ATHENA WEEK 3 - 1 Flashcards
Advantages of large firms
- more financing for R&D projects
- spread fixed costs over larger sales volume
- better developed complementary activities
- learning effects
- can take large or riskier innovation projects
Icarus Paradox
a firm’s prior success in the market can hinder its ability to respond to new technological generations
Disadvantages of large (growing) firms
- lower efficiency due to loss of managerial control
- less innovative because size can make them less nimble/responsive to change
- communication and coordination can be difficult
- strategic commitments can tie the firm to existing businesses and technologies.
how can you make large firms feel small?
by breaking the overall firm into several smaller subunits.
you can make a firm feel smaller by breaking the overall firms into smaller subunits, you can do this with: virtual organization, network organization, modular organization
Virtual Organization: Teams work together online or across locations like independent units.
Network Organization: The company connects multiple smaller units (inside or outside the firm) that work together like a web.
Modular Organization: The company builds products or services in small, separate parts (modules) that can be worked on by different teams.
Centralization
the degree to which decision-making authority is kept at top levels of management
Decentralization
the degree to which decision-making authority is pushed down to lower levels of the firm
Formalization
the degree to which the firm utilizes rules, procedures, and written documentation to structure the behavior of individuals or groups within the organization
Mechanistic organization
an organization structure characterized by a high degree of formalization and standardization, causing operations to be almost automatic or mechanical
Standardization
the degree to which activities are performed in a uniform manner
Organic organization
an organization structure characterized by a low degree of formalization, where employees may not have well-defined job responsibilities and operations may be characterized by a high degree of variation
what is said about the structure of large firms
usually make greater use of formalization and standardization because as the firm grows, it becomes harder for managers to oversee everything directly
What is the downside of formalization and standardization in large firms?
It reduces flexibility and can make the firm feel mechanistic or slow to adapt.
How do large firms try to avoid becoming too rigid or slow?
By DECENTRALIZING authority, allowing different divisions to act more like small, independent companies.
Ambidextrous organization
– one part focuses on EXPLORATION (innovation and new ideas), while another focuses on EXPLOITATION (efficiency and improving existing processes).
Different cultures, structures, systems
Loosely coupled organizations
development and production activities are not tightly integrated but rather achieve coordination through their adherence to shared objectives and common standards.
Modularity
degree to which a system’s component may be separated and recombined (like LEGO, same car engine used in different models).
Center for global strategy
when all innovation activities are conducted at a central hub and innovations are then diffused throughout the company
Local-for-local strategy
when each division or subsidiary of the firm conducts its own R&D activities, tailored for the needs of the local market
Locally leveraged strategy
when each division of subsidiary of the firm conducts its own R&D activities, but the firm attempts to leverage resulting innovations throughout the company
Globally linked strategy
innovation activities are decentralized, but also centrally coordinated for the global needs of the corporation
center for global
centralized, one hub, ONE central team, sends it to the whole world
globally linked
decentralized but linked, multiple countries and teams with a specific task
Center for global or globally linked: specialization
center for global
