Why do firms experience evolutionary cycles in which there is a fit between strategy and structure, punctuated with periods in which strategy and structure are reshaped?

Evolutionary Cycles and Strategic Leadership

Why do firms experience evolutionary cycles in which there is a fit between strategy and structure, punctuated with periods in which strategy and structure are reshaped? Provide examples of global firms that have experienced this pattern.

Evolutionary cycles are a common phenomenon in the business environment, especially among firms that strive to grow and remain competitive in their industries. These cycles are characterized by an initial fit between an entity’s strategy and structure, followed by periods in which an organization’s structure and strategy are reshaped. While some associate the evolutionary cycles with changes in a company’s demographics and enhanced experience among employees, it is likely that the phenomenon is caused by the significant growth of firms, which induce new business prerequisites that require the realignment of the structure and strategy of an organization.

Based on the analysis of the business environment, it is evident that evolutionary cycles are mainly caused by the significant growth of firms from simple to complex units, which necessitate an appropriate restructuring of an entity’s structure and operating strategy. As opined by Awa (2016), once a firm changes its strategy, the current structure may become ineffectual. For example, the majority of the firms begin as simple systems, whose primary decisions are made by a sole proprietor or partners. However, as these businesses grow in scale and size, they assume a more functional level design. Under this form of structure, tasks, and activities are grouped by business functions (Awa, 2016). Therefore, each area of specialization is headed by a functional manager, such as production, marketing, and accounting managers.

 Similarly, when the firm continues to grow and expand its operations, it assumes a more complex structure to allow the smooth running of its operations. Most notably, a multidivisional design may be adopted in such a scenario. This organizational structure consists of a general office and some semi-autonomous divisions (Moschandreas, 2000). Unlike the functional and simple design, the multidivisional system may not be compatible with simple business-level strategies because of its industrial and product diversification. Therefore, when a firm adopts a multidivisional level structure, it requires a business-level plan to offer value to consumers, coupled with corporate strategy, to help compete in multiple industries. Hence, business growth, which triggers new business requirements, is the primary cause of evolutionary cycles, which allows entities to reshape their operating strategies according to their current organizational structures.

Several companies have, in recent times, experienced evolutionary cycles, among them Siemens. Most notably, Siemens began as a small company in a building in a back courtyard in Berlin, specialized in telegraph construction (“About Us”, n.d.). The firm constituted of 10 personnel, which suggests that it exhibited a simple organizational structure. However, with time, Siemens was awarded numerous contracts by the Russian government to construct and expand telegraph lines, which led to the establishment of an independent subsidiary in St. Petersburg, headed by Carl (“About Us”, n.d.). The establishment of the subsidiary likely gave rise to a more definite organization structure and strategies that would allow the smooth running of operations in the new company. Since then, Siemens has reorganized itself into sixteen mini-corporations, which are semi-autonomous (Moschandreas, 2000). The progressive growth of Siemen from a simple firm to a multinational company has caused evolutionary cycles, whereby the strategies are reshaped to fit the firm’s structure appropriately.

Strategic Management: Meaning, Concepts, Examples (Explained)
Evolutionary Cycles

In recap, the evolutionary cycles in the business environment are a result of the significant growth in firms, which necessitate the reshaping of organizational strategies to make them effective for the existing structure. Most notably, as firms move from simple, functional to multidivisional levels, they must change their plan for the effective running of operations. This pattern is typical in today’s businesses, such as Siemens and other growing firms around the globe.

Choose a CEO of a prominent firm that you believe exemplifies the positive aspects of strategic leadership. What actions does this CEO take that demonstrate effective strategic leadership? What are the effects of those actions on the firm’s performance? Use your notes for this weeks material to help.

Over the past few decades, the study of different leadership styles has caught the attention of scholars because of the close association between the concept and business success. Among the vastly studied management styles in the contemporary business environment is strategic leadership. While several individuals in business exhibit effective leadership styles, I believe that Elon Musk, the CEO of SpaceX and Tesla Motors, exemplifies the positive aspects of strategic leadership, such as being visionary, articulative and motivated, which enable him to lead the company towards industrial success.

Among the actions taken by Elon Musk that demonstrate effective strategic leadership, is remaining visionary about his company’s ability to move beyond the status quo. As noted by Kim and Mauborgne, a strategic leader is “one who has a clear vision, task, objective and policy to lead an organization towards performance” (cited by Zia-ud-Din, Shabbir, Asif, Bilal & Raza, 2017, p.9). In this context, Elon Musk has remained visionary about creating a car company that will transition the world to electric cars. By establishing policies, tasks, and specific objectives, Elon Musk governs one of the leading companies in the manufacturing of electric vehicles and space crafts.

Besides remaining visionary, Elon Musk’s action of articulating his ideas at the lowest level of the organization also demonstrates effective strategic leadership. Notably, in one of the articles in business insider, Musk mentioned that he does not own an office desk. Instead, he moves to whatever part of his business needs him most (“Elon Musk”, 2018). Musk’s practice of moving from one place to another exemplifies the traits of a strategic leader, who effectively articulates his problem-solving ideas to employees by interacting with them at a personal level.

Furthermore, Musk’s emphasis on employee empowerment and motivation is a significant trait that demonstrates effective strategic leadership. Most notably, unlike other leadership styles that focus on power and authority, strategic management is genuinely invested in empowering employees to work towards a shared vision and organizational success. Similarly, Elon Musk’s action of empowering the organization’s employees to face and tackle obstacles as they occur in the organization is a demonstration of effective strategic leadership.

Elon Musk’s actions have a significant positive impact on the firm’s performance. As noted by Devinney, organizational performance encompasses three areas of a firm’s outcomes- financial, product market, and shareholder return (cited by Ozer & Tinaztepe, 2014). The CEO’s actions enable the firm to incur higher profits compared to its counterparts. For example, the firm’s financial report for the fourth quarter of 2019 shows that Tesla recorded an operating income and margin of $359 million and 4.9%, respectively (“Q4 and FY2019 Update”, 2019). Arguably, the CEO’s action of empowering the entity’s employees to tackle obstacles in the business and his visionary trait enables Tesla to become more innovative in meeting consumers growing needs and preferences, thus enhancing the firm’s financial performance.

Additionally, the CEO’s actions enable the company to have a large market share in the electric automotive industry. According to a Statista report, Tesla’s vehicle deliveries reached between 367,000 and 368,000 units in 2019 (Wagner, 2020). This statistic is relatively higher compared to Tesla’s close competitor, China’s BYD. Arguably, Elon Musk’s motivation and visionary thinking enables the firm to manufacturer more efficient cars that have a higher preference among consumers, thus aiding the firm in recording higher sales.

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