Organizational Decline
Why Companies Enter the Decline Stage, Following Organizational Inertia and Changes in the Environment.
By
Miford Lau
May 11, 2010
Table of contents
Abstract 3
Chapter 1 - Overview of Organizational Decline 4
Chapter 2 - Organization Inertia 5
Chapter 3 - Changes in the Environment 9
Chapter 4 - Conclusions and Suggestions 11
Reference 12
Abstract
It’s not difficult to establish a new business organization when there is new business opportunity in a fast growing market especially in a developing country like China. In the beginning stage of some market segment, demand is strong and competition is not keen so resources are easy to obtain. The level of uncertainty is low with simple, stable and rich environment. Organizations are born to take advantage of market opportunities to utilize resources to create value. Tushman and O'Reilly (1996) investigated the life cycles of organizations and found that across industries, there is often a pattern in which success precedes failure. When there’s sustain or growing demand from the market, managers still find it easy to keep profitability and mange the organizational structure. Some managers may not be aware of the factors causing the organizational decline of their companies. Most of the time, they keep the eyes on portion of the outside stakeholders only. This makes them into a very risky position when there’s any big change in the environment. That’s why there have been hundred thousands of company turnover every year in China.
This paper is to search and discuss the causes that make companies enter the decline stage, following organizational inertia and changes in the environment.
Chapter 1 - Overview of Organizational Decline Organizational life cycle is a sequence of stages of growth and development through which organizations may pass (Gareth Jones, 2010). It’s recognized that there are four major stages which are
By
Miford Lau
May 11, 2010
Table of contents
Abstract 3
Chapter 1 - Overview of Organizational Decline 4
Chapter 2 - Organization Inertia 5
Chapter 3 - Changes in the Environment 9
Chapter 4 - Conclusions and Suggestions 11
Reference 12
Abstract
It’s not difficult to establish a new business organization when there is new business opportunity in a fast growing market especially in a developing country like China. In the beginning stage of some market segment, demand is strong and competition is not keen so resources are easy to obtain. The level of uncertainty is low with simple, stable and rich environment. Organizations are born to take advantage of market opportunities to utilize resources to create value. Tushman and O'Reilly (1996) investigated the life cycles of organizations and found that across industries, there is often a pattern in which success precedes failure. When there’s sustain or growing demand from the market, managers still find it easy to keep profitability and mange the organizational structure. Some managers may not be aware of the factors causing the organizational decline of their companies. Most of the time, they keep the eyes on portion of the outside stakeholders only. This makes them into a very risky position when there’s any big change in the environment. That’s why there have been hundred thousands of company turnover every year in China.
This paper is to search and discuss the causes that make companies enter the decline stage, following organizational inertia and changes in the environment.
Chapter 1 - Overview of Organizational Decline Organizational life cycle is a sequence of stages of growth and development through which organizations may pass (Gareth Jones, 2010). It’s recognized that there are four major stages which are