Cyert and March’s analysis of organizational decision making
Cyert and March’s analysis of organizational decision making is mainly concerned with the strategies used by business organizations to come up with economic decisions. They lay a lot of emphasis on the microeconomic factors affecting the organization in relation to the internal operations within the organizational framework.
In making these allegations, they argue that “one way of understanding modern organizational decision making is by supplementing the microeconomic study of strategic factor markets with an examination of the internal operation of the business firm – to study the effects of organizational structure and conventional practices on the development of goals, the formation of expectations and the implementation of choices” (Cyert and March, 1963 p.154). In their research, Cyert and March came up with a model with focus on the following.
First, focus is emphasized on the few key economic resolutions being made within the organization. Second there is a development of models which are mainly focused on the internal processes in the organization. Third is to ensure that there is a linkage between the models in the organization and the pragmatic observations. Fourth and last is to come up with a general presumption on the organization under review.
From this, Cyert and March were able to develop a theory that takes the organization as an independent unit. This model ensures that the prediction of the organizational behavior goes hand in hand with the decisions such as price determination, output determination and resource distribution. In order to achieve this, the model is broken down into four subsections comprising of goals, expectations, choices and control.
In order to increase revenues and subsequently profits the management of Sony managed to adopt Cyert and March’s analysis of decision making in that they were concentrating on the microeconomic factors in the organization. From the case study, Sony was a failing strategy since in a series of eight years; seven were a failure since the organization was unable to attain the forecasted profits. This failure was attributed to poor planning and occurrence of unprecedented challenges and or failure to execute the laid plan effectively.
Either way, the bottom line of the entire problem was with the management processes especially in decision making. This came at a very crucial economic time in the whole world, since most economies were undergoing a recession hence cutting down on spending. This would mean worse outcomes in the years to come and this therefore called for drastic measures to be taken in order to save the organization.
Plans to reorganize the operations of the company were announced at the beginning of 2009 and this was just one of the reorganization plans since 1994. The previous one’s had been short-lived and the management therefore anticipated for different results in this latest development. The management laid down a plan that is in line with Cyert and March’s model in the sense that they were concentrating on the economic variables such as price, competitive advantage and the cost of production and distribution.
One of the strategies that were adopted to reduce the cost of operation included reducing the range of products and business classes. This company dealt with many products in the name of diversification. The failure however proved that this was not working for the good of the company since it increased the cost of operation. The many business categories also contributed to the high operating costs which later on translated to consecutive losses.
All the business categories were amalgamated into a single business unit and the number of products reduced by eliminating those products which were already obsolete or which would become obsolete in the near future. With these changes the management had taken care of the cost of operation. They then reviewed their prices as per the market demands in order to acquire competitive advantage in relation to their competitiveness.
Brunsson’s view of organizational decision making
Brunsson’s view on decision making complements Cyert’s and March’s analysis since he insists on rational decision making. This involves putting into consideration the alternative consequences of the decisions being implemented besides the positive anticipations. These consequences include but are not limited to responsibility allocations, actions mobilizations and organizational legitimization.
In his analysis, Brunsson explains that “these consequences of decisions can influence decision making and the assumptions about feasible norms that provide their context and the result of this is that these decisions will run counter to actions leading to organizational hypocrisy” (Brunsson, 1989 p.453). He goes ahead to explain that some decisions substitute their respective actions or reduce the likelihood of the actions taking place hence leading to what he calls systematic irrationality.
This means that organizational decisions can be made, but if these decisions are not implemented effectively, then they are as good as nonexistent. This explains why the strategies in Sony worked effectively in the long run to revive the company. The decisions were made and implementation plans effected promptly. From this therefore, we can deduce that Cyert and March’s model and Brunsson’s model work hand in hand to ensure that organizational decisions are made and implemented effectively.
Zimmerman’s insights on rules and decision-making
Zimmerman’s insights on decision making revolve around decision making issues and ideas in groups are concerned. In most organizations, decisions are made by a group of people mostly referred to as the board. This in most cases is done through voting whereby the majority votes win.
Examples of such groups involved in decision making include the legislature, jury, school boards, sales teams, corporate boards and so on. These groups are very important in their respective setups since they come up with the most important decisions that affect the outcomes of very crucial events. In such cases, individual decisions play a very minimal role irrespective of how reasonable they could be.
If the decisions do not get the support of the majority of the members present, then it is considered non viable. One of the reasons as to why group decision making is considered to be more viable is because decisions made therein are a representative of opinions from more than one person. The adage that goes two is better than one is given a firsthand in this kind of decision making since one person can make a mistake, but in a group there has to be at least some people or person who will notice this mistake and highlight it.
Sequential straw polling is one of the methods mostly adopted in group decision making. This is defined as “a non binding polling procedure to publicize members’ preferences and facilitate consensus processes” (Salaman, 2002 p.334). This procedure is considered to be the neutral way of arriving at major organizational decisions since it takes into consideration different perspectives of the same decision and these include age differences, sitting positions or level of profession.
People of the same age group are more likely to have the same opinions, or people who belong to a clique or the same level of profession, due to peer influence. Sequential straw polling therefore dictates that representatives in decision making boards should be selected across the organization so that their decisions are considered a viable sample of the whole.
This is one decision making strategy that the CEOs of Sony failed to implement from the beginning, hence contributing to the downward trend. From the case, it is notable that the CEO did his own analysis of the company and identified the major problems as first, the existence of the silo culture, second some businesses making losses while others are making profits, third producing products which are already obsolete in terms of technology, fourth lack of software competency and fifth existence of non strategic assets in the company.
