Term Paper on "Life Cycles in Organizations"

Term Paper 4 pages (1089 words) Sources: 1+

[EXCERPT] . . . .

Life Cycles in Organizations

Organizations' life cycles can be broken down into four distinct phases: pioneering, expansion, maturity and decline.

The pioneering firm enters a relatively unpopulated market where there is a lot of unexploited market potential. The company's market share and market power are high, but its initial sales volume is quite low. This low sales volume results in lower profit margins, and this is attributable to the high start up costs and associated one time fixed costs of doing business. Also, this funds crunch leads to a lot of borrowed funds, low liquidity and no dividends. (Pashley, 1181)

There are some unique challenges associated with managing a company in this pioneering phase. First, there is the concept of buy-in. Employees and investors alike must be convinced of the viability of doing business in that particular arena. Is the company at an advantage because it serves a lonely market? Or is it a lonely market because for whatever set of reasons, there is no revenue to be earned in it? This is the question that must be answered, and it must be answered in the positive and that answer must be believed by the employees and investors. Without buy-in here, the organization is bound to fail in the pioneering phase.

Managers must constantly stay on point by stressing the innovation associated with pioneering in their market. They must not allow the organization to lose focus or move onto tangential businesses. They must stress the importance of sticking to the core competency being developed in this pioneering market.

During the growth phase of an organization, the managers' key challenges are entirely different. They already have buy-in, or the organization would not have progressed beyond the pioneering phase. (Pashley, 1182) Here, the managers must concentrate on the day-to-day functions associated with steering the organization. The work is less visionary and more methodical. How do you motivate the employees to be persistent and shelve further innovation for exploiting a formula that has been shown to work?

And of course, at the same time, the managers must not breed complacency at the organization either. The trick is truly to achieve a balance between the same creative energies that got the organization past the pioneering phase in the first place, and to institute practical day-to-day strategies that will keep the organization growing rather than becoming spread too thin.

In the maturity phase, the challenge is actually the reverse of the challenge that managers face in the growth face. This is the time to maintain core competency but to expand the market with new product development and ancillary products. So, in essence, the maturity phase represents a return to creativity. (Cosier, generally)

In the maturity phase, management must create the opportunity for employees and investors to encourage new products and markets that will help stave off the last stage, decline, for as long as possible. This will come by pushing creativity over stagnancy and changing compensations structures such that innovative thinking and opening up new (tangential) markets are rewarded.

Often, the ability to rescue an organization that has reached the decline stage depends on the work done to expand the market and discover new markets in the maturity phase. If the maturity phase exhibits much profit-taking and resting-on-laurels as… READ MORE

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