Organizational Behaviour Theories: A Critical Analysis

This essay critically analyzes the impact of organizational behaviour theories on businesses. The theories discussed include Strategic Choice Theory, Resource Dependency Theory, Theory of Population Ecology, and Institutional Theory. The essay highlights the pros and cons of each theory and concludes that Strategic Choice Theory is the most effective model for businesses in the current market environment.

Management theory and practice
Essay

The world that we live in as well as its business environment has witnessed a significant number
of changes over the span of last two decades. The predominant reasons behind this change
includes the advent of globalization, the rise in technology and the enhanced ardency in the use
of internet. The fact that social media has gradually entered into our everyday lives also has a
role to play in the changing business environment (Hajli, 2014). The combined impact of these
changes has also led to changing organizations. Business organizations today have undergone a
large number of changes in terms of organizational culture, modes and manners of
communication, structure and hierarchy in the organization, role of managers, growth of leaders,
decision making and more so have had a massive impact on our organizations.
This essay highlights upon several organization behaviour theories that have helped us
understand businesses better. The theories as well as their impact have been critically analyzed.
The writer’s inclination towards a particular theory is also clearly explicated post weighing the
pros and cons of all the discussed theories.
One of the most recent addition to organizational behaviour theories is the Strategic choice
theory. The theory throws light on the role played by leaders and managers of the business in
positively impacting the organization by gaining a deeper insight about the business environment
within which the organization functions (Pisano, 2017). Before the advent of this theory, it was a
fairly common perception that organizations pave their way forward depending upon the
operational requirements of the business. These of course in turn depend on the external
environment of the business. Strategic choice theory offered an alternative wherein organizations
could formulate an agency dedicated to making these choices. The desired outcome from this
was to make choices which are strategic in nature but also in sync with the external environment
of the business (Whittington, 2014). There are several tools that guide marketers in assessing the
external environment impacting their industry. These tools include Porter’s five forces model,
Ansoff’s matrix, BCG matrix, SWOT and TOWS analysis as well as PESTLE. These tools can
be used by the created agency of dedicated individuals in order to gain a deeper insight about the
industry of operation.
The success of any organization largely depends on the fact that the strategies adopted by the
business are in line with the external environment within which the business functions.

Ecommerce giant Amazon Inc. has been leading the Ecommerce industry at the moment. The
growth and advent of Amazon across different parts of the world is a clear evidence of Strategic
Choice Theory. The behemoth of the Ecommerce industry has adopted a “Go Global, Act Local”
or better known as “GLOCAL” The GLOCAL strategy adopted by Amazon has helped the firm
in building a solid base across various continents including South East Asia and Australia (Diehl
& Bishop, 2017). This strategy was developed keeping in mind the needs of the business’s target
market as well as the stance of existing competitors. Hence Strategic Choice Theory formulates
business strategies by considering the present business environment as well as ensure long term
sustainability of the business.
The second organizational behaviour theory discussed is the Resource dependency theory which
was founded back in 1970. As the name suggests, the theory underpins the firm belief that
resources are highly critical to the success of any business. They form a solid base for power,
growth and sustainability. Resource dependency theory therefore throws light on how an
organization’s behaviour is directly impacted by the availability of resources (Biermann &
Harsch, 2017). Most of the resource used by any organization are limited and mostly perishable
in nature. Businesses spend a great deal of cost and time in ensuring that they are able to procure
quality resources and transport them in time in order to effectively utilize them for business
production.
This resource dependency theory suggests that the strategies adopted by a business to manage its
resources is the harbinger to the success of the firm. Unfortunately, the resource dependency
theory focuses only on the raw material resources required by the firm and fails to identify the
role played by other critical resources such has financial resources and human resources.
The theory clearly highlights upon the importance of effective management of raw materials of
the business. Therefore rather than relying on a single vendor, organizations associate with a
large number of vendors for the supply of their raw materials. The Apple Inc. is a leading a name
in the mobile phone industry. Vendors would gladly associate with such a strong brand name.
Even then, Apple credits its success of a 1 trillion Dollar company to its several vendors like
Huawei, LG, Intel and Samsung. This strategy adopted by the IT giant Apple reflects upon the
use of resource dependency theory.

