STAGES OF

CORPORATE
DEVELOPMENT
Stages of corporate development
• Successful corporations tend to follow a
pattern of structural development as they
grow and expend.
• Beginning with the simple structure of the
entrepreneurial firm (in which everybody does
everything), they usually (if they are
successful) get larger and organize along
functional lines with marketing, production &
financial dpt.
• With continuing success, the company adds
new product lines in different industries &
organizes itself into interconnected divisions
Stage-1: Simple Structure
• This stage s typified by the entrepreneur, who
founds the company to promote an idea
(product & services).
• Company has little formal structure, which
allows to directly supervise of every employee
• Planning is usually short range or reactive.
Stage 2: Functional Stage
• Entrepreneur is replaced by a team of
managers who have functional specializations.
• The chief officer of the company must learn to
delegate; otherwise, having additional staff
members yield no benefits to the
organization.
• Strength of stage-2 corporation lies in its
concentration and specialization in one
industry.
• And the weakness is that all of its eggs are in
one basket.
• So, the company needs to move to a different
structure.
Stage 3: Divisional Structure
• This stage is typified by the corporations
managing diverse product lines in numerous
industries.
• It decentralizes the decision-making authority.
• These organizations grow by diversifying their
product lines & expending to cover wider
geographical areas.
• Organizations move to a divisional structure
with a central headquarters & decentralized
operating divisions – each division or business
unit is a functionally organized stage 2
company.
Stage 4: Beyond SBUs
• Even with its evolution into strategic business
units during the 1970s to 1980s, the div. form
is not the last word in organizational structure.
• The use of SBUs may result in a red tape crisis
• New advanced forms of organizational
structure have emerged under conditions of
– Increasing environmental uncertainty,
– Greater use of sophisticated technological
production methods and information system,
– The increasing size and scope of worldwide
business corporations,
– A greater emphasis on multy – industry
competitive strategy, and
– A more educated cadre of managers and
employees.