Life Cycles, Size, and Decline BA 152

Industry Life Cycles n Industry Evolution – Entry strategies n – Survival Strategies n Specialist n Generalist

Entry Strategies n Entering the market early –

Entry Strategies n Entering the market later –

n 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. n 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 Survival Strategies

Organizational Life Cycle n Stages of Life Cycle Development – Pre-Birth Stage n first idea n commitment and early planning n implementation

Organizational Characteristics During the Life Cycle n ENTREPRENEURIAL STAGE: – Personal control systems – Innovation by owner/manager – Goal: – Management style: – Crisis:

n COLLECTIVITY STAGE: – Personal rewards aimed at individuals who contribute to organizational success – Innovation from employees and managers – Goal: – Management style: – Crisis: Organizational Characteristics During the Life Cycle

Organization Size: Is Bigger Better? n Pressures for Growth –

Size and Structural Characteristics As Organizations get bigger: Complexity Centralization Formalization Flexibilty

Large Vs. Small: How can you be both? n n n n n n n n n n

n FORMALIZATION STAGE: – Impersonal rewards through formalized systems – Innovation from separate innovative groups – Goal: – Management style: – Crisis: Organizational Characteristics During the Life Cycle

n ELABORATION STAGE: – Extensive rewards tailored to product and department success – Innovation by institutionalized R & D – Goal: – Management style: – Crisis: Organizational Characteristics During the Life Cycle

Organization Life Cycle Small Large Size Entrepreneurial Collectivity Formalization Elaboration ????????? Streamlining Continued maturity Decline Creativity Provision of Clear Direction Addition of Internal Systems Development of Teamwork Crisis: Need for Leadership Crisis: Need for delegation with control Crisis: Too much red tape Crisis: Need for revitalization

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

Stages of Decline Blinded Inaction Faulty Action Crisis Dissolution Successful Organizational Performance Declining Organizational Performance

Managing the Downsizing n Implementation approaches must be a function of the severity and speed of decline. n 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 Case: Sunflower, Inc.