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The Modern Business Enterprise: Ashutosh Murti

The document summarizes models of how modern business enterprises have changed over time. It discusses Alfred Chandler's model from the 1960s of large vertically integrated firms and Woody Powell's 2001 model of knowledge-based networks. It then examines the differences between the two models and factors driving the transformation. Finally, it explores models of the organizational life cycle including birth, growth, decline, and death.

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Amit Admune
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27 views

The Modern Business Enterprise: Ashutosh Murti

The document summarizes models of how modern business enterprises have changed over time. It discusses Alfred Chandler's model from the 1960s of large vertically integrated firms and Woody Powell's 2001 model of knowledge-based networks. It then examines the differences between the two models and factors driving the transformation. Finally, it explores models of the organizational life cycle including birth, growth, decline, and death.

Uploaded by

Amit Admune
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
You are on page 1/ 15

The Modern Business 1

Enterprise
Ashutosh Murti
ashutosh@iimshillong.ac.in
2 Changing Face of Organizations

• Late 1800s : Large Trusts (Who was the most famous ―Trust Busterǁ?)
• Early-Mid 1900s : Multi-divisional vertically integrated firm
• 1960s-70s : Conglomerates (horizontal diversification)
• 1980s : Leveraged buy outs-hostile takeovers
• 1990s : Narrow focus to core competencies—outsource non-core
work
• 2000 : Off-shore to China whatever possible
• 2006 : Growth of Private Equity
• 2008 and beyond : What will we learn from the ―Great Recessionǁ?
Transformation of Modern Business
3 Enterprise

• Alfred Chandler: 1962 Woody Powell 2001: based on


classic book: Strategy & two decades of sociological
Structure research on the research (on publishing
large U.S. business firms industry early 1980s, bio-
from late 19th through mid technology industry from
20th century—duPont, GM, the late 1980s)
Sears, Standard Oil…

Both on MIT faculty at one time


What are the key differences in their two
4 models? Similarities?

• Strategies?

• Structures?

• Other Features
5 From Chandler to Powell

• Individual jobs Project teams


• Sequential design production simultaneous
• Core competency: scale, technology knowledge
• Power through size power through learning
• Job security through seniority volatility, uncertainty
• Hierarchy networks
• Internally funded growth venture capital markets
• Firm led R&D R&D partnerships universities as players
What factors led to emergence and
6 supported these two models?

What role is played by:


• – Changing markets?
• – Technological Innovations—which ones?
• – Government actions/policies?
• – Decisions/Strategies of executives/ top managers?
• – External actors/institutions?

• Given answers above, how much choice did/does an enterprise


have in adopting the ―newǁ form?
How did/do these organizational models affect
7 our family? How are they likely to affect us?

• Our grandparents worked in Chandler’s era, some of our parents


experienced the transition from Chandler’s to Powell’s era.
• Do their models ring true, based on your own family’s experience?
• How many parents experienced the transition? How did it affect
them?
• Do you expect to live in Chandler’s model or Powell’s, or
something different?
What individual skills/capabilities are most
8 needed in Powell’s model?

• What skills/capabilities does an effective top manager need?


• What skills/capabilities might you need to succeed in this world of
work?
What have we learned from the ―Great
9 Recession??
10 The Organizational Life Cycle

• A sequence of stages of growth and development


through which organizations may pass
• The four principal stages of the organizational life
cycle:
• Birth
• Growth
• Decline
• Death
11 Organizational Birth

• Occurs when entrepreneurs take advantage of opportunities to


use their skills and competences to create value
• A dangerous life cycle stage associated with the greatest chance
of failure- Liability of newness
• Population ecology theory seeks to explain the factors that affect
the rate at which new organizations are born (and die) in a
population of existing organizations
• Number of births determined by the availability of resources-
Population density
• As the environment is populated with a number of successful
organizations, birthrate tapers off because- Fewer resources &
Difficulty of competing
• Survival strategies-r-strategy versus K-strategy
The Institutional Theory of Organizational
12 Growth

• Institutional theory explains how organizations can increase


their ability to grow and survive in a competitive
environment by becoming legitimate in the eyes of their
stakeholders.
• Organizations can develop competitive advantages by
increasing division of labor
• Creates surplus resources that foster greater growth
• Growth should not be an end-in-itself
• Organizational isomorphism: the similarity (strategies,
structure and culture) among organizations in a population
• Three processes that explain why organizations become
similar are:
• Coercive isomorphism
• Mimetic isomorphism
• Normative isomorphism
Figure 11.4 - Greiner’s Model of
13 Organizational Growth

Crisis of Leadership, Autonomy, control red tape


14 Organizational Decline and Death

• Organizational decline starts with organization entering when


it fails to anticipate, recognize, avoid, neutralize, or adapt to
external or internal pressures that threaten its long-term
survival
• May occur because organizations grow too much
• Effectiveness and profitability
• The forces inside an organization that make it resistant to
change- Risk aversion, The desire to maximize reward, Overly
bureaucratic culture
Weitzel and Jonsson’s Model of
15 Organizational Decline

• 5 stages of decline
• Stage 1: Blinded
• Stage 2: Inaction
• Stage 3: Faulty action
• Stage 4: Crisis
• Stage 5: Dissolution

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