Why do firms experience evolutionary cycles in which there is a fit between strategy and structure?

Why do firms experience evolutionary cycles? well, this could be as a result of several factors as explained in detail below.

What is an evolutionary business circle?

An evolutionary business cycle refers to the economic fluctuations that a business experiences while in pursuit of its long-term objectives.

Definition of strategy and strategic fit

A strategy is an action plan constructed to achieve short-term and long-term goals. A strategic fit is the extent to which an organization is willing to go to capitalize on external market opportunities by utilizing the available firm capabilities and resources. To achieve an ideal strategic fit, a firm has to strike a unique balance between firm resources and capabilities.

Why do firms experience evolutionary cycles

Definition of a business structure and structure fit

A business structure refers to the levels of management that a company adopts to oversee business operations.

Business structures include sole proprietorship, partnerships, co-operatives, limited liability companies, and corporations.

A structure fit is the ability of a company to deliver decisions that favor substantial growth and smooth business operations.

A business survives because it provides relevant products that can be used in a specific period of time. In light of this finding, the nature of products or services stipulates the shelf-life of that particular business.

Moreover, the nature of the product affects the business structure. High-risk and volatile merchandise may require a hierarchical setup where decisions trickle down from the highest office.

A hierarchical setup serves to maintain a strict work policy to minimize errors and promote high work efficiency. On the other hand, businesses that rely on creative products may adopt a diversified setup to allow room for creativity.

Managers in this setup are given some level of autonomy to decide what is best for their respective departments.

Purpose for evolutionary cycles in business

Every business must undergo change to keep up with the latest trends in the market.

In a customer-oriented model, the market demands determine the nature of products, packaging, and distribution.

Additionally, the latest technological trends are instrumental in fostering efficient customer service to clients.

A business entity undergoes several stages in its life cycle. The five main stages of the business cycle include birth, growth, maturity, decline, and revival.

Birth

At the inception of a business idea, the entrepreneur often has a dream for that business.

This is in regard to the nature of the product or service, the target audience, and the logistics of getting the product to the consumer.

At this level, the business structure is simple and straightforward. The decisions solely lie in the hands of the proprietor.

The merchandise is always specific for a given audience and may stem from one product line.

At this stage, the marketing strategy is often low-key with word of mouth playing a huge role in establishing a rapport with potential clients.

The birth stage of a business is capital-intensive. Launching a new product line taps into the proprietor’s financial pot at a rapid rate.

This can be attributed to the cost of running a business with new partners, expensive marketing strategies that offer promising results, and certification of the business entity.

Growth

At this juncture, a business is often on the fast track towards acquisition of new clients and partners.

The market response towards the product or service influences adjustments to the product line.

When there emerges a need for diversification, the firm has to add more employees, contract more suppliers, and market intensively.

The growth stage is critical to a business as it provides a unique avenue for consumers to express their views on the products being sold, the logistics and the quality of customer service.

All these attributes determine the formulation of new business strategies that are consumer-oriented.

Maturity

The maturity stage is marked by the establishment of autonomous departments led by competent managers.

This part of the business cycle is burdensome to the owner of the business as numerous decisions have to be made at every business hour to facilitate smooth transactions.

Not only do department heads make decisions, but they also acquire the authority to assist in the recruitment of experts to reinforce business strategies.

As a measure of confidence in the company’s growth and stability, some business owners offer company shares to interested investors.

Investors give business credibility in the market hence promoting brand trust. At this level, the business has established linkages in all sectors such as the finance sector, legal sector, religious groups, and the government.

By virtue of being a trusted service provider, the entity acquires a significant market share.

Decline

The weakness of human nature dictates that at some point employees may fail to keep up with the business strategy.

A notable example is a poor leadership in critical departments that have a significant impact on business success.

When managers lose the company’s vision, they derail the company’s efforts to match resources with firm capabilities for a strategic fit.

Other lapses include reduced marketing aggressiveness by working on the notion that the brand is popular.

A significant decline in business may stem from poor quality in production. Watering down product quality is one of the major causes of business decline.

Plummeting market reviews drive away investors and suppliers who seek reliable alternatives.

Revival

This is the stage where a business makes a come-back after taking an economic dip.

In the revival stage, a company normally has re-evaluated business strategies, revamped personnel, and rebranded products and services. Market reviews provide an avenue for consumers to express their concerns over the brand.

By analyzing the market reviews, a company restructures its systems, personnel, and products to provide a strategic fit.

Evolutionary cycles in management

The dynamic nature of business requires management to step up and align business goals with the available resources.

The competition risk of new entrants in the market and rapidly changing technology stimulate the need for renewed business strategies.

Managers hold the key to the survival of a business. By boosting the work morale of employees, managers can tap into talents and human work skills that are sustainable in the long-run. 

Encouraging employees to be innovative triggers a sense of responsibility towards the firm.

Adopting a pro-active initiative is critical in identifying new market opportunities, new threats, and new talents that can provide a firm with sustainable competitive advantages to weather all stages in the business cycle.

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