Organizational development is the process of planning and implementing changes in the overall capabilities of an enterprises in order to increase its operating effectiveness and profitability.
“Pyramid framework is widely used in the business for planning to build an organization and as a strategic lens through which to evaluate the strengths and the areas of improvements of the existing business. Pyramids of organizational development includes six drivers of financial results and they are market, products, resources, operational systems, management systems and corporate culture.” - (Flamholtz & Randle, 2007).
There are five dimensions that interact to shape an organization’s development. They are age of the organization, size of the organization, stages of evolution, stages of revolution and growth rate of the industry. These dimensions are important to find out the problems as well as an opportunity of an organization (Flamholtz & Randle, 2007).
Approaches for the development of the company
As mentioned in (Johnson, Scholes, & Whittington, (2005) pg:348-364, there are different approach to develop company. Company need to understand build, borrow or buy model and choose one of the development methods to address the future evolution of the company. Over the time, company need to choose the appropriate growth options for them. Organizational growth occurs in three ways:
Organic growth/ internal development/build: This is one of the methods of strategy development. In-house development means in-house capacity building which means using their expertise to develop new products/services or market. It involves 100% ownership of the project, and it is corporate entrepreneurship. Company can choose to have organic growth if they have expertise within organization. This allows company to maintain strategic interdependence. Company need to analysis if the internal expertise can give them competitive advantages.
Strategic alliance/borrow: Globalization offers both new opportunities and challenges for the organization and there is an intense pressure for company to stay in competition with the global business competitors. Therefore, organizations cannot always cope with increasingly complex environments solely from internal resources and capabilities. Therefore, without the need to own all the resources, company can readily obtain required materials, skills, innovation, finance or access to markets, through cooperation.
A strategic alliance allows two or more organization to share resources and activities to pursue a strategy. Strategic alliance can be formed either with competitor or with the provider of the complementary products or services. Strategic alliance offers co-specialization, whereby the company benefits by concentrating on the activities that best match their capabilities. There can be many factors which motivates company to enter into the cooperative agreements. Company may require additional resources to expand their market so they can benefit from the know-out of their partners in an alliance. Other reasons to undergo alliance are learning, risk reduction, speed to market, cost minimization and to eliminate current poor performance, to cope with the turbulence market. Companies can form formalized inter-organizational relationship, informal networking, with or without shareholding and ownership or loose arrangements of cooperation to borrow or benefit from the technological expertise, brand, know-how, specialization of one another.
Mergers and acquisitions/Buy: It involves developing strategies by taking over the ownership of another organization. Motives for development through mergers and acquisitions is to enter into new product or market. The market entry mode in competitive environment would be easier through merger and acquisition. Sometimes opportunistic acquisitive companies with high share value or price/earnings (P/E) ratio spot and acquire a firm with a low share value or P/E ratio to increase future revenue for the company. Also, company acquire and merge to exploit the core competency of another firm. Drive of institutional shareholders for continual growth also choose mergers and acquisitions.
Carefully designed road-map helps company to find a way to take company to next level. Company need to continually evolve to stay innovative, competitive and relevant.
About the Writer
She is currently studying Master in Migration Studies and a graduate of Master in International Business.
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