- The five major theories underlining the development of nonmarket strategies are: institutional theory, resource dependence theory, resources-based view (RBV), stakeholder theory, and agency theory as covered in Module 5. Please describe the institutional theory and Resources-based View (RBV), discuss their essence and critically evaluate their applications to the nonmarket strategy development. Provide examples to support your arguments.
Answer:
According to module 5, non-market refers to the public institutions that can be specified by majority rule, due process, broad enfranchisement and collective actions and publicness. Therefore it is essential for non-market institutions to manage their organisational performance and competitiveness concerning the institutional and societal contexts of business environments. For this purpose, the non-market sectors use certain theories as a frameworks to improve their organisational performances, including the resource based theory, institutional theory, stakeholder theory etc (Huang, 2024). According to Chowdhury (2021) institutional theory focuses on the volatile aspects of the organisations such as the organisational roles, norms, values, processes and their impacts on organisational performance, and internal organisational practices. The purpose of this theory to focus on resilient aspects of the organisations is the believe that organisations adapt to the expectations of the environment they are operating in, for being competitive and to gain strength power, legitimacy and acceptance over other competitors. in non-market areas, this theory imitates the importance of considering and adhering to the regulations, standards, and aligning with public perspective or playing a significant role in fulfilling CSR for a better organisational image.
Considering an example of Apple, which is a multinational enterprise, the organisation considered the institutional theory to manage competitive advantage by investing in lobbying efforts. The organisation spent around US$ 9.4 million on lobbying efforts to increase its market power (Khan et al., 2023). Similarly, institutions can adapt to the regulations, environmental considerations and societal norms or engage with multiple stakeholders such as government, social communities, media or to adapt transactional or relational strategies etc to overcome challenges such as political instability and regulatory compliance issues (An et al., 2024; Voinea & van Kranenburg, 2018). This imitates that the practical implementation of institutional theory in non-market areas is a viable approach for organisations.
However, according to (Varadarajan, 2020) Resource Based View (RBV) depicts that organisations should be able to make use of unique, valuable, inimitable and non-substitutable resources in a strategic way, that helps the organisations achieve competitive advantage in the environment they are operating in. Organisations based on this view utilises their tangible and on tangible assets (finances, physical and human resources, etc) that help them achieve unique outcomes, ultimately offering a higher value to the organisations and adding effectiveness to organisational performance. It has been reported in a study that small-scaled organisations does not avail benefits up to the expectations using RBV, until organisations have exceptional amount of funds to support marketing, however, RBV is suitable for large-scaled organisations with adequate resources/funds. Considering an example by Sunshine coast council (n.d.), where the organisation utilised its internal resources to organise a beach clean-up program, involving locals, volunteers, schools and environment protection groups to clean up the beach and protect the coastal environments. This example depicts how organisations can make use of non-market strategies considering RBV, which imitates the effectiveness of this approach in non-market areas.
References:
Adomako, S., Abdelgawad, S. G., Ahsan, M., Amankwah-Amoah, J., & Liedong, T. A. (2023). Nonmarket strategy in emerging markets: The link between SMEs’ corporate political activity, corporate social responsibility, and firm competitiveness. Journal of Business Research, 160, 113767. https://doi.org/10.1016/j.jbusres.2023.113767
An, Y. H., Lew, Y. K., & Khan, Z. (2024). Non-market strategies in weak institutional environments: The case of MNE subsidiaries in Cameroon. Journal of International Management, 30(3), 101140. https://doi.org/10.1016/j.intman.2024.101140
Chowdhury, D. (2021). Institutional Theory In Knowledge and Competitiveness in Elite Institutions in Bangladesh: Implications for Governance. Publisher: Bangladesh University Grants Commission. https://www.researchgate.net/publication/350751384_Institutional_Theory
Huang, D. X. (2024). Module 5 MNEs’ sustainability-driven strategies: Nonmarket strategies and their theoretical underpinnings [PowerPoint slides]. Canvas@RMIT University. [Insert link]
Khan, Z., Zeng, J., Knight, G., Rajwani, T., & Pattnaik, C. (2023). Non-market strategies and disruptive innovation in the platform economy. Journal of International Management, 29(5), 101047. https://doi.org/10.1016/j.intman.2023.101047
Sunshine Coast Council. (n.d.). Beach clean up program. https://www.sunshinecoast.qld.gov.au/environment/get-involved-in-conservation/beach-clean-up-program
Varadarajan, R. (2020). Customer information resources advantage, marketing strategy and business performance: A market resources based view. Industrial Marketing Management, 89, 89-97. https://doi.org/10.1016/j.indmarman.2020.03.003
Voinea, C. L., & van Kranenburg, H. (2018). Feeling the squeeze: Nonmarket institutional pressures and firm nonmarket strategies. Management International Review, 58, 705-741. https://doi.org/10.1007/s11575-018-0355-1
