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TheoriesUnderlying ‘Management in Networks’ by Companies

Inthe current globalized world, firms are operating in the context ofnetworks and business relations that can impact on their results andthat can also be a potential sources of competitive advantage.Management networks are a challenge for managers because the firmsfind it difficult to control, direct or predict the outcomes of theiractions. is concerned with management of the externalrelations and then integrating then them with the internaloperations. This element has become more common in this dynamicbusiness landscape that presents problems and opportunities. In orderfor the management strategies to be effective, various theories haveemerged in the last decades that have tried to lay a well-definedstrategy for network management. The two theories, the competencydevelopment theory and the network theory are thought to have thegreatest influence in network management (Provan&amp Kenis, 2008). Thispaper examines the two theories in details explaining the conceptsbehind them and how the managers can apply them to manage theirbusiness networks.

CompetencyDevelopment Theory

Theconcept of the core competency of a firm and the development ofResource based view (RBV) has emphasized the important ability of afirm to manage its fortunes proactively rather than just depending onthe market circumstances. Competency development has raised concernamong scholars with regards to strategic marketing. Some scholarshave suggested that development of marketing competencies is verysignificant and is linked to superior performance of a firm. competencies have also been examined by other scholars in astrategic way such that organizational structure, business strategy,and marketing information processing capabilities yielded positiveresults on marketing capability development (O`Driscoll,Carson &amp Gilmore, 2000). In order to understand the wider nature of competency developmenttheory, it is important to discuss in a wider strategic setting asfollows:

GenericCompetitive Strategy: Thisstrategy considers whether cost leadership, differentiation or focusprovides a vital starting point in discussions regarding strategy.The choice of generic competitive strategy that fundamentally affectsthe marketing strategy and involves deeper considerations ofimportant internal resources, market dynamics, industry structure andexternal factors such as competition (O`Driscoll,Carson &amp Gilmore, 2000).

OrganizationalStructure: Inthis element, strategy and structure are combined to come up withconcepts of organizational structures that range from issues ofcentralization and decentralization to contingency theory. They alloffer the insight to managers on how a firm may be structured and thefunctional activities of the firm are administered. This conceptrequires that managers achieve a balance between innovation andefficiency in order to serve the market requires uniqueorganizational arrangements (O`Driscoll,Carson &amp Gilmore, 2000).

SharedValues: Justlike structure and organization, shared values, corporate culture andleadership styles concepts are related to strategic direction andsuccess of an organization. Human resource practices and theirunderlying value systems are said to be either bureaucratic, marketor clan based. Bureaucratic resources rely on rank and establishednorms that guide the working relationships in a firm. Market basedimply’s that behavior may be traded in the market place and clanbased resources assume that those in an organization can have a senseof belonging in the organization (O`Driscoll,Carson &amp Gilmore, 2000).

Generally,Organization Competence is the capability, skill or expertise that amanager or a group of managers possess to the relevance of managementand development of the organization. It is the ability of a firm toperform consistent productive tasks that relate directly orindirectly to its outputs. Capabilities are interactiveprocedures by which skills and knowledge are integrated with tangibleresources to transform marketing inputs to outputs. It involves boththe technical, human and conceptual capabilities. Competency is alsoperceived to have contingency dimensions where it can also be naturedand positioned in the experimental learning perspective (Klijn&amp Koppenjan, 2000).


NetworkTheory has also gained significance in the last decades. Technologyhas advanced and markets have been more volatile encouraging thereassessment of the nature of transactions costs and a step towardsthe reassessment of networks in managing exchange. Managers have cometo realize that operating in a network context is a source ofoperational and strategic advantage. An organization becomes thefocal point in a network of relationships and integration ofdifferent strengths and characteristics. Networks relationships canbe highly or weakly collaborative as well as being combative andinvolve asymmetrical power (O`Driscoll,Carson &amp Gilmore, 2000).In such essence, management of such partnership on strategic, socialand operational levels imposes important challenges, hence, requireappropriate competencies to be comprehended and developed.

Networkfirms are advised to develop both soft and hard competencies in theirrelationship with stakeholders and the market in general. It is alsoimportant to note that majority of the capabilities involved inmanaging networks are based on the market. This is evident fromcustomer relationship activities such as the quality assuranceprocesses and customer care activities where other companydepartments are involved. Market awareness is also an element oftrust building and social bonding in a particular network. Since thekey players of a network are managers, they are supposed to monitorthe activities of a network to ensure that the costs and benefitssuit the organization’s goals (Wilkinson&amp Young, 2002). Thismonitoring should involve the network legitimacy that ensures thatactions and activities of a network are appropriate and desirable to,both the member firms and to the external interest groups. However,judging the legitimacy of a network and calculating returns oninvestment requires a strategic mindset. Networks are usuallyevolving and their presence in a particular firm does not mean thatthey are effectively applied. This requires that managers balancestrong ties and weak ties so as to maintain a positional advantagewithin their particular networks (Wilkinson&amp Young, 2002).

Anetwork perspective enables a form to identify more casual factorsthat tend to explain the firm’s relationship, performance andbehavior that have not been investigated to any given extent. Thereexist network analysis methods that reveal measures of measures ofdistinctive network characteristics and a particular farm’sposition in the network. The methods can be used to draw hypothesizesand predict behavior and performance of the firm and therelationships that exist in the organization. Leaders are supposed tofoster social networks with employees, peers, and customers. In turn,the networks enable leaders to get their work accomplished, transactwith customers, transfer knowledge, innovate, and create value(Parkhe,Wasserman &amp Ralston, 2006).

Inconclusion, this paper reveals that business organizations operatewithin the context of the two networks. They have a direct impact inmanagement on the strategic decisions and actions undertaken byorganizations as well as the outcomes of the business activities. Thecompetitiveness and competitive advantage of a business organizationis dependent on business relations and networks it is able toformulate and maintain. However, managing these relations andnetworks is one of the biggest challenge facing businessorganizations today. Based on their experience in the businessenvironment, business organizations are adapting to the impacts oftheir actions resulting into self-organized networks structures whichdefines relationships. Complex and self-organizing systemstransforms the role of management in business organizations(Wilkinson&amp Young, 2002). Participationand adoption rather than control and giving direction becomes themajor role of management in an organization. This leads into attemptsto restructure the self-organizing network in order to gain morecontrol.


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anetwork approach to governance. PublicManagement an International Journal of Research and Theory,2(2),135-158.

O`Driscoll,A., Carson, D., &amp Gilmore, A. (2000). Developing marketingcompetence and

managingin networks: a strategic perspective. Journalof strategic marketing,8(2),183-196.

Parkhe,A., Wasserman, S., &amp Ralston, D. A. (2006). New frontiers innetwork theory

development.Academyof Management Review,31(3),560-568.

Provan,K. G., &amp Kenis, P. (2008). Modes of network governance:Structure, management, and

effectiveness.Journalof public administration research and theory,18(2),229-252.

Wilkinson,I., &amp Young, L. (2002). On cooperating: firms, relations andnetworks. Journalof


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