Organizational Theory and Decision Making

This assignment delves into different organizational theories, including determinist, institutional, and strategic choice theories. It analyzes the strengths and weaknesses of each theory and examines how they influence decision-making within organizations. The report emphasizes the practical applications of these theories in various organizational contexts and suggests strategies for enhancing organizational effectiveness.

Running head: MANAGEMENT THEORY AND PRACTICE
Management Theory and Practice
Name of the student
Name of the university
Author note

Executive summary
The aim of this report is to discuss about the effectiveness of the different organizational theories
on the organizational performance. Moreover, the different organizational theories had been
compared in order to gain an understanding on the efficiency of the organizational theories on
different organizational situation. This report concludes that strategic choice theory is more
effective compared to the determinist theories for the business organizations.
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Table of Contents
Introduction......................................................................................................................................3
Strategic choice theory....................................................................................................................4
Process of strategic choice...............................................................................................................5
Resource dependency theory...........................................................................................................6
Institutional theory...........................................................................................................................7
Population ecology..........................................................................................................................8
Identification of the effective organizational theory.......................................................................9
Conclusion.......................................................................................................................................9
Reference.......................................................................................................................................11
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Introduction
In the current business scenario, business organizations have to adopt various
organizational theories in order to operate and gain competitive advantages in the market
(McGrath, 2013). However, the utility and effectiveness of the organizational theories are
different for different organizations based on their external environment. Organizational theories
are also being evolved and modified to meet the contemporary requirements of the business
organizations. Among all the available organizational theories, determinist theory and strategic
choice theories are being the most popular for the contemporary business organizations (Yarger,
2012). This is due to the reason that, these theories covers and aligns with major criterions of the
contemporary business organizations.
Strategic choice theory is more concerned with the effective and efficient choice being
made by the business organizations in decision making process from the available alternatives.
However, on the other hand, determinist theories refers to the market scenario of the
organizations, dependency of the business on the available resources and the standard norms and
regulations being followed by the organizations in order to gain competitive advantages in the
market (Yarger, 2012). This report will discuss about the effectiveness of these theories on the
contemporary business organizations. Moreover, various types and aspects of these theories will
also be discussed in relation to the organizational effectiveness. This report will conclude by
choosing the most effective theory among the discussed ones.
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Strategic choice theory
Contemporary business organizations have to choose their option from various available
alternatives. Thus, business organizations have to consider various aspects in order to have the
most effective options, which will help them to gain strategic advantages over their competitors.
This entire process of choosing the most effective option over others is being stated by the
strategic choice theory. This theory is effective and important for the contemporary business
organizations due to the reason that in the current business scenario, business organizations have
to consider various aspects factors in order to effectively operate in the intensely competitive
market (Henderson, 2017). Thus, it is important for them to choose the most effective option
available in order to gain the maximum outcome.
There are various opinions being provided by the authors in regard to the effectiveness of
the strategic choice theory for the business organizations. According to Hill, Jones and Schilling
(2014), strategic choice theory helps the business organizations not only in having the right
choice but also in making the right decisions. In this book, the example of Coca cola has also
been stated. It is being stated by the authors that, with the help of the strategic choice theory,
Coca cola able to adopt effective market entry strategy in various market around the world. From
the available market entry strategies, Coca cola determines the most effective one by considering
all the viable aspects in strategic choice theory. This helps them in having the competitive
advantages in the market they enters.
MANAGEMENT THEORY AND PRACTICE 4

Process of strategic choice
In initiation of the strategic choice theory, there are certain steps that should be followed
by the organizations to have the favorable and positive outcome. The following sections will
discuss about the various steps involved in the choosing the most effective option.
 Identification of the available alternatives is the first step in choosing the strategic choice.
In this step, the responsibility of the managers is to identify the various alternatives by
comparing with various factors such as expansion policy, cost leadership, differentiation
and market focus (Valipour, Birjandi & Honarbakhsh, 2012). Moreover, in this process, it
is also being determined that, whether the chosen option will have the positive impact in
future or not.
