California State University Northridge Principles of Management Essay

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California state university Northridge

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Essay topic on “Principles of Management, Part 1”

2020/2021

Dr Eunsuk Hong

Please complete the following essay question:

Critically compare the theoretical perspectives and practical implications of Coase (1937)

and Penrose (1959) in terms of their views on (i) the size of firms and (ii) the growth of

firms.

Key requirements:

1. You should complete this task using and citing all theories and concepts covered in Part

I of this module – (a) Transaction cost theory of the firm (Coase, 1937), (b) Penrose’s

the theory of the growth of the firm (Penrose, 1959), (c) Adverse selection (Akerlof,

1970), Agency theory (Eisenhardt, 1989), (d) 5 Forces analysis (Porter, 1980), (e)

Resource-based view of the firm (Barney, 1991), (f) vertical integration and diversification.

2. Please note that this task is NOT a descriptive summary of those theories (e.g.,

summary of theory A, then theory B, then theory C.....). Rather, those theories should

be used and cited systematically in your discussion and analysis of key theoretical

perspectives and practical implications initiated by Coase (1937) and Penrose (1959).

Key points to remember

General

(1) Your essay should be submitted online via BLE (Moodle).

(2) Please see SFM Assessment Guidelines, available at BLE (Moodle) for information about the

regulations relating to coursework (submission, late submission, plagiarism and word count).

(3) The deadline date and time for essay submission is on Monday 4 January 2021 at 11.59

pm.

(4) Word limit: 3,000 words excluding references.

Assessment guidelines

(1) Please see UG Marking Criteria, available at BLE (Moodle) for information about the

marking criteria.

Writing tips

(1) Try to have a clear and logical structure to your answer. Do not be afraid to use sub-

headings to structure your essay.

(2) Please see Referencing guide for information about the suggested referencing systems.

Your essay should acknowledge the source of all ideas and evidence with appropriate

references. Failure to do so constitutes plagiarism.

References

Akerlof, G.A. (1970) ‘The market for “lemons”: qualitative uncertainty and the market mechanism’,

Quarterly Journal of Economics, 84 (3): 488-500.

Barney, J. (1991) ‘Firm Resources and Sustained Competitive Advantage’, Journal of Management,

17 (1): 99-120.

Coase, R. (1937) ‘The nature of the firm’, Economica, 4(16): 386-405.

Penrose, E. (1959) The theory of the growth of the firm, New York: Oxford University Press.

Eisenhardt, K.M. (1989) ‘Agency Theory: An Assessment and Review’, Academy of Management

Review, 14(1): 57-74.

Porter, M. (1980) Competitive Strategy, New York: Free Press, Ch1 (pp. 3-32).


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Essay topic on “Principles of Management, Part 1” 2020/2021 Dr Eunsuk Hong Please complete the following essay question: Critically compare the theoretical perspectives and practical implications of Coase (1937) and Penrose (1959) in terms of their views on (i) the size of firms and (ii) the growth of firms. Key requirements: 1. You should complete this task using and citing all theories and concepts covered in Part I of this module – (a) Transaction cost theory of the firm (Coase, 1937), (b) Penrose’s the theory of the growth of the firm (Penrose, 1959), (c) Adverse selection (Akerlof, 1970), Agency theory (Eisenhardt, 1989), (d) 5 Forces analysis (Porter, 1980), (e) Resource-based view of the firm (Barney, 1991), (f) vertical integration and diversification. 2. Please note that this task is NOT a descriptive summary of those theories (e.g., summary of theory A, then theory B, then theory C…..). Rather, those theories should be used and cited systematically in your discussion and analysis of key theoretical perspectives and practical implications initiated by Coase (1937) and Penrose (1959). Key points to remember General (1) Your essay should be submitted online via BLE (Moodle). (2) Please see SFM Assessment Guidelines, available at BLE (Moodle) for information about the regulations relating to coursework (submission, late submission, plagiarism and word count). (3) The deadline date and time for essay submission is on Monday 4 January 2021 at 11.59 pm. (4) Word limit: 3,000 words excluding references. Assessment guidelines (1) Please see UG Marking Criteria, available at BLE (Moodle) for information about the marking criteria. Writing tips (1) Try to have a clear and logical structure to your answer. Do not be afraid to use subheadings to structure your essay. (2) Please see Referencing guide for information about the suggested referencing systems. Your essay should acknowledge the source of all ideas and evidence with appropriate references. Failure to do so constitutes plagiarism. References Akerlof, G.A. (1970) ‘The market for “lemons”: qualitative uncertainty and the market mechanism’, Quarterly Journal of Economics, 84 (3): 488-500. Barney, J. (1991) ‘Firm Resources and Sustained Competitive Advantage’, Journal of Management, 17 (1): 99-120. Coase, R. (1937) ‘The nature of the firm’, Economica, 4(16): 386-405. Penrose, E. (1959) The theory of the growth of the firm, New York: Oxford University Press. Eisenhardt, K.M. (1989) ‘Agency Theory: An Assessment and Review’, Academy of Management Review, 14(1): 57-74. Porter, M. (1980) Competitive Strategy, New York: Free Press, Ch1 (pp. 3-32).
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Explanation & Answer

