Strategic Choice Theory
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.
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.
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.
Process of Strategic Choice
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 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.
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 effectively follow the institutional theory in order to maintain the effective organizational structure.
Resource Dependency Theory
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.
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 (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.
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, 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.
Reference
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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.
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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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