Organizational Theory
This liability of newness—the dangers of
being the first in a new environment—is
due to the following:
• Entrepreneurship is a risky process
• New organizations lack formal structure
• Resources may be scarce because of
established organizations.
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Organizational Theory
A population ecology model of
organizational birth
Population ecology theory seeks to explain
the rate at which new organizations are born
(and die) in a population of organizations.
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“When Being First Doesn’t Make You No. 1”
 In Jan. 2000 – almost two years before Apple
Computer’s iPod hit market – Singapore-based Creative
Technology unveiled similar product
 Creative best known for Sound Blaster audio cards, product
category it pioneered and still dominates
 But Creative is niche player, w/ sales one-tenth of Apple’s
 More importantly, because its roots are in commodity world of PC
peripherals, Creative had little understanding of branding and
marketing tactics Apple uses
 Problem for many Asian companies as they enter global consumer
markets (Sony and Samsung are exceptions)
 Creative’s advertising had only run in computer trade magazines, were
designed in-house, pitched specific products rather than overall brand
 Creative’s MP3 global market share was 31% in 2001, fell to 17% in
2003 (iPod has 54%)
 CEO: “Marketing is important, I know that. But we’ve always had
the best technology and we still do. That’s how we’ll fight back:
innovation.”
 Source: Wall Street Journal, 8/12/04
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Organizational Theory
The r versus K issue addresses timing
of entry into the population.
R-strategy involves entering a new
environment early.
K-strategy involves entering an environment
late, after other organizations have tested
the waters.
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Organizational Theory
The specialist versus generalist issue
addresses the set of resources for which
an organization competes.
Specialists concentrate their skills to pursue
a narrow range of resources in a single
niche.
Generalists spread their skills thinly to compete
for resources in many niches.
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FIGURE 11-3
Strategies for
Competing in the
Resource
Environment
Specialist Strategy
(operates in one niche)
Generalist Strategy
(operates in several niches)
r–Strategy
(early entry into
environment)
r–Specialist
r–Generalist
K–Strategy
(late entry into
environment)
K–Specialist
K–Generalist
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FIGURE 11-4
Greiner’s Model of Organizational Growth
Large
Stage 1
Stage 2
Stage 3
Stage 4
Stage 5
5. Crisis of ?
Size of organization
4. Crisis of
red tape
3. Crisis of
control
2. Crisis of
autonomy
1. Crisis of
leadership
5. Growth through
collaboration
4. Growth through
coordination
3. Growth through
delegation
2. Growth through
direction
1. Growth through
creativity
Small
Young
Mature
Age of organization
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FIGURE 11-6
Weitzel and Jonsson’s Model of Organizational Decline
Stage 1:
Blinded
Stage 2:
Inaction
Stage 3:
Faulty action
Stage 4:
Crisis
Stage 5:
Dissolution
Acceptable
performance
Good
information
Performance
Prompt action
Corrective
action
Effective
reorganization
Actual
performance
Decline begins
Time
Acceptable organizational performance
Actual organizational performance
Dissolution and
organizational death
Organizational Theory
 IBM’s Gerstner indicates there are two critical
ingredients for managing during crisis:
communication and performance
 Ees need to be treated like adults and not handed
trite memos about costs being too high
 Ees also need to understand entire picture of why Co
isn’t competitive; message needs to come from CEO,
often face to face
 Leaders need to provide clear sense of strategy
quickly
 Eliminating bureaucracy helped IBM refocus on
customers
 Source: Wall Street Journal, 7/13/04
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