Organizational Decline

2602 WordsJun 18, 201011 Pages
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…show more content…
It is not restricted to big organizations but applicable to small and medium organizations. As seen in many companies, they are not willing or capable to grow but remaining at same company size or performance. As the leaders or top management people play an important role in companies their behavior or working attitude is sometimes a major source of organizational inertia and decline. Organizational inertia is developed with various sources in many companies. Tushman (1999) states that successful company could be said to have a niche in the marketplace within which it has demonstrated its ability to overcome challenges and operate profitably. However, that success breeds inertia. A company that grows too fast may exceed the maximum effectiveness and managing capacity. The rapid growth is beyond its sustainable level as a result of having the risk of decline. Most companies may wish to find certain stability in their growth processes and certain level of consistency. When a company has matured and saturated to a level so that all its processes, procedures and even the culture have been frozen, the managers feel there is nothing to achieve further. If stability and consistency are achieved, the managers become risk averse and inertia sets in. This phenomenon can often be seen in many big Japanese companies, in which the management teams are not confronted with the threat of takeover. The
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