 The next step is to analyze and evaluate the chosen alternatives. In this step, the
alternatives are being evaluated based on various factors. GAP analysis is being involved
by the managers in order to identify the advantages and limitations of all the chosen
alternatives (Van Ittersum & Cassman, 2013).
 The last step is the initiation of the strategic choice. In relation to the analysis and
evaluation of the available alternatives, the most effective one will be selected. The
chosen strategic choice should be the most suitable and effective alternative for the
business organization (Leleur, 2012). In this step, various strategies and policies in
relation to the chosen option are being initiated along with the initiation of the
contingency policies.
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Resource dependency theory
Various diversified resources ranging from natural resources to human resources and
financial resources are important for the business organizations. This is due to the reason that,
business organizations can only operate in the market effectively if they have the abundant
supply of the resources (Drees & Heugens, 2013). Thus, according to the resource dependency
theory, allocation and the supply of the resources determines the behavior and policies of the
organization. According to this theory, the key source of competitive advantages for the business
organizations is their access to the required resources. However, similar organizations operating
in the market will also have the requirement of the same resources and thus, the more unique and
strategic resources will be accessed by the business organizations, the more will be their strategic
advantages in the market.
According to Rivas (2012), environment is one of the key and important resources to be
considered by the organizations. It is being stated in the article that, natural resources is one of
the key elements for gaining competitive advantages for the business organizations. Moreover, it
is also being discussed by the authors that, other required resources such as gender diversity in
the workforce and having international members in the organizations. In this article, the author
concludes that the more effective will be the abundance of the resources in the organizations, the
more will be their competitiveness.
For instance, Jindal Steel Plant will have the more competitive advantages if they have
the access to strategic resource of iron ore having good quality irons. It will help them to have
more competitiveness in the market and to stay ahead in the competition. Moreover, having
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strategic resources will have added advantage for them due to the reason that, other competing
organizations will not have the access to these resources. However, there is one limitation being
identified with this theory. According to this theory, having strategic resources will help the
organization to stay ahead in the competition. However, with having strategic resources that
cannot be accessed by their competitors, may also lead to the emergence of monopoly power in
the market. It will in turn have negative impact on all the associated stakeholders.
Institutional theory
In gaining competitive advantages in the market, business organizations should also
follow standard norms, organizational structure and cultures to be followed by the internal
stakeholders. According to the theory of institutional theory by Meyer and Rowan, formal
structure is important for the business organizations in having the singular approach and
effective control in internal management. Thus, the more effective will be the internal
management of the organization, the more will be their competitiveness in the market. According
to Zilber (2012), institutional theory is still very much relevant in the contemporary business
scenario. This is due to the reason that, according to the author, institutional theory helps in
changing the organizational culture in accordance to the change in the external environment
effectively. This is important for the contemporary business organizations due to the reason that,
the business environment in the current state of affairs is rapidly changing and thus, the business
organizations should also change accordingly. Thus, initiation of the institutional theory will help
the business organizations in having the flexible organizational culture, which can be changed
according to the market requirement. Moreover, it is the responsibility of the leadership to
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effectively follow the institutional theory in order to maintain the effective organizational
structure.
However, in the case of institutional theory, there are some limitations being identified.
One of the key limitations is the emergence of bureaucracy in the organization. Thus, the
effectiveness and efficiency of the organization will get hampered. As stated by Van der Voet
(2014), bureaucracy in the organization will also have negative impact and will pose resistance
in initiation of the change management. The organizational policies and procedures will be
ineffective and inefficient due to this issue. Moreover, it is also being stated in the article that
with the emergence of institutional theory in the organization, rate of generation of innovative
ideas in the organization will also get affected. This is due to the reason that, all the internal
stakeholders will be bound by the standard and norm being stated and no one will go beyond that
(Powell & DiMaggio, 2012). Thus, initiation of the institutional theory will help the business
organization to go by standard norms and regulations with having some sort of limitations that
need to be overcome.
