Chapter 11 - Organisational transformations Flashcards
Organisational life cycle
The predictable sequence of stages of growth and change for a business
The 4 stages of the life cycle
Birth
Growth
Decline
Death
Organizational birth
The founding of an organization: a dangerous life cycle stage associated with the greatest change of failure
Entrepreneurs:
Are people who recognize and take advantage of
opportunities to use their skills and competences to create
value.
Why is the failure rate high for businesses in birth?
The failure rate is high because new organizations experience the liability of newness.
Liability of newness
The dangers associated with being the first in a new environment.
Developing a plan for a new business
- Notice a product opportunity and develop a basic business idea.
- Conduct a strategic analysis (SWOT).
- Decide whether the business opportunity is feasible.
- Prepare a detailed business plan.
Population of organizations
The organizations that are competing for the same set of resources in the environment
Population ecology theory:
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.
Two factors account for the rapid birth-rate:
- As new organisations are founded, there is an increase in the knowledge and skills available to generate similar new organisations.
- 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.
Two factors work to decrease the rate at which organizations are founded:
- Births taper off as the availability of resources in the environment for late entrants diminishes.
- The difficulty of competing with existing organisations for resources.
First-mover advantages
The benefits an organisation derives from being an early entrant into a new environment
R-strategy
A strategy of entering a new environment early.
K-strategy
Is a strategy of entering an environment late, after other organisations have tested the water.
Specialists:
Organisations that concentrate their skills to pursue a narrow range of resources in a single niche
Generalist:
Organisations that spread their skills thinly to compete for a broad range of resources in many niches
Natural selection
The process that ensures the survival of the organisations that have the skills and abilities that best fit with the environment.
Organizational growth
The life cycle stages in which organisations develop value creation skills and competences that allow them to acquire additional resources.
Institutional theory
A theory that studies how organisations can increase their ability to grow and survive in a competitive environment by satisfying their stakeholders.
Institutional environment
The set of values and norms in an environment that govern the behaviour of a population of organisations
Organizational isomorphism
The similarity among organizations in a population.
Three processes that explain why organisations become more alike have been identified:
Coercive isomorphism
Mimetic isomorphism
Normative isomorphism
Coercive isomorphism
Pressured to by other organizations or by society in general
Mimetic isomorphism
Organisations intentionally imitate and copy one another to increase their legitimacy
Normative isomorphism
Organisations that come to a resemble to another over time, because they indirectly adopt the norms and values of other organisations in the
environment
Disadvantages of isomorphism
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
Organizational decline
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.
Profitability:
A measurement of how well a company is making use of resources relative to its competitors.
Organizational inertia
Forces inside organization that make it resistant to change
Factors that cause inertia are:
Risk aversion
The desire to maximise rewards
Overly bureaucratic culture
Risk aversion
As organisations grown, managers often become risk averse – that is, they become unwilling to bear the uncertainty associated with entrepreneurial activities
The desire to maximize rewards
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.
Overly bureaucratic culture
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.
The major sources of uncertainty in the environment are:
Complexity
Dynamism
Richness
Crisis of red tape
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.
What did Weitzel and Johnson model?
Identified the 5 stages of organisational decline
What are the 5 stages of organisational decline?
Blinded
Inaction
Faulty action
Crisis
Dissolution
Blinded
organisations are unable to recognise internal or external forces that threaten their long term survival
Inaction
Even though there is decreasing performance, managers do little to solve problems
Faulty action
Problems continue to multiply despite corrective action
Crisis
Critical point where radical changes need to take place
Dissolution
Organisation can not longer recover
Lost support from stakeholders
Disbanding happens
