BA Business Studies: Causation and Effectuation in Management Issues

This essay contrasts the causation and effectuation approaches to entrepreneurship and business management in the 21st century. Causation focuses on predefined goals and strategic decision-making to achieve them, while effectuation emphasizes utilizing available resources to shape goals. The essay discusses how globalization and the rise of the internet have changed business practices, rendering traditional, causation-based strategies like STP less effective in dynamic environments. It argues for the importance of effectuation, which involves adapting to uncertainty and leveraging available means, and highlights the limitations of textbook theories that prioritize goal-setting over resource evaluation. The essay concludes that successful management requires a balance between causation and effectuation, enabling firms to navigate complexity and create opportunities.

Contemporary
management issues
21st century

Table of Contents
INTRODUCTION ..........................................................................................................................3
TASK ..............................................................................................................................................3
CONCLUSION ...............................................................................................................................6
REFERENCES................................................................................................................................7

INTRODUCTION
The Causation as well as Effectuation approaches of entrepreneur are contrasting with
each other. The approach of causation state that, focus has been paid by the entrepreneur on the
predefined set goals and then aims has been established in order to determined the necessary
means which is required to attain the goals (Coudounaris and Arvidsson, 2021). On the other
hand, the approach of effectuation state that, focus has been paid by the entrepreneur on that
means which are present in front of them or that are in their hand. This can be used in order to
convert the aim into one or more goals that are not necessarily predefined. The following report
is going to cover the concept of causation and effectuation and its relevance in order to
understanding the uncertain business management issues in the global business environment.
TASK
The common practices which are done by the different types of organisation ten to twenty
year ago in the market has been change due to the overall rise in the economy and globalisation.
Due to globalisation, overall change has been seen in the global business environment. Rise in
the use of internet, is being considered as one of the most important and significant factor due to
which the way of operating the different function by the firm within the economy has been
changed(Feng and et. al., 2020). The concept of Causation is basically ends-driven which
comprises of decision making with management plans. These plans are totally based on strategic
decision making process which help in achieving the set goals and objectives. On the other hand.
The concept of effectuation is to totally different or opposite from the concept of causation. This
means that don't paid focus on the end goals and the different resources which are required to
achieve that objectives. Emphasis has been paid on that resources which are possessed by the
company or entrepreneur.
Effectuation may be defined as the process of taking established means and paid focus on
selecting aspects between the different possible effects, which can be developed by means that
are present in hands. However, a debate has been still on going, on the utilization of the
effectuation and causation to the different extent in relation to time period. In addition to this, the
traits of entrepreneur is being considered as those factors which affect or influence the logic of
overall choice of decision making. The STP of an organisation is being considered as an specific
of causation. This help the firm in paying focus on establishing different set of goals in order to

achieve the target market size and target customers. In causation the concept of STP help in
defining the goals which are need to be attained in order to meet the objectives. The STP of the
firm is totally based on the pre assumed goals that there is an existing area in which the demand
and supply curves are defined. This pre assumed nature of causation approach is incorrect which
make it ineffective in the tradition economy. In STP, the segmentation approach of this model
help the organisation in paid focus on segmenting the marketplace and developing its goods and
services accordingly(Melo, Silva and Almeida, 2019). In addition to this targeting the market is
totally based on the objective of the firm. This is being considered as one of the most important
element of causation, as the goals and objective of the firm need to defined within this approach.
Moreover to this , the positioning approach of the STP model is totally based on the reach of the
target market by taking overall demand and supply into consideration. The theories which are
written in the textbooks deal with the creation of new venture in altered manner. In these theories
focus has been paid on setting up the goals and objectives without evaluating all the resources
which are present in front of them or in their hand. In addition to this, these theoretical
approaches paid focus on the end goals and objective instead of evaluating the resources which
are present in their hand and how they can be used to attain the objectives(Yu and et. al., 2018).
Furthermore, impact has been paid by these theoretical approaches on the creation of new
venture like business plan, setting the goals and objectives. It is very important for an
organisation to evaluate all the current resources while generating a business plan in order to
become successful in the new economy market. In addition to this, in order to develop an
effective business plan, then it is very important to underrated all the uncertain business
environment factor which are macro and micro in nature. These dynamic business environment
factors may negatively impact on the business plan which lead to the failure(Nelson and Lima,
2020). Due to this, the utilization of the textbooks theories become ineffective. As all the factors
are not taken into account and focus has been paid on the setting up the goals which need to be
achieved. In order to develop an accurate business plan an organisation have to focus on
establishing the goals on the bases of means which are present in hand.
Effectuation may be defined as that process in which all set of means and all possible effects has
been taken into consideration. This not only help in managing the vintage points but also help in
focusing all the resources which are possessed by the firm. All the actions of entrepreneur help in
carry out and managing all the situations of the future goals. This is mainly, when an

