System theory is a theory that organizations are composed of many subsystem that aren't necessarily related. Contingency theory claims that there is no best way to organize a corporation, to lead a company, or to make decisions. Contemporary theory consists of five contemporary organization- population, ecology, resource, dependence, contingency, transaction, cost and institutional model.
System theory allows to understand the connection between various parts and how they connect with each other. It broke away from the classic idea that viewed organizations as machine and moved toward more holistic view.
Contingency theory believes that the optimal course of action is contingent upon the internal and external situation. Leaders of this theory are flexible in choosing and adapting to succinct strategies and to suit change in a situation.
Contemporary theory's population focuses on the dynamic changes of birth and death of organization and organizational forms. Resource dependence examines the influence of power in the relating of exchange resources. The contingency does not believe in doing things one way. Transaction considers social- psychological dimension in the costing of product, goods and services. The institutional model studies institution structures and process in global governance.
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