Transcript Case Study: Apple’s Life Cycle

Chapter 12
Organization size and life cycle
Group 1
Marcus Depaul
Ula Ou
Carrie Haung
Vincent Kuo
Ruby Tsai
Jeremy Chang
Serena Chang
Maggie Lee
Samantha
Chapter Contents
 Organization size
 Organizational life cycle
 Size bureaucracy and control
 Bureaucracy in a changing world
 Bureaucracy Vs other forms of control
 Decline and downsizing
Organization size: is bigger better?
 Pressures for growth
Size 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 size
 Large. 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
Organizational life Cycle
 Stages 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 II
 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 III
 Characteristics during the life cycle
Size bureaucracy and control
 Definition
Size bureaucracy and control II
 Size and structural control
 Formalization. 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 III
 Personnel
ratios
Bureaucracy in a changing world
 Organizing temporary systems
 The 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 bureaucracy
 Bullpen sessions
 Geographic region based teams
 Empowerment to researchers
 Professional training at all levels
Bureaucracy Vs other forms of control
 Bureaucratic control
 Control is achieved trough rules, standard procedures
and bureaucratic mechanism. Positions are legitimated
by Rational legal,Traditional or Charismatic authority.
 Market control
 Price mechanism and competition are used to evaluate
performance.
 Clan control
 Behavior is controlled by enforcing shared values,
commitment, traditions and beliefs. Used in high
uncertainty contingencies.
Decline and downsizing
 Definition and causes
 Atrophy. The company becomes inefficient and unable to
adapt to a changing environment.
 Vulnerability indicated inability to prosper in the
company’s environment.
 Environmental decline or Competition. This is experienced
when the external resources become insufficient to
maintain the company operative.
Decline and downsizing II
 A model of decline stages
 Blinded 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 III
 Downsizing implementation
 Search 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.
Case Study
What is IKEA?
 Founder: Ingvar Kamprad
 I: Ingvar
 Established in 1943 in Sweden.
 K: Kamprad
 Largest furniture retailer.
 E: Elmtaryd
 A: Agunnaryd
ORGANIZATIONAL PRACTICES
IN THE FIVE PHASES OF GROWTH
CATEGORY
PHASE 1
PHASE 2
PAHSE 3
PHASE 4
PHASE 5
Entrepreneurial
Stage
Collectivity
Stage
Formalization
Stage
Elaboration
Stage
Management
Focus
Make and sell
Efficiency of
operation
Expansion of
market
Consideration of
organization
Problem solving
and innovation
Organizational
Structure
Informal
Centralized and
functional
Decentralized
and geographical
Line staff and
product groups
Matrix of terms
Top-Management Individualistic &
Style
entrepreneurial
Directive
Delegative
Watchdog
Participative
Control System
Market results
Standards and
cost center
Reports and
profit centers
Plans and
investment
center
Mutual goal
setting
Management
Reward
Emphasis
Ownership
Salary and merit
increases
Individual bonus
Profit sharing
Team bonus
and stock options
Source: Larry E. Greiner, 1972. Evolution and revolution as organizations grow.
IKEA’s Life Cycle
Expand market
out of Sweden
Design its own
furniture
Entrepreneurial
Stage
(1943-1956)
Collectivity
Stage
(1956-1962)
Formalization
Stage
(1960s-1980s)
Establish of
IKEA Group
Elaboration
Stage
(1982-)
Entrepreneurial Stage
Management Focus: Make and Sale
 1943
 IKEA is founded by Ingvar Kamprad
 1948
 Furniture is introduced into the IKEA range
 1951
 The first IKEA catalog is published
 1953
 Furniture showroom opens in Älmhult,
Sweden
Collectivity Stage
Management Focus: Efficiency of Operation
 1956
 Designing furniture for flat packs and self-assembly
 1958
 The first IKEA store opens in Sweden
 1959
 The 100th co-worker joins IKEA
Collectivity Stage
Management Focus: Efficiency of Operation
 1960
 The first IKEA
restaurant
 1961
 Product testing begins
 1962
 Develops strong relationships between IKEA and
Polish suppliers during the 1960s
Formalization Stage
Management Focus: Expansion of market
 Start from 1960’s
 Expand market out of Sweden
 1965
 Largest IKEA store opens in Stockholm, Sweden
 The opening of a self-serve warehouse
Formalization Stage
Management Focus: Expansion of market
 1976
 The 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.
Elaboration Stage
Management Focus: Consideration of organization
 1982
 IKEA Group is formed
INGKA Holding
Stichting Ingka
Foundation
 1985
 IKEA now has 10,000 co-workers and 60 stores in the
IKEA Group
Elaboration stage
Management Focus: Consideration of organization
 1986
 New president and CEO
 Ingvar 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 Group
Elaboration stage
Management Focus: Consideration of organization
 1990
 The 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 business
Elaboration stage
Management Focus: Consideration of organization
 1991
 Swedwood – the industrial group of IKEA
 IKEA acquires its own sawmills and production plants
and establishes the industrial group Swedwood to
produce wood-based furniture and wooden
components
Elaboration stage
Management Focus: Consideration of organization
 1997
 IKEA on the web: www.IKEA.com
 The first forestry manager is employed at the IKEA
Group
 1999
 The 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 stage
Management Focus: Consideration of organization
 2004
 The 200th IKEA store opens in US
 2006
 The IKEA Group exceeds 100,000
co-workers and operates in 44
countries
 IKEA Food is launched
After Elaboration Stage
 The firm demonstrates considerable focus, will and
capability
 Focus: Well-defined target market
 Will: Good quality and simple design products are available
 Capability: High quality and low cost
 Innovative business strategies
 Learning oriented
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