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Three Important Management Theories

Various business managers and owners have described business as a “game”. Nothing could be truer when we attempt to utilize the concepts of game theory in the financial decisions of corporations. According to game theory corporations make decisions based upon their belief in the actions of their competitors as well as what they feasibly can accomplish (Fairchild, 2008). Each player makes a move just as though one were playing a huge game of chess.

Financial decisions in game theory are based upon gaining competitive advantage. Corporations may put money into research and development if they feel as though they will have a distinct advantage in new products. Used in conjunction with a SWOT analysis game theory is about finding the next move based upon the current strengths, weaknesses, opportunities and threats of other market players.

Companies may also consider Portfolio Theory which helps decisions makers determine optimal allocation of resources by assessing the reliability of development possibilities under different levels of risk (Rutkauskas, 2008). Under such a theory expansion and development is based upon the securest income streams at the least amount of risk at the highest amount of return possible.

In order for Portfolio Theory to be practical strong data crunching and market data must be available. For example, a business that must make a decision to expand its product offerings or to spend more money developing its current products would do so based upon future projections, current income streams, market data and the likelihood of a return on the investment.

Stakeholder Theory’s premises are that members of society have a distinct interest in the well being of corporations and that society’s needs should be part of the factor when making business decisions (Laan, Eas & Witteloostuijn, 2008). A study that monitored social performance on the S&P 500 found that there was a close association of profits and performance (Laan, Eas & Witteloostuijn, 2008). Organizations that engaged the public through social work also earned more profits but as their social engagement slowed so did their profits.

Organizations that desire to determine their best courses of action should consider the moves of their opponents (Game Theory), the most financially sound courses of action (Portfolio Theory) and the needs of the public (Stakeholder Theory). Organizations should use at least these three theories in developing a holistic approach to canvases competition, financial resources and public opinion.

GTC is in a particularly difficult place due to financial constraints, government legislation, poor public image related to the gaming industry and the strong nature of competition in a small market. However, the theories can be used to weigh the different options the casino may be considering towards the market which would give greater assurance then simply shooting in the dark.

Fairchild, R. (2008). The manufacturing sector’s environmental motives: a game-theoretical analysis. Journal of Business Ethics, 79 (3).

Rutkauskas, A. (2008). On the sustainability of regional competitiveness development considering risk. Technological & Economic Development of Economy, 14 (1).

Laan, G., Eas, H. & Witteloostuijn, A. (2008). Corporate social and financial performance: an extended Stakeholder Theory, and empirical test with accounting measures. Journal of Business Ethics, 79 (3).

Article Source: http://www.articlemap.com

Murad Ali is a three time book author, a business professor and a human resource manager. He runs the following sites: (Business Articles) www.themodernbusinessworld.com (Dating Articles) www.datingdesires.blogspot.com (Website Marketing) www.article-agent.org (Free article directory) www.article-agent.net

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