Strategic Management: Formulation and Implementation

Forms Of Change

Organizations can change their identity and boundaries, their culture and structure, and the nature of their control structure. Each form of change poses its own particular management requirements, because of the differing content areas that grab managers' attention. But certain shared characteristics of major organizational change must be understood by managers, if the changes process itself is to produce the intended results.

Organizational Identity and Change at the Boundaries

The most drastic change organizations cam make is to alter fundamentally their relationships to their environments what they supply and what they receive; their ties to other organizations; the expectations external constituencies hold for them; and, therefore, the activities they undertake.

Organizations can change their relationships to their environments by restructuring or redefining their identity and boundaries through mergers, acquisitions, divestitures, or alliance and partnership:

Merger
A merger is a fundamental altering of the boundary between firms, erasing the line and creating a common identity in the eyes of investors, customers, suppliers, and regulators out of what was formerly separate.
Divestiture
A divestiture creates a new boundary, pushing outside what was formerly inside; some ties may remain between the divested unit and the former parent (such as financial stake created as part of the terms of the sale), or all ties may be erased.
Acquisition
An acquisition alters or erases the identity of the acquired unit. It also changes the identity of the acquired by enlarging its market scope, bringing new' customers, or requiring relationships with suppliers new to the acquiring company because of the requirements of a different set of products.
Strategic alliance
A strategic alliance between firms might results in blurring of the boundaries between them. A close working relationship between a supplier and a customer blurs the boundary between them and may influence other market relationships of each partner. An alliance between similar companies serving different markets, can cause altered investor relations (equity swaps) as well as joint marketing that alters customer relationships.

Restructuring mergers, acquisitions, divestitures, and liquidations represents the sharpest and most dramatic identity change, but organizations may also alter their identities more slowly, with much more continuity, as part of a more natural growth and evolution of their constituency or stakeholders relations.

Internal changes sweeping reorganizations, major downsizing, or revamping of product lines do not alter organizational identity unless they impinge upon and redefine relationships with major stakeholders. In general, when stakeholders are replaced, or when all aspects of relationships with all stakeholders are altered in every respect, then organizational identity has been completely altered, and the organization has become something fundamentally different.

Identity changes have several distinctive properties, especially in contrast to internal organizational changes. Some of these are:

Identity changes generally involve formal contracts between stakeholders, and therefore have significant legal aspects.

Identity changes may be highly public while they are in process, not just when the final results are announced to the public.

The focus of identity changes is often on tangible assets: product flows, buildings, machinery, customers contracts, patent rights, pricing issues, equity stakes, financial payments.

Identity changes often involve image changes, from logos to slogans, culminating in name changes.

Major restructuring of key relationships especially mergers and acquisitions increases the likelihood of unilateral managerial action, which is exercised on everything all at once and further disempowers the rest of the people.

Among the many byproducts of significant organizational restructuring are discontinuity, disorder, and distraction.

Abrupt changes, especially those are externally induced, create managerial difficulties. If mismanaged, restructuring can all too easily make people feel helpless, anxious, startled, embarrassed, dumb, overworked, cynical, hostile, or hurt (Kanter, 1989).

It is important to remember that organizations may maintain multiple identities. Even in a small company there are differences between its legal identity, operating identity, and public identity. Moreover, identity change is clearly connected with changes in power increased ability to mobilize, resources, information, and support (Kanter, 1983).