Answer-
System theory is one of the most prevalent organisation theory.
System theory is a part of modern management.
The institutions are either considered open or closed system.
There is an interaction with the outside system in open system.
In the closed system there is no such interaction with the outside world.
An organisation is also a system as it comprises of machines ,technologies ,assets
and human beings.
A closed system is not affected by the external environment but an open system
is affected by it.
Hence this theory studies an organisation as a SYSTEM.