Strategic Management: Formulation and Implementation

Size And Complexity Of Organization

As the organization grows larger and become sincreasingly complex and diverse the structure needs to change to allow for effective communication and coordination. Chandler found that large companies evolved through a pattern of four stages: the initial expansion and accumulation of resources, the rationalization of the use of resources, the expansion into new markets and lines to help assure the continuing full use of resources, and finally the development of a new of structure to make possible continuing effective mobilization of resources to meet both changing short term market demands and longterm market trends.

Recognition of this characteristic has prompted several attempts to formulate a model linking changes in organizational structure to stages in an organization's strategic development. Four distinct stages of strategy related organization structure have been singled out.

Stage I

Stage I organization are small, single business enterprise managed by one person. The owner entrepreneur has close daily contact with employees and each phase of operations. The owner makes all the pertinent decisions regarding objectives, strategy, daily operations, and so on. As a consequence, the organization's strengths, vulnerabilities, and sources are closely allied with the entrepreneur's personality, management ability and style, and personal financial situation.

Stage I enterprises are organized very simply with nearly all management decisions and functions being performed by the owner. A problem that sometimes develop in this stage is that as additional employees are added, it becomes increasingly difficult for the manager/owner to adequately handle the business. In the management terms, the span of control becomes to large.