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Running head: PRINCIPLES OF MANAGEMENT

Principles of Management
Instructor’s name
Institution
Course
Date

1

PRINCIPLES OF MANAGEMENT

2

Principles of Management
Introduction
In the contemporary business setting, individuals and establishments must espouse
appropriate principles to guarantee enterprise growth and development, particularly in the current
fast-paced competitive environment. Every business establishment must continuously develop
and adapt to even the minimal alterations in the market place. Such instances mainly apply to
small firms and startups, which often struggle to maintain a competitive edge and high rankings
while retaining their clientele. However, keeping the establishment alive does not have to be
exhausting and intricate as many individuals suppose. All business establishments espouse their
intricacies. Importantly, individuals must appreciate that every team member makes up a work
family. Thus, every establishment must treat every member accordingly. Such endeavors are
easy and satisfying if individuals follow a particular pattern and employ appropriate theories in
their dealings. In every business, difficulties and failures teach individuals how to tackle
intricacies and assist in progression. Due to this, individuals must never give up when they make
mistakes. Instead, they should treat difficulties as challenges they require to conquer and an
opportunity for growth. Consequently, business principles can help individuals run their
establishments since they inculcate persistence and discipline into individuals. Several theories
that tackle the growth of establishments and business principles suffice. Edith Penrose's (1959)
typical book, called The Theory of the Growth of the Firm, and Ronald Coase's firm's transaction
cost theory, among other approaches, are some of the theories establishments must espouse to
maintain a competitive edge.

PRINCIPLES OF MANAGEMENT

3

Comparison between Edith T. Penrose’s 1959 Theory of the Growth of the Firm, and
Barney’s 1991 firm’s theory
Edith Penrose's manuscript interrogates the development of a theory on a firm's growth.
In this book, the author argues that the binding limitation on an establishment's growth rate
emanates from its current management's capacity. This administrative limit is the Penrose impact
on an establishment's growth rate (Penrose, 1959). Penrose offers elementary rules for corporate
development and the pace at which establishments can grow effectively. Never the less,
alongside a sturdy growth process theory, the author provides a philosophy of efficient resource
management, approach, and competitive incentives for diversification. Mainly, Penrose provides
a descriptive structure for extricating casual correlations between competitive advantage, skills,
and capital, resulting in a competitive advantage theory hinged on resources.

Additionally, the author offers three arguments regarding a firm's capital, sustainable
growth, and competitive incentives. Arguably, the resources a firm habitually incorporates in
their dealings will coin the productive services their management can render. The management's
experience will impact the effective services all its supplementary resources can cause. As
management endeavors to utilize the available resources, a dynamic interacting process
emanates, which encourages growth but limits its growth rate. Conversely, Barney's 1991 firm's
resources theory affirms that a firm espouses competitive advantage if individuals can
incorporate immobility and heterogeneous resources (Barney, 1991). From this assertion, one
can suggest that searching for unrelenting competitive advantage sources must focus on an
establishment's immobility and heterogeneity. This notion is beneficial because it is intricate for
supplementary establishments or competitors to espouse due to heightened costs and the
intricacies in acquiring and utilizing resources. Arguably, Penrose's theory can relate to Barney's

PRINCIPLES OF MANAGEMENT

4

because diversity emanates in both approaches. Penrose firstly argues that establishments can
coin economic value by incorporating creative and efficient resource management into their
dealings, not through pure resource possession.

The author distinguishes between efficient and productive capital. Primarily, this resource
package presents will be divergent depending on personal implementations despite similar
resource sets. Because of creativity, resource employments, intra-industry heterogeneity
stimulates divergence in productive opportunity and economic performance (Penrose, 1959).
Additionally, Penrose ascertains casual links between capital, successful and innovative
prospects. The establishment's leaders' experience and supplementary resources, consequently
impacting the establishment's image, espouse exceptional productive opportunities. Business
leaders perform as catalysts by transforming the establishment's resources into sturdy abilities
and novel product implementations. New resource arrangements lead to the creation and
innovation of economic value in the dynamic capacity sp...


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