The third theory of organizational behaviour is the theory of population ecology. This theory
states that organizations work for the population and are found among them. Therefore it is
imperative that organizations work in a manner that responds to the changing needs and demands
of the population surrounding them. The theory also suggests that organizations which have
proved to be sustainable in the industry are the ones who could appropriately respond to
environment changes (Rockwood, 2015). These environmental changes refer to those in the
external environment as well as external environment.
Within every industry, a new organization tends to grasp understanding of what the previous
organizations have been doing. For example, a new automobile company would attempt to
follow the footsteps of Toyota or Hyundai or Volkswagen. If the company aims to target
premium segment customers by making luxury cars, then the company would follow the likes of
Audi, Mercedes or BMW. The idea behind following the leader of the industry is to get easily
accepted by the public and appear legitimate in their opinion. Even though this theory clearly
reflects upon the actions of new organizations and acknowledges their effort to mould as per the
customer needs, the theory is also flawed because it implies that older organizations that have
been in the market since a long time would find it difficult to change with changing consumer
needs owing to their large size and complicated structures. This can be seen in the example of
Nokia which once dominated the mobile handset market, lost its shoe and failed to identify the
industry’s expectations from the brand.
The last theory is the institutional theory. The theory aims to consider the impact of the process
through which several norms, routines, rituals or practices become solid guidelines for social
behaviour. The institutional theory implies that the legitimacy of these social behaviour confirms
the organization’s survival or existence (Greenwood et. al., 2017). For example, for a university
to survive as a university, besides all the legal documents, it is important the stakeholders of the
university accept that it is a university. For a school to survive, everyone has to agree that it is a
school. The theory therefore suggests that the base for the survival of any institution is the
process through which organizations allow their stakeholders to accept the organizations as per
its social norms.

With reference to this theory it can be inferred that organizations tend to be very similar to each
other in order to be accepted. This can be seen in several organizations structure. Hence it is the
institutions need to be accepted that makes it mirror the actions of other organizations in the
industry. One of the major lacunae in the theory is the changing environment of today.
Organizations today are breaking the barriers and adopting absolutely new structures, cultures
and modes of communication. Several organizations have flat structures or no hierarchy
structures. The leaders of the theory have stated that formal legitimacy is a limiting factor for
business development and growth. They have also mentioned that all industries and
organizations are witnessing the institutional pressure to be homogeneous with regards with
other organizations of the industry. This pressure can be seen in the form of coercive pressure
from the government, mimetic pressure to copy the leader and normative pressure within the
internal environment of the organization.
The above discussion highlights upon four critically used organizational behaviour theories. The
aim of the report was to make a detailed yet easy to understand analysis of all the theories in an
unbiased manner. The report also works towards deepening reader’s understanding regarding the
different schools of thoughts on organizational behaviour theories and how each of them vary in
terms of their degree of adaptability to the business environment. Every theory that guides
organizations has its own set of pros and cons and no theory has yet been identified that could
work uniformly across all organizations in industries.
Another prevalent theory is the deterministic theory which by and large states that a market
functions of its own and is pretty much self-controlled (Walker et. al., 2015). This theory held
true for a very long time. However given the current stance of the market, the strategic choice
theory is the only one that aims to gain control in the market by understand consumer behaviour.
It effectively covers all market forces that have any significant role in guiding the organization.
In fact to a lot of extent, this theory is being adopted by a large number of organizations present
across several industries. Therefore the essay can be concluded by stating that Strategic Choice
Theory is a better model than deterministic theory of organizational behaviour. This theory is
proactive, reactive and an adaptive approach to the changing market environment. As opposed to
deterministic theory which is largely an adaptive theory.

In the changing business environment, the customer is the king. The environment’s impact on the
success of any business is very high. Therefore it is the need of the hour to understand the role
played by external environment. Strategic choice theory aims to do just that. Organizations
adapting this theory mould their functioning, offerings, pricing and advertisements based on the
changing environment. This has not only led to the growth of the organization but has also led to
long term sustainability in the business.

References
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