After identifying these problems, Stringer went ahead and developed a restructuring plan which worked alright in ensuring that the company stopped making losses but still it was not able to resume its initial position. The CEO had great ideas but from the results, it is clear that he needed more people to assist him in making decisions.
This means that he would have constituted a board consisting of members from different professions such as economists, marketers, IT personnel and strategic planners so as to ensure that the decisions made cover all departments in the organization. Such mistakes are what Zimmerman and her colleagues were trying to avoid when they came up with the sequential straw polling decision making process.
They meant to ensure that before any major final decision is made, opinion has been sought from people of different calibers and the eventual decision determined by the majority similar opinions. The assumption made in this case is that a group is less prone to mistakes compared to individuals. This therefore is one of the things that lacked in Sony Corporation hence preventing it from bouncing back to its initial position despite all the investments made in this attempt.
Bates model on normative factors and decision-making
Bates model on normative factors and decision making is based on the consumer decision making models which affect their choice of products and services. When conducting marketing and advertising activities, organizations should consider the market trends by conducting a research on what is appalling to a majority of the target population.
One of the factors highlighted in Bates model is the kind of language used in advertising and the nature and quality of the adverts. This should be in line with the group being targeted that is whether children, young people, teenagers or people over the age of 60.
Young people for example prefer slang language and highly advanced technology and despite being unprofessional, it should be adopted by companies dealing with electronics since this is what attracts the youth. Most people below the age of 60 value entertainment and they tend to sacrifice many other things to have the best entertainment facilities at their disposal especially items such as televisions, music systems and games equipments.
From this therefore, the most important decisions in any company dealing with electronics and entertainment is on the advertising strategies being employed. This is what creates awareness and ensures that customers perceive the existence and usefulness of these products in the market. As a result of this, the market share increases steadily since more people will adapt the products and the final result will be increase in profits.
This explains why any organization should be willing to invest highly in advertising campaigns in all kinds media. This includes television advertisement, print media advertisements and thanks to technology nowadays there is also advertising through the internet. The latter is the most effective since information is able to get to the universal audience in the shortest time possible.
The CEO of Sony was able to apply this concept after coming up with new products and this is what enabled the company to bounce back. The television department specifically played a major role in this come back after the introduction of the LCD brands under the name Sony Bravia.
This replaced the CRT versions which were being faced out of the market gradually. This product was however already being produced by competitors such as LG and Samsung and this meant that this step was not an automatic success since a lot of publicity was still required (IBS center for management research, 2009 p.12).
As a result, Sony was forced to reduce its prices and increase the cost of advertising a strategy which worked well with the young consumers, as stipulated by Bates model. From this, the company was able to acquire a bigger share of the market that had initially been lost to the other competing companies.
The advertisements which were developed were appealing especially to the young people who mostly value high quality videos and music sound. As a result, the market that was attracted to this organization was mostly made up of college students and young professionals who also form a majority of the population in most parts of the world.
Factors that have hindered Sony from preserving its competitive position in the market
From the year 2005, Sony has been undergoing a series of transformations in the quest to restore it to its former position. In the early years, this company was one of the most profitable companies and most famous in the electronics business. It was known for producing high quality electronics which were also high cost. Despite this the company still had a high percentage of the market share compared to its competitors.
Besides the electronics business, Sony also had businesses in other lines such as cosmetics, restaurants and mailing company. These were all doing well owing to the goodwill generated by the electronics business. This however ended up working against the company once market conditions changed. More companies joined the electronics business and competition went up in a way that forced the company to re-strategize its operations.
The first step towards re organizing the company was to do away with the businesses which were not making profits. This step left only the electronics business standing since the rest were considered irrelevant. Besides that production in the electronics business was also cut down in order to concentrate on the most profitable products.
The management also came up with cost reduction strategies which included the amalgamation of departments such as procurement, customer service and distribution. These were economically viable steps but they did not fully address the problem at hand which was an increase in the number of competitors in the market. Technological advancements were on the rise on a daily basis and this meant that the company had to be very vibrant in order to catch up with the competition.
All these efforts proved futile in the bid to improve the profitability of the company. Investments were made in the most recent technology but still this did not take the organization back to its initial position. One of the reasons behind this is increase in the number of competitors over time. Many electronics companies came up over time and the greatest challenge to Sony seemed to be coming from LG and Samsung.
The greatest achievement by these two companies that threw Sony off balance was the invention of the LCD televisions at a time when Sony was busy trying to restructure their business model. By the time Sony was coming up with a similar product, these two had already taken up the biggest share of the market. Through advertising however, they were able to get back a portion of the market share, though a small bit of it.
Over the years, the company had been concentrating more on the television and this created a channel for their next big problem. Other companies were taking over their market for other products especially in the game business. New gaming software was being developed and this took Sony long to adopt owing to the fact that it had reduced its operations in this sector.
As a result, competitors took over the market and offered high technology products which phased out the previously used software technology. All these issues can be blamed on the failure to plan ahead of time and forecast according to the current market trends.
It was like the management was always waiting to learn from mistakes and this cost them a market share that they have not been able to recover for so many years. From this therefore, a conclusion can be made that despite having many products to offer, Sony has not been able to preserve its competition due to lack of information on the market trends and the direction being taken by their competitors.
Reference List
Brunsson, N 1989, The organization of hypocrisy: talk, decisions, and actions in organizations. Wiley, Chichester.
Cyert, R & March, J 1963, A behavioral theory of the firm. Prentice-Hall, New Jersey.
IBS Center for management Research, 2009, Sony Corporation – Restructuring continues, Problems remain, <http://www.icmrindia.org/>
Salaman, G 2002, Decision making for business: a reader, SAGE, London.