought process of an entrepreneur where they focus on finding best way to accomplish provided
task. The decision making process of James Stoner also states as choosing of alternative solution
so as to complete task.

CONCLUSION
From the above presented information, it can be concluded that causation and effectuation can be
referred as two terms which assist in modifying varied entrepreneurial practices. The term
causation relates to casual thinking of individuals in which they only focus on accomplishing
pre-set objectives. While on the other hand, in effectuation ways are identified first so as to meet
objectives that are unpredictable. Both the concepts are different and similar to each other and
are framed to understand better entrepreneurial practices in long term. It not only defines
entrepreneurial strategies but also emphasise on describing management principal. Adding to
this, it is important for entrepreneur to take these approach into consideration and focus on
bringing innovation so as to gain competitive advantage. Business is full of uncertainties and its
negative impact can be mitigated by framing of effective management strategies.

REFERENCES
Books and Journals
Grégoire, D.A. and Cherchem, N., 2020. A structured literature review and suggestions for future
effectuation research. Small Business Economics, 54(3), pp.621-639.
Guo, R., Cai, L. and Zhang, W., 2016. Effectuation and causation in new internet venture
growth: the mediating effect of resource bundling strategy. Internet Research.
Hauser, A., Eggers, F. and Güldenberg, S., 2020. Strategic decision-making in SMEs:
effectuation, causation, and the absence of strategy. Small Business Economics, 54(3), pp.775-
790.
Karami, M., Wooliscroft, B. and McNeill, L., 2020. Effectuation and internationalisation: A
review and agenda for future research. Small Business Economics, 55(3), pp.777-811.
Matalamäki, M.J., 2017. Effectuation, an emerging theory of entrepreneurship–towards a mature
stage of the development. Journal of Small Business and Enterprise Development.
McKelvie and et al., 2020. The measurement of effectuation: highlighting research tensions and
opportunities for the future. Small Business Economics, 54(3), pp.689-720.
Ortega, A.M., García, M.T. and Santos, M.V., 2017. Effectuation-causation: what happens in
new product development?. Management Decision.
Roach, D.C., Ryman, J.A. and Makani, J., 2016. Effectuation, innovation and performance in
SMEs: an empirical study. European Journal of Innovation Management.
Ruiz-Jiménez and et al., 2021. The impact of effectuation, causation, and resources on new
venture performance: novice versus expert entrepreneurs. Small Business Economics, 57(4),
pp.1761-1781.
Shirokova and et al., 2021. Effectuation and causation, firm performance, and the impact of
institutions: A multi-country moderation analysis. Journal of business research, 129, pp.169-
182.