Basics of organisation growth 5-6 PGCSM03 23 Vijaya.pdf

Basics of Organisation Understanding organizational growth Post graduate Certification in Strategic Management Session 5-6 Vijaya . V Session Coverage What is an organizational life cycle? What are the contexts of organizational birth? What is organizational isomorphism? What are the strategies...

Basics of Organisation Understanding organizational growth Post graduate Certification in Strategic Management Session 5-6 Vijaya . V Session Coverage What is an organizational life cycle? What are the contexts of organizational birth? What is organizational isomorphism? What are the strategies of competing in the resource environment? How does an organization grow and survive ? The Organizational Life Cycle • Organizational life cycle: A sequence of stages of growth and development through which organizations may pass • The four principal stages of the organizational life cycle: Population ecology – Birth | Growth | Decline | Death • Organizational birth: The founding of an organization; occurs when entrepreneurs take advantage of opportunities to use their skills and competences to create value • A dangerous life cycle stage associated with the greatest chance of failure – Liability of newness: The dangers associated with being the first in a new environment – A new organization is fragile because it lacks a formal structure A Population Ecology Model of Organizational Birth • Population ecology theory explains the factors that affect the rate at which new organizations are born (and die) in a population of existing organizations – Population of organizations: The organizations that are competing for the same set of resources in the environment Competition of – Environmental niches: Particular sets of resources telecom players in India • Number of births determined by the availability of resources – Population density: The number of organizations that can compete for the same resources in a particular environment – Factors that produce a rapid birthrate • Availability of knowledge and skills to generate similar new organizations Tata Tele • New organizations that survive provide role models services to and confer legitimacy Reliance Jio Population Ecology Model • Natural selection: the process that ensures the survival of organizations that have the skills and abilities that best fit with the environment – Over time, weaker organizations die because they cannot adapt their procedures to fit changes in the environment – Natural selection is a competitive process – Fewer resources are available for newcomers • First-mover advantages: Benefits derived from being an early entrant into a new environment – Difficulty of competing with existing companies – As the environment is populated with a number of successful organizations, birthrate tapers off • https://economictimes.indiatimes.com/news/company/corporate-trends/whatsbehind-the-failure-of-most-startups/articleshow/98964629.cms • https://thebusinessrule.com/10-failed-startups-in-india-which-raised-enoughfunds/ Competing in the resource environment • Survival strategies • Specialist strategy versus generalist – Strategies that organizations can use strategy to gain access to resources and – Specialists: Organizations that enhance their chances of survival in concentrate their skills to the environment pursue a narrow range of – r-strategy versus K-strategy resources in a single niche • r-strategy: A strategy of entering a – Generalists: Organizations that new environment early spread their skills thin to compete for a broad range of • K-strategy: A strategy of entering resources in many niches an environment late, after other organizations have tested the environment r-Specialist, r-Generalist, K-Specialist, K-Generalist Early in an environment, new organizations are likely to become r-Specialists - Move quickly to focus on serving the needs of a particular group - As r-Specialists grow, they often become generalists and compete in new niches K-Generalists move into the market and threaten the weaker r-Specialists The market is dominated by the strongest r-Specialists, r-Generalists, and K-Generalists Strategies for Competing in the Resource Environment Amazon OYO Amazon Paytm Apple smartphones IBM PCs Samsung smartphones Godrej group The Institutional Theory of Organizational Growth Institutional theory: A theory that studies how organizations can increase their ability to grow and survive in a competitive environment by becoming legitimate in the eyes of their stakeholders Institutional environment: Values and norms in an environment that govern the behavior of a population of organizations Organizational growth: The life-cycle stage in which organizations develop valuecreation skills and competences that allow them to acquire additional resources • • • • Organizational isomorphism: the similarity among organizations in a population. Three processes that explain why organizations become similar are: • Coercive isomorphism – Organisations are forced to follow certain stipulations and norms that make them similar. Many global manufacturers like NIKE are forced to comply with measures for worker safety .Every company is forced to practice the same. They get similar • Mimetic isomorphism – Organisations imitate each other and become similar by adopting good practices, standard practices like TQM, Lean manufacturing et. Accreditation in Higher education institutions • Normative isomorphism – Newer organisations adopt the same system, culture and values and resemble older ones New IIMs resembling their mentor older IIMs. Many IT companies imitate Google’s culture Greiner’s Model of Organizational Growth Greiner proposes 5 sequential growth stages • - Each stage results in a crisis - Advancement to the next stage requires successfully resolving the crisis in the previous stage • Stage 1: Growth through creativity – Entrepreneurs develop the skills to create and introduce new products – Organizational learning occurs – Crisis of leadership – entrepreneurs may lack management skills • Stage 2: Growth through direction • Crisis of leadership results in recruitment of top-level managers who take responsibility for the organization’s strategy – Crisis of autonomy • Creative people lose control over new product development • Professional managers run the show • Decision making becomes centralized • Stage 3: Growth through delegation – To solve the crisis of autonomy, managers must delegate • Strike a balance between the need for professional management and the opportunity for entrepreneurship, Movement toward product team structure – Crisis of control as power struggles over resources emerge between top-level and lower-level managers • Stage 4: Growth through coordination – To resolve crisis of control, managers must find right balance of centralized and decentralized control – Top management takes on role of coordinating different divisions – Crisis of red tape with Increasing reliance on rules and standard procedures , Organization becomes overly bureaucratic and stifles entrepreneurship • Stage 5: Growth through collaboration – Emphasizes greater spontaneity in management action – Social control and self-discipline take over formal control – Greater use of product team and matrix structures – Collaboration makes an organization more organic which can be a difficult task Understanding growth • https://thedigitalyug.com/startup/how-didnokia-story-fail-after-selling-one-billionphones • What do you understand about how an organization grows and survive? Case Discussion – National Geographic Society Refer to Google JamBoard today’s class for team work and presentation in class