Organizational Birth and Population Ecology in Business
Birth of the Organization
This stage marks the founding of an organization and represents a particularly risky phase in the organizational life cycle due to a high probability of failure. The failure rate is high because of the liability of newness, meaning the risks that come from operating in unfamiliar environments, often as first movers.
A new organization is fragile because it lacks a formal structure that provides stability and predictability in its processes and value-creating activities. The environment can also be hostile toward new organizations. Entrepreneurs face these challenges by developing a business plan that outlines the strategy they intend to follow.
Stages in Business Plan Development
- Develop a core idea: Decide what products or services to offer and which market segments to target.
- Conduct a strategic analysis: Use tools like SWOT analysis to evaluate internal strengths and weaknesses, as well as external opportunities and threats.
- Assess available resources: Ensure resources are sufficient for the venture.
- Prepare a detailed business plan: The plan should include the following components:
- Statement of intentions and objectives
- Strategic goal
- List of required resources
- Organizational timeline
Organizational Population Ecology
Theory of Organizational Population Ecology
This theory explains the factors that influence the birth and death rates of organizations within an existing population.
Organizational Populations
Organizational populations are groups of similar organizations that compete for the same resources within a shared environment.
Factors That Increase the Birth Rate of Organizations
- Increase in available and accessible skills and knowledge
- Surviving organizations serve as models for new entrants
Factors That Decrease the Birth Rate of Organizations
- Decline in available environmental resources
- Presence of entry barriers
- Increase in competition
Survival Strategies
Ecological theorists have identified two sets of strategies that organizations can use to gain access to resources and increase their chances of survival in the environment.
r-Strategy vs. K-Strategy
r-Strategy
Involves exploring new environments to take advantage of first-mover benefits.
K-Strategy
Involves exploiting existing environments through imitation and increased efficiency.
Advantages of r-Strategy
- First to capture resources
- Rapid growth
Advantages of K-Strategy
- Well-established organizations in a stable environment
- Wait for uncertainty to decrease before entering new markets
Specialist Strategy vs. Generalist Strategy
Specialist Organizations
Operate in stable environments.
Generalist Organizations
Operate in dynamic and changing environments.
When organizations enter a market early, they tend to become r-specialists. As they grow, they may evolve into generalists, expanding and competing across new niches. K-specialists are created to serve specific market segments that larger firms have neglected or abandoned.
The driving force behind the ecological model is natural selection.