Identify and Define a Market Niche

Figure 4. Pyramid of Organizational Development

On the first stage company finds a niche and search what market needs. New venture has to develop, acquire or provide a product or service that will satisfy the identified market need. It has to build an organization that is capable of functioning of a day-to-day basis to provide the product or service. Informal type of strategic planning is dominated in these companies.

On the second expansion stage number of employees rapidly increases. Company meets problems of growth rather than survival. It develops the increasingly complex operational systems. Strategy planning system is not very formal, but it needs some strategic planning. Management by objectives is adopted as a controlling function.

The third stage of organisational development implies planning, standardization of business processes, management training and control. Planning is made on the more formalised level and includes written plan of financial and non-financial goal, objectives, and targets of the organization. New budgeting and accounting system is introduced. Controlling undermines other than top-down approaches since it fails. The company budgeting system needs to be brought down to the level of individual departments and products. Formalization of recruiting procedures directed to hiring more professional employees. A formal performance appraisal system should be in place, and management development programs should have taught the firm’s management for efficient usage. At this stage company needs to establish a formal process of strategic planning.

The fourth consolidation stage accompanies by improving corporate culture and operates with values, beliefs and norms. Enterprise has a decentralized system of responsibility with strong managers. It is ruled under a participative style of leadership. Company culture promotes increased accountability and organization becomes profit oriented rather than strictly revenue oriented. Strategic planning ought to be a topic in company’s managed development programs. Expansive market research and analyses are necessary. Flexible budgeting, based on different assumptions about economy and related level of business, is become the main controlling method. Deviations from standard will require factual explanations. This stage has following functions of management development:

• shaping the corporate culture;

• promoting leadership style, that postulates appropriate style of leadership, promotes a single style of leadership;

• Rewarding and recognizing managers.

Organizational growth and types of crises

Another strategic approach to the growth of the new venture is strategic management by risk control. The foundation of this approach is focused on the crises of the hierarchic organization growth. Besides an investigation of the financial and marketing side of the new venture growth we may construct controlling on the executive officers and employees -management relations. Organizational development encounters contentious innovations in hierarchic structure.

Table 3. The crises of the hierarchic organization growth¹⁴

The organizational growth follows all stages with formalization of business relationship between the new venture colleagues (see Table 3.). The coordination of the growth on the different stages allows minimise financial expenditures and soften or even eliminate the employees swamping.

To sum up the developing business entity comes through the number of stages with specific organizational and managerial patterns. These patterns should be taken into consideration while planning and implementing company development progress.