Ch.9 - Organization Size, Life Cycle, and Decline

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University of Fraser Valley
Business Administration
BUS 304
Liz Wiebe

Chapter 9 Organization Size Life Cycle and DeclineOrganization Size Is Bigger BetterPressures for GrowthOrganizational size is a contextual variable and it influences design and functioningOrganizations often experience pressures for growth even at the expense at making the best products and showing the greatest productsToday the business world has entered an era of the megacorporationCompanies in all industries from aerospace to consumer products to media strive for growth to acquire the size and resources needed to compete on a global scale to invest in new technology and to control distribution channels and guarantee access to marketsOther pressures include that many execs have found that firms must grow to stay economically healthy and to stop growing is stagnantoTo be stable means that customers may not have their demands fully met or that competitors will increase market share at the expense of your companyoWalmart for example keeps growing because execs have inferiority complex and are ingrained with the idea that to stop growing is to stagnate and dieDilemmas of Large SizeLarge OrganizationsoEconomies of Scale Huge resources and economies are scale are needed as onlylarge company could build a massive pipeline in Alaska for exampleoGlobal Reach Have the resources to be a supportive economic and social force in difficult times WalMart gave employees 1000 for emergency assistance when Katrina hit for exampleoVertical Hierarchy Mechanistic standardizedoComplex offers hundreds of functional specialties within the organizationoStable Markets companies can have a presence that stabilizes a market for years if theyre well establishedoOrganization Men The organization can provide longevity raises and promotionsSmall OrganizationsoResponsive Flexible These are the crucial requirements for success in a global economyoRegional Reach Quick reaction to changing customer needs or shifiting environmental and market conditionsoFlat Structure Organic They have a freeflowing management syle that encourages entrepreneurship and innovationoSimple Smaller amount of people less resources less departments etcoNiche Finding Done through encouraging innovationoEntrepreneurs Come up with ideas for new small businessesBigCompanySmallCompany HybridoThe paradox is that the advantages of small companies sometimes enable them to succeed and hence grow largeoMost of the 100 firms on Fortune magazines list of the fastestgrowing companies in America are small firms characterized by an emphasis on being fast and flexible in responding to the environmentoSmall companies can become victims of their own success as they grow large shifting to a mechanistic structure emphasizing vertical hierarchiesoGiant companies are built for optimization not innovationoThe bigcompanysmallcompany hybrid combines a large corporations resources and reach with a small companies simplicity and flexibility for instance by using a divisional structure
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