Chapter 11 - Organisational transformations

Question 1

Organisational life cycle

Answer 1

The predictable sequence of stages of growth and change for a business

Question 2

The 4 stages of the life cycle

Answer 2

Birth

Growth

Decline

Death

Question 3

Organizational birth

Answer 3

The founding of an organization: a dangerous life cycle stage associated with the greatest change of failure

Question 4

Entrepreneurs:

Answer 4

Are people who recognize and take advantage of
opportunities to use their skills and competences to create
value.

Question 5

Why is the failure rate high for businesses in birth?

Answer 5

The failure rate is high because new organizations experience the liability of newness.

Question 6

Liability of newness

Answer 6

The dangers associated with being the first in a new environment.

Question 7

Developing a plan for a new business

Answer 7

1. Notice a product opportunity and develop a basic business idea.
2. Conduct a strategic analysis (SWOT).
3. Decide whether the business opportunity is feasible.
4. Prepare a detailed business plan.

Question 8

Population of organizations

Answer 8

The organizations that are competing for the same set of resources in the environment

Question 9

Population ecology theory:

Answer 9

A theory that seeks to explain the factors that affect the rate at which new organisations are born (and die) in a population of existing organisations.

Question 10

Two factors account for the rapid birth-rate:

Answer 10

1. As new organisations are founded, there is an increase in the knowledge and skills available to generate similar new organisations.
2. Accounting for the rapid birth-rate in a new environment is that when a new kind of organisation makes it easier for entrepreneurs to found similar new organisations because success confers legitimacy, which will attract stakeholders.

Question 11

Two factors work to decrease the rate at which organizations are founded:

Answer 11

1. Births taper off as the availability of resources in the environment for late entrants diminishes.
2. The difficulty of competing with existing organisations for resources.

Question 12

First-mover advantages

Answer 12

The benefits an organisation derives from being an early entrant into a new environment

Question 13

R-strategy

Answer 13

A strategy of entering a new environment early.

Question 14

K-strategy

Answer 14

Is a strategy of entering an environment late, after other organisations have tested the water.

Question 15

Specialists:

Answer 15

Organisations that concentrate their skills to pursue a narrow range of resources in a single niche

Question 16

Generalist:

Answer 16

Organisations that spread their skills thinly to compete for a broad range of resources in many niches

Question 17

Natural selection

Answer 17

The process that ensures the survival of the organisations that have the skills and abilities that best fit with the environment.

Question 18

Organizational growth

Answer 18

The life cycle stages in which organisations develop value creation skills and competences that allow them to acquire additional resources.

Question 19

Institutional theory

Answer 19

A theory that studies how organisations can increase their ability to grow and survive in a competitive environment by satisfying their stakeholders.

Question 20

Institutional environment

Answer 20

The set of values and norms in an environment that govern the behaviour of a population of organisations

Question 21

Organizational isomorphism

Answer 21

The similarity among organizations in a population.

Question 22

Three processes that explain why organisations become more alike have been identified:

Answer 22

Coercive isomorphism

Mimetic isomorphism

Normative isomorphism

Question 23

Coercive isomorphism

Answer 23

Pressured to by other organizations or by society in general

Question 24

Mimetic isomorphism

Answer 24

Organisations intentionally imitate and copy one another to increase their legitimacy

Question 25

Normative isomorphism

Answer 25

Organisations that come to a resemble to another over time, because they indirectly adopt the norms and values of other organisations in the
environment

Question 26

Disadvantages of isomorphism

Answer 26

The ways organisations have learned to operate may become out-dated, inertia sets in, and the result is low effectiveness.

The pressure to imitate competitors and beat them at their own game may reduce the incentive to experiment so that the level of innovation declines

Question 27

Organizational decline

Answer 27

The life cycle stage that an organisation enters when it fails to anticipate, recognise, avoid, neutralise or adapt to external or internal pressures that threaten its long-term survival.

Question 28

Profitability:

Answer 28

A measurement of how well a company is making use of resources relative to its competitors.

Question 29

Organizational inertia

Answer 29

Forces inside organization that make it resistant to change

Question 30

Factors that cause inertia are:

Answer 30

Risk aversion

The desire to maximise rewards

Overly bureaucratic culture

Question 31

Risk aversion

Answer 31

As organisations grown, managers often become risk averse – that is, they become unwilling to bear the uncertainty associated with entrepreneurial activities

Question 32

The desire to maximize rewards

Answer 32

Research suggests that managers’ desire for prestige, job security, power and the strong property rights that bring large rewards often leads them to focus on strategies that increase organisational size, even if this reduces future
profitability and organizational effectiveness.

Question 33

Overly bureaucratic culture

Answer 33

In large organisations, property rights can become so strong that managers spend all their time protecting their specific property rights instead of working to advance the organisation’s interests.

Question 34

The major sources of uncertainty in the environment are:

Answer 34

Complexity

Dynamism

Richness

Question 35

Crisis of red tape

Answer 35

When organisations fail to manage the process of achieving growth through coordination

The number of rules and procedures increase, but does not increase organisational effectiveness.

Question 36

What did Weitzel and Johnson model?

Answer 36

Identified the 5 stages of organisational decline

Question 37

What are the 5 stages of organisational decline?

Answer 37

Blinded

Inaction

Faulty action

Crisis

Dissolution

Question 38

Blinded

Answer 38

organisations are unable to recognise internal or external forces that threaten their long term survival

Question 39

Inaction

Answer 39

Even though there is decreasing performance, managers do little to solve problems

Question 40

Faulty action

Answer 40

Problems continue to multiply despite corrective action

Question 41

Crisis

Answer 41

Critical point where radical changes need to take place

Question 42

Dissolution

Answer 42

Organisation can not longer recover

Lost support from stakeholders

Disbanding happens