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An organization is an ordered social unit composed of groups of individuals working in unity to achieve some agreed objectives. Organization theory studies how organizations can gain from identifying general themes for the rationale of solving existing or foreseen problems. This is done with an aim of maximizing efficiency and productivity and meeting the needs of stakeholders (Lall in Kim and Nelson 2000).
Different organizational theories exist, and they all have applications that favor them and some that go against them at different levels of organization. This paper looks at the contrasts between institutional and evolutionary theory of organization. This will be in how the two theories analyze situations in Dell and Kodak in the light of their performance over the past years to date.
At a broad level, the difference between the two theories is that, evolutionary economic theory sees economy as constantly changing, with the economy almost regularly proceeding in a manner that is not totally unfamiliar to the stakeholders, or to a great extent clearly understood by them (Peters b2000). In contrast, the institutional theory of organization assumes the economy to be at rest, or undergoing well projected changes, or in context, issues the decision makers can have experience over. In turn, this variation in the method the economic outlook is interpreted pilots to important variations in the operational parts of the theories in organizations.
Resource based view on the other hand, conceptualized a firm as a bundle of resources and the way these resources are combined determines the success of any individual firm (Hamel and Prahalad 1994).
Kodak case study
Kodak had a great market monopoly for many years, and as the resource based view theory has it, the company built its strategy along its strength in photography only. Kodak started with photography and did not include any new inventions into its business line. Despite having a variety of products in the market, all of them were narrowed to photography. If probably the firm had options in information technology and other forms of product that are not necessarily in the same line with photography, it could have managed to fight its rivals in market.
Kodak’s resources were generally quite loosely defined, tending to include everything internal to the firm. Barney (1986) lists all assets, capabilities, organizational processes, firm attributes, information, knowledge etc as resources. Some of the resources that Kodak had were not put into appropriate use as in the classification: valuable, rare, Inimitable and non-substitutable (Barney 1986). While resources are purchased, it is arguable that to achieve advantage from its resources, Kodak could have developed them internally (Dierickx & Cool, 1989)
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Therefore, Kodak did not at appropriate capacity develop the resources it had to better its future. This is the sole reason for its decline as per the resource based view theory.
The hierarchy and bureaucracy theory examines Kodak as having had a leadership system that is unfavorable to the functioning of the company. In efficient systems, communication is easy unlike in bureaucratic system where channels have to be taken to accomplish it. In this scenario, task are not assigned to individual but to layers of hierarchy (Ferguson 1984).This in one capacity or another, reduces accountability and innovation.
The innovativeness and capacity to change rapidly with adequate technology by other players in the photography industry caused a great constriction to the business of Kodak. This was despite the many years of monopoly and experience in the market. Instead, Kodak focused on establishing clear lines of authority and control. The organization majored on division of labor and specialization and set rules into the structure to ensure stability and uniformity (Weber 1947). The company expected to be able to predict future trends by understanding and looking at cause and effect. This made the decision makers not respond by probing for new tools of decision making but relied on the old known ways of problem solving that worked for them in the past.
Dell Case Study
According to Peters (b1999), institutions take a lifecycle approach, in that the firm changes in order of management, organizational structure as it grows. This theory looks at Dell as having gone into the existence phase and all the other phases’ up to resource maturity phase. At this level, the company, due to stiff competition from rival firms, it could not appropriately survive the develop phase of the path, but rather, went the decline way. When internal and external problems hit the company, it found it hard to compete with its rivals and was forced to record losses and had Michael Dell get back to head the company to try establishing it to a better stand. The humble beginning of the company in a student room in University of Texas Signifies the existence phase of the company’s growth. Typically, the initial success and control of the market that Dell had was a reassuring attribute. This later turn of events from a student room to one of the greatest companies in the world was quite reassuring and the decision makers did not expect any unusual changes in the industry. This justifies the institutions school of thought that only expected changes come to pass.
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As provided by the theory, Dell is highly dependent on institutional environment and does not bother much about the external surrounding. It also has lots of uncertain goals and relies extensively on professionals (Christopher and Carlotta 1988). All this in combination makes the company incapacitated in several ways and vulnerable to being out competed by other firms.
Evolutionary theory examines the condition in Dell as having experienced changes in the industry without any anticipation from its decision makers. Due to this unpreparedness, the company had it practically incapacitated to match its rivals in competition. The rationality of the actors in Dell is bounded, in the sense of Herbert Simon (1955). There was no other way the stakeholders could understand fully the context in which they were operating, yet, they had to cope. To the normal reasoning, they had to do tricks that in the past provided them solutions to these same problems satisfactorily. Unfortunately, insufficient innovativeness and not seeing opportunities that other players in the industry see in the wake of changing times lead to reduction of their market share in the business.
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It can be argued that Dell did not invest appropriately into research to enable them foresee future trends in the market and provide solutions to them before they arise. This could be an initiative that was taken by its rivals to ensure domination of the computer industry.
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