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Organizational Life Cycles, Size, and Decline. BA 152. Industry Life Cycles. Industry Evolution Entry strategies First movers Followers Survival strategies Specialist Generalist. Entry Strategies. Entering the market early Pick of environmental resources Rapid growth

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industry life cycles
Industry Life Cycles
  • Industry Evolution
    • Entry strategies
      • First movers
      • Followers
    • Survival strategies
      • Specialist
      • Generalist
entry strategies
Entry Strategies
  • Entering the market early
    • Pick of environmental resources
    • Rapid growth
    • Better chances of survival
entry strategies1
Entry Strategies
  • Entering the market later
    • Reduces operational uncertainty
    • Correct way to compete is apparent
    • Lower R&D investment
    • Survival as the more efficient producer
survival strategies
Survival Strategies
  • Specialists
    • Concentrate skills in a single niche
    • Develop core competencies
    • Can provide better customer service
    • and superior products, but
    • Trouble if the niche disappears or others enter.
  • Generalists
    • Spread skills across many niches
    • Providing greater brand recognition
    • Can succeed when environment is uncertain,
    • If risk is spread across a number of niches
organizational life cycle
Organizational Life Cycle
  • Stages of Life Cycle Development
    • Pre-Birth Stage
      • first idea
      • commitment and early planning
      • implementation
    • Entrepreneurial Stage
    • Collectivity Stage
    • Formalization Stage
    • Elaboration Stage
organizational characteristics during the life cycle
Organizational Characteristics During the Life Cycle
  • ENTREPRENEURIAL STAGE:
    • Personal control systems
    • Innovation by owner/manager
    • Goal: Survival
    • Management style: Entrepreneurial
    • Crisis: Lack of/Need for leadership
organizational characteristics during the life cycle1
Organizational Characteristics During the Life Cycle
  • COLLECTIVITY STAGE:
    • Personal rewards aimed at individuals who contribute to organizational success
    • Innovation from employees and managers
    • Goal: Growth
    • Management style: Charismatic, directive
    • Crisis: Lack of/need for delegation
organization growth is bigger better
Organization Growth: Is Bigger Better?
  • Pressures for Growth
    • Organization goals
    • Economies of scale
    • Executive advancement
    • Economic health
size and structural characteristics
Size and Structural Characteristics
  • As Organizations get bigger:
    • Complexity increases
    • Centralization decreases
    • Formalization increases
    • Flexibility decreases
large vs small how can you be both
Large Vs. Small: How can you be both?
  • Structural reorganization (split up)
  • Smaller headquarters staff (decentralize)
  • Subsidiaries/spin-offs that can act small
  • Skunkworks to develop new products
  • Support intrapreneurship within the firm
bigger may not be better
Bigger may not be better!
  • Growth is difficult to maintain.
    • A $100K company has to generate $10K to grow by 10%.
    • A $100B company has to generate $10B to grow by the same 10%
    • In the 1990s, what percentage of publicly-traded firms increased their revenues and profit by an average of 10% a year?
  • Growth can stretch a firm too thin.
    • A 20% growth rate per year means a firm doubles in size in less than four years.
bigger may not be better1
Bigger may not be better!
  • What determines a firm’s size?
    • Market Cap?
    • Employees?
    • Profits?
    • Market share?
    • Revenues?
  • The wrong choice can lead to seriously negative consequences.
organizational characteristics during the life cycle2
Organizational Characteristics During the Life Cycle
  • FORMALIZATION STAGE:
    • Impersonal rewards through formalized systems
    • Innovation from separate innovative groups
    • Goal: Internal stability/market expansion
    • Management style: Delegation with control
    • Crisis: Too much red tape
organizational characteristics during the life cycle3
Organizational Characteristics During the Life Cycle
  • ELABORATION STAGE:
    • Extensive rewards tailored to product and department success
    • Innovation by institutionalized R & D
    • Goal: Image/reputation-building
    • Management style: Team approach
    • Crisis: Lack of/need for revitalization
organization life cycle
Organization Life Cycle

Large

Streamlining

Continued maturity

Decline

Development of Teamwork

Addition of

Internal Systems

Size

Provision of

Clear Direction

Crisis: Too

much

red tape

Creativity

Crisis: Need for

revitalization

Crisis: Need for

delegation

with control

Crisis: Need for Leadership

Small

Entrepreneurial Collectivity Formalization Elaboration ?????????

organizational decline and downsizing the causes
Organizational Decline and Downsizing: The Causes
  • Organizational Atrophy
    • Loss of ability to respond to changing environment
    • Inefficient, bureaucratic, fat, and happy
  • Organizational Vulnerability
    • Loss of resources
    • Loss of market share
    • Loss of legitimacy
  • Environmental decline
    • Stagnating economy
    • Flat/shrinking market
    • Increased competition
stages of decline

Successful Organizational Performance

Prompt

Action

Corrective

Action

Effective

Changes

Effective

Reorganization

Declining Organizational Performance

Stages of Decline

Good

Information

Acknowledge

Decline

Major

Changes

Reorganization

No choices

Blinded Inaction Faulty Action Crisis Dissolution

managing the downsizing
Managing the Downsizing
  • Implementation approaches must be a function of the severity and speed of decline.
  • Implementation issues to consider
    • Consider voluntary programs with incentives (but be careful - who might leave?)
    • Over communicate - “The best surprise is no surprise.”
    • Allow employees to leave with dignity
    • Assist those leaving
    • Use ceremonies to reduce anger/confusion
    • Remember those who stay!
next time

Next Time

Sunflower, Inc.

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