MASTER OF BUSINESS ADMINISTRATION
The contingency theory is one of the theories that present an ideal way to handle a corporation, to lead an organization and to enable effective decision-making. The course of action according to this theory is dependent on the contingency and is directly related to the internal and external situation within a particular hierarchy. There are various theories that were developed during the 60s and these introduced new management styles and organization structures which could efficiently influence the environment and execution within an organization.
Contingency theory is more of a formal structure which helps to implement the methods that could help to use different technologies in a better manner. The primary argument of the contingency theory is about the centralization of authority, creation of rules and procedures and maintenance of span of control. Donaldson (1999) also mentioned that organizations are like open systems that require the management to fulfill their internal needs so that they can successfully adapt to the circumstances.
In case of contingency theory there is no specific methodology of organization in place, and this theory suggests customized approach towards the environment which is being dealt with. This theory also explains that the organization type must be according to the environment within which a particular organization operates. Fiedler has suggested a focused approach towards the contingency model and he stated that the leader-member relationship is very important for the determination of favorableness of a particular situation similarly also mentioned that the degree of task structure is also extremely important in order to handle a particular situation regardless of the hierarchy. According to him, the leader’s position and power are crucial dimensions and are determined by the formal authority provided to him.
On the other hand the resource dependence paradigm is more towards the creation of an organisation structure that believes in enhancement of autonomy along with maintenance of stability and exchange of relations. In this theory the explanation of strategy would be about the profits interconnected with the Association of power and the dominant approach of the economy at a given time. There are three primary ideas which are a part of this theory, and the first one states that for an organisation, maintenance of social context really matters and secondly there are strategies that the organisations should have in order to enhance the autonomy within their structure and pursue interests.
Lastly, power plays a very important role in the identification of actions, internally or externally taken by an organization. Hence, if we compare the above two the glaring difference which can be noticed is that the contingency theory explains the direct use of power in decision-making however in case of resource dependence the particular situation being handled by an organization is primarily controlled by a close a unit which may have a better penetration into the prevailing issue.
The population ecology was initially introduced by Michael T. Hannan during late 70s, this theory is a very detailed understanding of the process and environment within which various organizations compete and it states that there is a natural selection which takes place in this environment. In order to explain it in a better manner it can be said that, organizations are in a sea of various competence, and there is death associated with organizations which may also be called as firm mortality, and there is the birth of new organization means organizational founding and growth which is similar to that of the natural environment where we live. Niche theory is an important part of population ecology, and was identified by Hannan and Freeman in 1977. This theory has two distinguish between two major types of organizations which are generalists and specialists. The specialists are organizations that explore the environment and take the risks in order to change ongoing practices, on the other hand the generalists prefer security and do not majorly exploit the environment within which they operate.
This theory has been instrumental in providing the results obtained by generalists and specialists in unstable and stable environments. It was this theory that proved, generalism as not the best choice to be adapted by organisations operating in unstable environment, an example application of this theory would be that as a production manager in case if I choose not to produce cost efficient products to win the market, considering the unstably then it does not guarantee the success of my organisation and therefore a specialist approach would rather be more helpful as it would directly attacked the market.
Similarly, Glenn R Carroll introduced the theory of resource partitioning, which states that in an unconcentrated/concentrated mass market the generalists would always try to reach the centre where there would be an abundance of resources however specialist organisations would create their own space thus resulting in a partition of the market. Hence, Carroll explained further that in a market where there is an abundance of resources the chances of success for specialists are better in case if it is a highly concentrated market. To understand it better, if as a production manager we are approaching a market, it would be beneficial for us to exploit it as much as we can in case if there are lots of players who are there however the market is fairly concentrated.
The detailed account provided by Williamson was primarily about this theory related to transaction costs. This theory elaborated on the importance of steps which can result in providing the low-cost operations leading to an organization becoming a manufacturer at the lowest cost. To understand this theory better, let's take an example of an organization where a particular production is taking place. If we consider the cycle according to which from an institutional environment the product reaches an individual, there would be various sub steps where this theory can be applied in order to obtain the most cost efficient process.
