Case Study: Apples Life Cycle

Chapter 12Organization size and life cycleGroup 1Marcus DepaulUla OuCarrie HaungVincent KuoRuby TsaiJeremy ChangSerena ChangMaggie LeeSamantha

Organization sizeOrganizational life cycleSize bureaucracy and controlBureaucracy in a changing worldBureaucracy Vs other forms of controlDecline and downsizing

Chapter ContentsPressures for growthSize enables to acquire resources, bargaining power, compete on the global market and avoid stagnation. Growth might be prioritized to other goals such as profits or quality.Dilemmas of large sizeLarge. Access to large capitals and global markets enables to take risks and make investments otherwise out of reach.Small. Fosters inter-group dedication and entrepreneurial spirit. Also enhances innovation.Hybrid. Obtained trough a divisional structure

Organization size: is bigger better?

4Stages of life cycle development

Entrepreneurial. Focus in on providing the product/service, market it and survive. Crisis occurs for lack of leadership.

Collectivity. Departments and specific job assignments are developed. Formal systems start to appear in a strong top down leadership environment. Crisis arises due to need for delegation

Organizational life Cycle Formalization. Internal control and operative systems are created, the bureaucratic body of rules and procedures concretized and communications formalized. Crisis occurs due to mid management immobilization and rigidity.

Elaboration. Collaboration between divisions is enhanced without increasing bureaucracy. The latter is simplified and the organization might be split in smaller units. Crisis might emerge as the company becomes over-complexity, over-bureaucratized and sluggish. Renewal is required. Organizational life Cycle II

Characteristics during the life cycleOrganizational life Cycle III

DefinitionSize bureaucracy and control

Size and structural controlFormalization. Larger size requires more formalized to achieve standardization and control. Centralization. In a centralized organization decisions are made top bottom. Contrary to how bureaucracy would suggest larger companies tend to decentralize.

Size bureaucracy and control IIPersonnel ratiosSize bureaucracy and control III

Organizing temporary systemsThe formalized hierarchical structure is used during stable periods. When external contingencies require it procedures can be managed trough a loosed temporary structure which enables to respond promptly.Other approaches to busting bureaucracyBullpen sessionsGeographic region based teamsEmpowerment to researchersProfessional training at all levelsBureaucracy in a changing worldBureaucratic controlControl is achieved trough rules, standard procedures and bureaucratic mechanism. Positions are legitimated by Rational legal, Traditional or Charismatic authority. Market controlPrice mechanism and competition are used to evaluate performance.Clan controlBehavior is controlled by enforcing shared values, commitment, traditions and beliefs. Used in high uncertainty contingencies.

Bureaucracy Vs other forms of controlDefinition and causes

Atrophy. The company becomes inefficient and unable to adapt to a changing environment.

Vulnerability indicated inability to prosper in the companys environment.

Environmental decline or Competition. This is experienced when the external resources become insufficient to maintain the company operative.

Decline and downsizing A model of decline stagesBlinded Stage. Internal or external changes pose a treat to long term survival.Inaction stage. Decline is consciously or unconsciously denied and no action is taken.Faulty action stage. Future failure to adjust would be fatal. Clear guidelines and possible downsizing are necessary.Crisis stage. The organization faces chaos. Major reorganization and redesign are necessary.Disillusion stage. Irreversible decline has happened and ordered shutdown is the only option.

Decline and downsizing II

Downsizing implementationSearch for alternatives. If possible managers should try to avoid layoffs by alternative measures (work sharing, pay cuts etc)Communicate more. If future layoffs are a concrete possibility open communication is highly recommended.Provide assistance to displaced workers. Company is responsible for assisting its layoffs, thuus shall provide severances, benefits and outplacement assistance.Help the survivors thrive. Managers should acknowledge how downsizing effects remaining employees feelings and provide support and reassurance. Decline and downsizing III

Case StudyWhat is IKEA? I: Ingvar K: KampradE: ElmtarydA: Agunnaryd

Founder: Ingvar KampradEstablished in 1943 in Sweden. Largest furniture retailer.

