Contingency Theories Essay

Contingency theory suggests that it is possible to form excessively much to run into the demands of the environment. This would be a instance of strategic misfit. Think of an illustration of misfit caused by an inappropriate organisation design. Explain how a firm’s construction could consistently increase its costs and topographic point it at a strategic disadvantage.

Contingency theory is the thought that there is no uniformly “best” construction for all houses in all fortunes. Contingency theory has focused on three factors that may impact the comparative efficiency of different constructions: * Technology and undertaking interedependence

* Example: Telecommunications progresss have immensely improved the ability of applied scientists and merchandise specializers located physically far apart to pass on and organize merchandise design. This decrease in the costs of coordination reduces the demand for members of a squad to be in the same portion of the firm’s formal organisation or even to be portion of the same house. Hence. a house might endure strategic misfit if it is excessively vertically incorporate relation to the ability of coordination across houses. * Information flows

* Example: Harmonizing to the economic expert Galbraith. administrative hierarchy ( foremans! ) develop in order to manage “exceptions” – determinations that can non be made easy by using standard organisations modus operandis. Successively higher degrees of organisation are needed to manage more hard exclusions. What follows from this statement is that strategic misfit occurs as the sum. complexness and/or velocity of information processing that a house must set about to do determinations alterations but the house does non alter. A house with a stiff hierarchy in an environment where responses must come more quickly is disadvantaged. * The tenseness between distinction and integrating

* Example: Lawrence and Lorsch note a tenseness in complex organisations between the benefits of making independent specialised work groups ( distinction ) and the demand to incorporate these groups into a corporate whole ( integrating ) . Differentiation provides the benefits of division of labour – but integrating is necessary to capture the benefits of labour division. See a multi-product nutrient company that silos each of its merchandises. Here the house may lose the benefit of utilizing all of its merchandises together to derive purchase over retail merchants.