Population ecology
The current business scenario is highly competitive in nature and huge number of
business organizations is operating. Population ecology refers to the number of similar firms
being operating in a particular sector. In addition, it also includes the individual characteristics
and aspects of the organizations operating in the same field. Thus, determination of the
population ecology will help the managers to initiate strategies and policies in the organization in
accordance to the competitive scenario of the organization. According to Marion and Gonzales
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(2013), one of the key aspects or factors that to be considered by the upper level management in
the organization is the population ecology. This is due to the reason that, effective determination
of the population ecology will help the leaders in identifying the competition in market and play
the leadership role accordingly.
Identification of the effective organizational theory
Organizational theories that are being discussed above in this report have their own
effectiveness for the business organization. However, among the determinism and strategic
choice theories, strategic choice theory will be the most effective. This is due to the reason that,
in the case of strategic choice theory, business organizations will have the choice of selecting the
most effective option for them (Burke, 2017). However, on the other hand, determinist theories
such as resource dependency theory, institutional theory and population ecology cover different
and diversified areas to consider for the business organizations. Moreover, in the case of
determinist theory, various limitations are being identified, which may pose challenges for the
business organizations. However, there will be no such limitations for the strategic choice theory.
This is due to the reason that, in the case of strategic choice theory, organizations will have more
available options to choose from. Thus, in case of any limitations being identified in particular
options, the second best option can be chosen by them.
Conclusion
Thus, it is being concluded that, all the theories being discussed above in this report are
effective and efficient for diversified organizational situation. However, in the above discussion,
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it is being identified that, determinist theories are having some sort of limitations such as
emergence of bureaucracy in the organization with the initiation of institutional theory. In
addition, it is also being identified that, initiation of the strategic choice theory will help the
organization to have more choices to select from. Thus, it is being expected that, initiation of
strategic choice theory will help the organization to enhance their effectiveness.
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Reference
Burke, W. W. (2017). Organization change: Theory and practice. Sage Publications.
Drees, J. M., & Heugens, P. P. (2013). Synthesizing and extending resource dependence theory:
A meta-analysis. Journal of Management, 39(6), 1666-1698.
Henderson, D. (2017). The role of business in the world of today. Business, Capitalism and
Corporate Citizenship: A Collection of Seminal Reports.
Hill, C. W., Jones, G. R., & Schilling, M. A. (2014). Strategic management: theory: an
integrated approach. Cengage Learning.
Leleur, S. (2012). Complex strategic choices: Applying systemic planning for strategic decision
making. Springer Science & Business Media.
Marion, R., & Gonzales, L. D. (2013). Leadership in education: Organizational theory for the
practitioner. Waveland press.
McGrath, R. G. (2013). The end of competitive advantage: How to keep your strategy moving as
fast as your business. Harvard Business Review Press.
Powell, W. W., & DiMaggio, P. J. (Eds.). (2012). The new institutionalism in organizational
analysis. University of Chicago Press.
Rivas, J. L. (2012). Co-opting the environment: an empirical test of resource-dependence
theory. The International Journal of Human Resource Management, 23(2), 294-311.
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Valipour, H., Birjandi, H., & Honarbakhsh, S. (2012). The effects of cost leadership strategy and
product differentiation strategy on the performance of firms. Journal of Asian Business
Strategy, 2(1), 14.
Van der Voet, J. (2014). The effectiveness and specificity of change management in a public
organization: Transformational leadership and a bureaucratic organizational
structure. European Management Journal, 32(3), 373-382.
Van Ittersum, M. K., & Cassman, K. G. (2013). Yield gap analysis—Rationale, methods and
applications—Introduction to the Special Issue.
Yarger, H. R. (2012). Strategic theory for the 21st century: the little book on big strategy. Lulu.
com.
Zilber, T. B. (2012). The relevance of institutional theory for the study of organizational
culture. Journal of Management Inquiry, 21(1), 88-93.
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