Patterns & Driving Forces of Corporate Development

Question 1

Definition Corporate Development

Answer 1

• Conscious and planned process of developing an organization’s capabilities such, that it can attain and sustain competitiveness
• The driving force behind strategic change
• -> Redesigned business portfolio
• -> Changed competitive positioning
• -> Improved effectiveness/efficiency of operation

Question 2

How do companies develop over time? (3)

Answer 2

• Incremental change (A->A’, over long period)
• Radical change (A->A’->Schizoid->B, over short period)
• Inertia (A, stable over time)

Question 3

Punctuated equilibrium theory, Tushman & Romanelli (1994)

• Research question
• Hypothesis
• Research design
• Levels of organizational transformation
• Main findings

Answer 3

RQ: What is the dominant pattern of CD, revolution or evolution?

Hypothesis: Greater likelihood of radical transformation if

a) performance crisis
b) major environmental change in industry
c) leadership succession

RD: quantitative inquiry of CD patterns of 25 US minicomputer companies

Transformation: (within 2 years)

• strategy shift (customer/product portfolio)
• structural shift (general mgmt, functional titles)
• power distribution (executive turnover, change in R&D spend/titles)

Findings:

• revolutionary patterns dominant (85%)
• environmental change and CEO succession as drivers
• CAVEAT: results differ widely between industries in other studies

Question 4

When do firms initiate radical transformations? (3+1)

Answer 4

When..

• discontinuous market developments occur
• firms have not been successful for some time
• management changes
• -> all 3 factors are mutually reenforcing

Question 5

Radical transformations are risky (2)

Answer 5

• Organizational changes lead to an immediate increase in the hazard of organizational failure
• The older the organization, the greater the jump in hazard rate

Question 6

Excessive change is detrimental (5+3)

Answer 6

• Frequently changing responsibilities
• Non-functioning middle management (inexperience)
• Badly structured processes
• Employee fatigue and fluctuation
• Increased resource deployment
• -> Bad implementation of change initiatives
• -> Focus on internal processes rather than customers/markets
• -> Detrimental financial results

Question 7

Inertia is risky, too (3+1)

Answer 7

• Firm size positively correlated with survival rate
• Deregulation massively impacts survival rate (due to change)
• Periods without transformation negatively impact survival rates