ORGANIZATIONAL PRACTICES IN THE FIVE PHASES OF GROWTHCATEGORYPHASE 1Entrepreneurial StagePHASE 2Collectivity StagePAHSE 3Formalization StagePHASE 4Elaboration StagePHASE 5Management FocusMake and sellEfficiency of operationExpansion of marketConsideration of organizationProblem solving and innovationOrganizational StructureInformalCentralized and functionalDecentralized and geographicalLine staff and product groupsMatrix of termsTop-Management StyleIndividualistic & entrepreneurialDirectiveDelegativeWatchdogParticipativeControl SystemMarket resultsStandards and cost centerReports and profit centersPlans and investment centerMutual goal settingManagement Reward EmphasisOwnershipSalary and merit increasesIndividual bonusProfit sharing and stock optionsTeam bonusSource: Larry E. Greiner, 1972. Evolution and revolution as organizations grow. IKEAs Life CycleEntrepreneurial Stage(1943-1956)Collectivity Stage(1956-1962)Formalization Stage(1960s-1980s)Elaboration Stage(1982-)Establish of IKEA GroupExpand market out of SwedenDesign its own furniture21Entrepreneurial Stage1943IKEA is founded by Ingvar Kamprad1948Furniture is introduced into the IKEA range1951The first IKEA catalog is published1953Furniture showroom opens in lmhult, Sweden

Management Focus: Make and Sale Collectivity Stage1956Designing furniture for flat packs and self-assembly1958The first IKEA store opens in Sweden1959The 100th co-worker joins IKEAManagement Focus: Efficiency of OperationCollectivity Stage1960The first IKEA restaurant1961Product testing begins

1962Develops strong relationships between IKEA and Polish suppliers during the 1960sManagement Focus: Efficiency of OperationFormalization StageStart from 1960sExpand market out of Sweden1965Largest IKEA store opens in Stockholm, SwedenThe opening of a self-serve warehouse

Management Focus: Expansion of market251976The Testament of a Furniture Dealer:It documents IKEA's vision and business idea and has a strong influence on the development and vitality of IKEA's culture.

Formalization StageManagement Focus: Expansion of market261982IKEA Group is formed

1985IKEA now has 10,000 co-workers and 60 stores in the IKEA Group

Elaboration StageManagement Focus: Consideration of organizationINGKA HoldingStichting Ingka Foundation27

1986New president and CEOIngvar Kamprad retires from Group Management to become an advisor to the parent company INGKA Holding B.V. Anders Moberg becomes President and CEO of the IKEA GroupElaboration stageManagement Focus: Consideration of organization

281990The first environmental policy at IKEA (Our responsibility)The IKEA Group develops an environmental policy to ensure that the company and its co-workers take environmental responsibility for all activities conducted within its businessElaboration stageManagement Focus: Consideration of organization291991Swedwood the industrial group of IKEAIKEA acquires its own sawmills and production plants and establishes the industrial group Swedwood to produce wood-based furniture and wooden componentsElaboration stageManagement Focus: Consideration of organization301997IKEA on the web: www.IKEA.comThe first forestry manager is employed at the IKEA Group1999The IKEA group grows to 50,000 co-workers and has 158 stores in 29 countries. A new President and CEO:Anders Dahlvig becomes President and CEO of the IKEA Group, taking over from Anders Moberg.

Elaboration stageManagement Focus: Consideration of organization312004The 200th IKEA store opens in US2006The IKEA Group exceeds 100,000 co-workers and operates in 44 countries IKEA Food is launchedElaboration stageManagement Focus: Consideration of organization

The firm demonstrates considerable focus, will and capabilityFocus: Well-defined target marketWill: Good quality and simple design products are availableCapability: High quality and low costInnovative business strategiesLearning oriented

After Elaboration StageThank you for your attention