Large firms often have difficulty adjusting to a changing business environment. They suffer from what Richard Daft refers to as "structural inertia" or the inability to adapt to a changing market. Regardless of whether it is the large investment in company assets (equipment, property,trained staff, etc.), decision makers/higher ups with firm viewpoints, or the difficulty in regards to changing company culture, these larger more established firms are finding it difficult to adapt to changing business environments.
The larger the organization, the larger the investment in assets. Equipment, a building and highly trained staff require a hefty investment by the company. If an organization invests in the above for a product, they will be less likely to react quickly to a change in the product mix in the near future. With funds tied up in their current product the organization will be less soluble, thus slower to react to a changing market.
By nature, large firms are bureaucratic with policies and procedures set firmly in place to maintain corporate structure and compliance. "By nature a bureaucracy causes businesses to be slow to respond to changing markets and customer demands" (Melvin). These structured environments provide the highest manager on the food chain with primary decision making power. This isolation of the primary decision makers
equates to a lapse from the time ideas and opportunities are addressed before they make it up the corporate ladder and are implemented.
The corporate culture for many large firms has been created over an extended period of time. Employees and managers alike become are trained in the methods of the current culture.In a changing environment many will become resistant to the change in the corporate culture that they are accustomed to. If employees and staff fail to perceive the potential benefits of a change in the current corporate culture they may become less cooperative and begin to fear the change. This avoidance may spread like wildfire throughout an organization as the previous stability has been removed and they are uncertain about their changing environment.
The rather slow ability of large firms to change does however open the door for new businesses to emerge and fill the current niche. These new firms will begin to siphon customers from established firms and may eventually become the conglomerate of tomorrow. Large firms must find ways to adapt to changing markets and become flexible like their smaller counterparts.
Daft, Richard. Organization Theory and Design. Cengage Learning, 2008. Apr. 23, 2010.
Melvin, Katherine. Size Matters - Large vs. Small Companies. Mar. 10, 2010.
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