Modern Management Issues

A strategy is a group of actions designed to take advantage of a company’s fundamental competencies and provide it a competitive edge. Every company must have or create a strategy. A plan is the only thing that can provide a firm or company with a direct road to success. Beland (2005), p. 16, In terms of strategic management, there are traditionally only two functional dimensions. A notable characteristic of the 1980s was the dominance of the industrial outlook, whereas the 1990s showed the dominance of the industry-based setup perspective. In recent years, these two dynamics has been moving back and forth seeking answers to the major strategic questions. Also, the third perspective appeared to have contained the pendulum’s movement between the two major frameworks that are raised between the strategic management: a point of view of the institution (Teece 2010, p.182). The dynamics are attached to both economic-corporates with sociological corporation theory that demonstrates the role of the corporate in contrast with the different competitive advantages. The paper deals with the comparison and the contrasts in the institutionalists point of view the strategic management and structure of the industrial traditions.

Institutionalists Perspective Model

Given an institutionalist view point, companies function within the jurisdictions of the social values, standards as well as assumptions concerning what institutes acceptable and suitable economic comportment. Economic decisions are controlled not only by income, informational as well as technological limits which are emphasized by neoclassical models but by socially constructed limits which are particularly humans in origins such as customs, habits, and norms (Hall 2010, p. 209). The institutional viewpoint proposes that human behavior’s motives extend beyond economic optimization to social obligation and social justification. Institutional theorists assert that compliance with social expectations plays a role in firm survival and success. Institutional theories specifically have an interest in how organizational processes together with structure turns out to be institutionalized over time. Institutionalized activities refer to activities which have a tendency to be resistant to change, socially accepted, enduring and does not directly rely on monitoring and rewards for their persistence. Institutional theorist claim that several actions in the organizations are taken for granted as well as strongly endorsed by prevailing culture of the firm of the power structure that decision makers do not question anymore the rationality and appropriateness of the activities (Bresser and Millonig 2003, p.32). This theory proposes that industrialized activities are the result of interrelated procedures at inter-organizational, organizational and individual levels of analysis. Thus, according to institutional perspective model. Managers make selective strategic decisions concerning the acquisition and accumulation, and this decision after will influence the potential for company sustainable together with heterogeneity advantage (Sturgeon 2002, p.479). Another fundamental principle of institutional theory is that social prescriptions are conveyed to firms through agencies like media, analysts, consultants, professional institutes, a state among others that have concepts regarding suitable managerial conducts.

Industrial Organization Tradition Model

The nature of ownership can be supported by industrial organization theory which comes with benefits like; assets advantages which specifically intangible form is owning it enables an organization to strategize on geographically dispersed cations added as a value to diversification by lowering transaction cost that has no advantages (Goodrick and Reay 2011, p. 411). The industrial organizational model adopts an external perspective to describe that forces outside the firm signify the lead impacts on strategic actions of the organization as well as is based on four assumptions. The first one is that the competitive environments, the general industry and external environment enact constraints and pressures on organizations, also decides strategies that will lead to superior returns. Secondly, several companies competing in an industry segment or an industry govern the same groups of strategically-relevant resources, therefore trail the same strategies. The third is that resources utilized in the implementation of strategies are highly mobile throughout organizations. And lastly, decision-makers of the firm are expected to be sensible as well as dedicated to acting solely in the company’s best interest (Battilana and Dorado 2010, p.1420).

Similarities and Differences of Industrial Organization Tradition and The Institutionalists Perspective Models of Strategic Management.

The preceding review shows that institutional perspective model and industrial organization model make the same assumptions regarding firm and individual behavior. The first assumption is that in both models, an external environment that creates pressures and constraints for a firm to make its strategy. Both of them supposes that individuals are motivated to comply with external environments rather than internal characteristics of the firm. Industrial organization model involves external environments like a competitive environment, industrial environment and general environment especially the industrial environment and institutional perspective model comply with external social pressures. Also in both models, specific decisions are derived from the strategies laid from a rational analytic thinking by the corporate managers (David 2011, p.28).

The two models also have different assumptions. Unlike industrial organization model, when applying the institutional perspective model, social prescriptions may become “taken-for-granted,” i.e. institutionalized, and thus very difficult to change or resist. From every firm’s perspective the institutional theory have a multiple impressions varying from; a corporate might have had a poor history thus the theory goes against them, also the substandard resource choices may be made due to sunken cost being reasonable. The success of a firm can be determined by their cultural support, also the corporates may refuse to instigate their resources and abilities to seek legitimacy and social approval, and the exertion of influences from social avenues lowers the ability to have heterogeneity.

References

Battilana, J., & Dorado, S. 2010. Building sustainable hybrid organizations: The case of commercial microfinance organizations. Academy of Management Journal, 53(6), 1419-1440.

Béland, D., 2005. Ideas and social policy: An institutionalist perspective. Social Policy & Administration, 39(1), pp.1-18.

Bresser, R. and Millonig, K., 2003. Institutional capital: Competitive advantage in light of the new institutionalism in organization theory.

David, F.R., 2011. Strategic management: Concepts and cases. Peaeson/Prentice Hall. (Dvaid 2011, p.28).

Goodrick, E., & Reay, T. 2011. Constellations of Institutional Logics Changes in the Professional Work of Pharmacists. Work and Occupations, 38(3): 372-416.

Greenwood, R. & Hinings, C.R. 1996. Understanding radical organizational change: Bringing together the old and the new institutionalism. Academy of Management Review, 21(4): 1022-1054.

Hall, P.A., 2010. Historical institutionalism in rationalist and sociological perspective. Explaining institutional change: ambiguity, agency, and power, pp.204-224.

Sturgeon, T.J., 2002. Modular production networks: a new American model of industrial organization. Industrial and corporate change, 11(3), pp.451-496. Teece, D.J., 2010. Business models, business strategy and innovation. Long range planning, 43(2), pp.172-194.

Tempel, A. and Walgenbach, P., 2007. Global standardization of organizational forms and management practices? What new institutionalism and the business‐systems approach can learn from each other. Journal of Management Studies, 44(1), pp.1-24.