The theory suggests applying strategy with the help of effective governance and shifting parameters within the environment to develop a strategy on the basis of behavioral attributes of the potential customer. The theory requires identification of endogenous preferences according to which the governance must create a strategy to operate within the institutional environment so that the product can be effectively created for the individual in minimum possible cost.
If we take an example of the Arizona coffee cups, it would be important to analyse endogenous preferences of the potential customers who would be willing to buy the product in the market at a certain price. The analysis will be done on the basis of decision reminds and role, information and idiosyncratic are the dimensions which would be critical for analysis. Once identified, the ownership of managing these barriers will be on the governance and price cost margins must be calculated after implementing the changes as required to meet the demands. Once there is vertical integration of the above, the product becomes ready for individual transaction and therefore could easily be manufactured while spending the least in the market to produce the product according to the anticipated demand.
There are four different types of autonomous strategies, the strategic action, emerging external environments, strategic context and creating linkage. The autonomous strategy process enhances the variation and increases the instability while helping to change the identity and explore new opportunities for an organization. The autonomous strategy process helps companies in order to initiate new and effective strategies that can be incorporated along with the ongoing corporate strategies to achieve a better hold on the market.
Autonomous strategy and action includes the initiatives which are taken in a GroupWise manner and are beyond the limitations of the corporate strategy. A lot of innovation happens with this, as these are mostly the areas which have not been important to the form since a long time and are usually different from the core function of the organisation.
Emerging external environments are processes that involve mutation within the main process and target continuous evolution of a company. These are highly influenced by other environment and our temporary most of the times however there may be situations when these may be providing high results and may overtake the current environment of the organisation.
The strategic context is an autonomous strategic action which is not highly trusted by the upper management and there remains a sense of confusion about the importance of the same for the company. The strategic context is more like a definition to analyse and anticipate the initiatives which may result to be added as a part of the structural context. There is a huge weightage which can be given to the importance of autonomous strategy actions if they are understood and implemented by operations managers which would directly help to convert positive opportunities and would help to perform better with lesser resources.
It is important for the strategic context to be applied while creating linkage, which means that creation of new opportunities, is very important along with a sound strategy for execution. Mutation once again acts as a major resource and requires the induced strategy to be implemented while the linkages are enhanced to achieve success from both strategic and organizational contexts.
Jesse, Jessica, and Jose Rodriguez after having overtaken the bridal gown business should first initiate a process to conduct an analysis in order to find out whether the market in which they are operating is stable or unstable. The product that they are selling over here can acquire the market as a specialist and hence it would be interesting to apply the contingency theory over the business concept in order to achieve better results. A further analysis of the process would help Jesse, Jessica, and Jose Rodriguez to determine the subprocesses for which they are dependent on other organisations, and according to the theory of transactional costs given by Williamson, they must conduct an analysis to study the institutional environment within which the product is being created.
The interrelationship between the requirements and the availability of products on the market should be studied so that as management they can control the actual production which goes out in the final market. Since the business is seasonal it will always be beneficial to concentrate on sales during the season and on production during the off-season, also negotiation on the raw product availability during the off-season can be another factor which may help to reduce the costs and improve profitability average.
It would be very helpful to imprecise knowledge of applications which can be helpful in centralization and immediate decision making. Similarly, the solution to handle the business process in an effective way would be to implement robust communication across processes so that the production is flawless, timely and well managed. Creation of linkages is very important along with development of strategies and therefore Jesse, Jessica, and Jose Rodriguez must take an initiative to combine their strategies along with corporate linkages that they can create in order to open new markets for the products that they are selling.
If we talk about the benefits that will be drawn by them with the help of application of above strategies, the most common benefit can be described as increased responsiveness by the customers and access to newer and wider market. The centralization will help to improve the cost control along with the negotiations and bargains on the off season production.
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