Life Cycles, Size, and Decline

BA 152

Industry Life Cycles

Industry Evolution– Entry strategies

– Survival Strategies Specialist Generalist

Entry Strategies

Entering the market early– – –

Entry Strategies

Entering the market later– – – –

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

Survival Strategies

Organizational Life Cycle

Stages of Life Cycle Development– Pre-Birth Stage

first idea commitment and early planning implementation

Organizational Characteristics During the Life Cycle

ENTREPRENEURIAL STAGE:

– Personal control systems

– Innovation by owner/manager

– Goal:

– Management style:

– Crisis:

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?

Pressures for Growth– – – –

Size and Structural Characteristics

As Organizations get bigger:• Complexity• Centralization• Formalization• Flexibilty

Large Vs. Small:How can you be both?

FORMALIZATION STAGE:

– Impersonal rewards through formalized

systems

– Innovation from separate innovative groups

– Goal:

– Management style:

– Crisis:

Organizational Characteristics During the Life Cycle

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

Siz

e

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

Streamlining

Continued maturity

Decline

Creativity

Provision ofClear Direction

Addition ofInternal Systems

Development of Teamwork

Crisis: Need for Leadership

Crisis: Need for delegationwith control

Crisis: Too much

red tape

Crisis: Need forrevitalization

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

Blinded Inaction Faulty Action Crisis Dissolution

Successful Organizational Performance

Declining Organizational Performance

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

Case: Sunflower, Inc.