entrepreneur bring new creativity or innovation in their action which help in managing and
operating all the activities of the business.
Though experiments given to Sarasvathy MBA students drawn that, the thinking of the
entrepreneur in order to achieve all the objective is not important. This will not be casual but
counted as effectual. In order to initiate and manage the abilities, it has been examined that there
are three important skills in relation to effectuation. This help in maintaining the skill and
personal contact. It has been observed that, all the areas in which the future working is depend
cannot be predicted (Ranabahu and Barrett, 2020) . Effectuation can be explained, if all the chef
have no idea about the kitchen ingredients and kitchen, come out with some new skill and
knowledge. This means that efficiency as well as skills are drawn in it.
U-Haul, not only implies all the marketing techniques but also implies the way in which all the
exploiting contingency are being covered. This help in identifying all the ideas which ultimately
result in effective management and creativity. With the help of these realistic approaches all the
financial viable areas has been managed with the innovation in entrepreneur. The two concept
are compare and contrast. All the objective and analysis identify all the causation. This help in
managing the work through all the reward and function. On the other hand, all the innovations,
sources of creations and their contingency has been managed by effectuation with the general
ideologies. In the causation effective reasoning has been given and in effectuation at what extent
the future can be managed has been give. As with the help of aligner approach this can be
examined as this not required prediction.
Principle of Effectuation. Their are different types of principle for the effectuation by which all
the details and work are being aligned. In the Bird in hand principle, initiative with their own
opportunities has been taken by the entrepreneur. In the Affordable loss principle, calculation
has been done of all the risk and return. In the Lemonade principle, advantage of the contingency
has been taken by the entrepreneur in order to make it opportunity(Ruiz-Jiménez, Ruiz-Arroyo
and del Mar Fuentes-Fuentes, 2021). In the Crazy quilt principle, real commitments in relation
to future goals and product has been involve. In the Pilot of plane principle, result has been made
closer to the expectations. Experience of the entrepreneur state that, in order to carry out all the
traits, entrepreneur in the effectuation have to manages all the categories. Entrepreneur have the
risk taking abilities so that they can deal with all the risk and complexities (Villani, Linder and

Grimaldi, 2018) . They also have the abilities to diversify their knowledge which help in their
further development.
CONCLUSION
From the above report it has been concluded that, causation focus on predefined goals
and objectives and effectuation focus on all the innovations and the accretion of the ideas. This
not only help in management but also help in creation of opportunists and general contingency.
This report concluded that the goals and the management of the firm is done by the nature and
working. In order manage their business the management of the firm have to work according to
the farming principle by maintain balance between causation and effectuation.

REFERENCES
Books and Journals
Coudounaris, D.N. and Arvidsson, H.G., 2021. How effectuation, causation and bricolage
influence the international performance of firms via internationalisation strategy: a
literature review. Review of International Business and Strategy.
Feng, X and et. al., 2020. How knowledge search affects the performance of reverse
internationalization enterprises: the co-moderating role of causation and
effectuation. Journal of Knowledge Management.
Melo, F.L.N.B.D., Silva, R.R.D. and Almeida, T.N.V.D., 2019. Gender and Entrepreneurship: a
comparative study between the Causation and Effectuation approaches. BBR. Brazilian
Business Review, 16, pp.273-296.
Nelson, R. and Lima, E., 2020. Effectuations, social bricolage and causation in the response to a
natural disaster. Small Business Economics, 54(3), pp.721-750.
Ranabahu, N. and Barrett, M., 2020. Does practice make micro-entrepreneurs perfect? An
investigation of expertise acquisition using effectuation and causation. Small Business
Economics, 54(3), pp.883-905.
Ruiz-Jiménez, J.M., Ruiz-Arroyo, M. and del Mar Fuentes-Fuentes, M., 2021. The impact of
effectuation, causation, and resources on new venture performance: novice versus
expert entrepreneurs. Small Business Economics, 57(4), pp.1761-1781.
Villani, E., Linder, C. and Grimaldi, R., 2018. Effectuation and causation in science-based new
venture creation: A configurational approach. Journal of Business Research, 83, pp.173-
185.
Yu, X and et. al., 2018. Managing uncertainty in emerging economies: The interaction effects
between causation and effectuation on firm performance. Technological Forecasting
and Social Change, 135, pp.121-131.