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The CASE Journal
Volume 6, Issue 1 (Fall 2009)
www.caseweb.org
Article Ref # TCJ06-01-04TN
THE UNTSIYA COMPANY: BUSINESS
DEVELOPMENT IN RUSSIA
Galina Shirokova
St. Petersburg State University (Russia)
Gina Vega
Salem state College
ecch the case for learning
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For use in conjunction with Strategic Management 13E, Pearce & Robinson. Expiry date 2015.
THE UNTSIYA COMPANY
Galina Shirokova and Gina Vega
Instructors’ Manual
Case Synopsis
strategy, even to the extent of changing his existing, stable organizational structure. Students
are challenged to select a growth strategy and related organizational changes to implement
that strategy.
Research Methods
conducted two in-depth interviews with Nikolaev. The interviews were tape-recorded and the
transcript was carefully analyzed afterwards. All numbers, organizational charts, photos and
other evidence were taken from the interviews and directly from the company. Information
about the industry came from public sources such as newspapers, magazines and on the web.
Courses, Levels, and Placement
EMBA students.
Before discussing this case in the class, students should have learned such theoretical issues
as organization life-cycle, strategy development, and organizational design. The literature for
studying these issues includes:
Institute Publishing, 2004. Ch.2, 3, 4.
2. Cameron E., Green M. Making sense of change management: a complete guide to the
Sterling, VA, 2004.
3. Thompson A.A., Strickland A.J Crafting and implementing strategy. Irwin: Chicago,
1995. Ch.7
Additional citations are provided in the reference section.
TCJ06-01-04TN
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For use in conjunction with Strategic Management 13E, Pearce & Robinson. Expiry date 2015.
Learning Objectives
Students will be able to:
entrepreneurship to professional management
of its strategy
extension of its business
4. Design an organizational structure appropriate to the company’s current strategy.
Theory Application
1. Organizational life cycle model by I. Adizes.
To analyze organizational growth and change we use the concept of life cycle, which posits
that organizations are born, grow up, mature, age, and die. The structure and management
One critical factor in an organization’s success is its ability to deal with the challenges it
faces. Adizes emphasizes the next relationship: the growth of an organization -- changes --
challenges. Growth brings inevitable problems or “growing pains.” Competent managers
know how to anticipate, identify, and most important, treat the “growing pains,” which are
resolved within the company.
In contrast, abnormal problems or organizational pathology demand treatment from external
sources. The danger of these problems is in their unexpected, unanticipated nature which
does not leave room for planning. The main task of the organization is to prevent a growing
Adizes focuses on the two variables of organizational life -- flexibility and control. As a
company becomes older, it demonstrates more rigid control and less flexible management.
The goal of management is to stay at the Prime stage where the optimal balance of these two
parameters appears for as long as possible.
TCJ06-01-04TN
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2. The PAEI model.
The PAEI model represents the combination of four managerial roles (or roles in decision-
making): P - the role of production of results, A - the administrative role, E - the
Table 1.
Input
Throughput
Output
Decision Roles:
Make organizations:
To be:
(P)rovide needed service
functional
Effective short-term
(A)dminister
systematized
Efficient short-term
(E)ntrepreneur
proactive
Effective long-term
(I)ntegrate
organic
Efficient long-term
Short and long term added value = profits.
Source: (Adizes, 1992, p. 46).
3. Theory E and Theory O
In the modern literature on change management, there are two distinct concepts of
organizational development with opposite implications for change strategy. The authors of
these concepts, named accordingly theory E (for economic focus) and theory O (for
Theory E has as its purpose the creation of economic value, often expressed as shareholder
value. Its focus is on formal structure and systems. It is driven from the top with extensive
help from consultants and financial incentives. Change is planned and programmatic.
TCJ06-01-04TN
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Table 2.
Theories E and O of Change
Purpose and Means
Theory E
Theory O
Purpose Maximize economic value Develop organizational capabilities
Leadership
Top-down
Participative
Focus
Structure and systems
Culture
Planning
Programmatic
Emergent
Motivation
Incentives lead
Incentives lag
Use of Consultants
Large/knowledge-driven
Small/process-driven
Source: (Beer, Nohria. 2000, pp.3-4.)
Discussion Questions
1. Using Ichak Adizes’ or other model of the corporate life cycle, characterize the life cycle
have to solve?
2. Analyze the organizational design of the Untsiya Company. Which structural elements
3. Analyze the strategic alternatives for the company’s future development.
Discussion Questions and Answers
Question 1. Using Ichak Adizes’ or other model of the corporate life cycle, characterize
the life cycle stages of the Untsiya company. What normal and abnormal problems did
the company have to solve?
We have chosen to use Adizes’ model, but similar “A”-level responses will result from the
use of other models, such as Churchill & Lewis, who identify five stages of small business
development, associated problems and relevant solutions (Neil C. Churchill & Virginia L.
Lewis. 1983. The five stages of small business development, Harvard Business Review. 30-
49).
Ichak Adizes’ model of the corporate life cycle is a sequence of ten stages of a company’s
development – from the birth of its idea until its death. At every stage, the company
management faces a certain number of organizational problems. Some of them are
predictable or normal problems, and they are easy to overcome. The others are non-standard
or abnormal problems which can lead to the company’s premature death.
Each stage of the life cycle demands different managerial styles accordingly to PAEI model.
The capitalized or non-capitalized letter in the model points to the dominant or subordinate
TCJ06-01-04TN
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For use in conjunction with Strategic Management 13E, Pearce & Robinson. Expiry date 2015.
role of the manager at a given stage. The blank space points to the absences of this role at this
stage of life cycle.
Figure 1. Organizational lifecycle model by I. Adizes. Source: Adizes I. Organizational
passages – diagnosing and treating lifecycle problems of organizations, Organizational
Dynamics, Summer 1979, p. 8.
Below are the life cycle stages the Untsiya company has already gone through:
• 2001 – August 15, 2002 — Courtship: the creation of a business idea, then choosing a
business and a business niche. Besides development and testing of the business idea,
this stage includes the creation of a business concept.
According to Adizes, these are some normal and abnormal problems in the Courtship stage.
The problems that Untsiya experienced are highlighted.
Normal
Abnormal
•
Excitement, reality tested
• Details thought through
• Realistically committed founder
• Product orientation – commitment to
add value
• Commitment commensurate to risk
•
Founder in control
• No reality testing of the commitment
• No details thought through
• Unrealistically fanatic founder
• Exclusive ROI-profit orientation
• Commitment not commensurate to risk
• Founder’s control is vulnerable
Source: Adizes, 2004, p. 31.
most problems typical for this stage.
TCJ06-01-04TN
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For use in conjunction with Strategic Management 13E, Pearce & Robinson. Expiry date 2015.
The problems of the Infancy stage are as follows. The problems Untsiya experienced are
highlighted.
Normal
Abnormal
•
Product orientation
• Questioning investors
• Commitment not threatened by risk
• Negative cash flow
•
Sustained commitment
• Premature sales orientation
• Doubting investors
• Commitment destroyed by risk
• Unanticipated negative cash flow
•
Loss of commitment
Source: Adizes, 2004, p. 47.
problem is the company's initial dual management. This is explainable in the light of
property issues, but is absolutely inappropriate as a managerial pattern as it can later
lead to duplication of functions and the owners’ "divorce" at the Adolescence stage.
Normal
Abnormal
• Self confidence
• Eagerness
• High energy
• Sales orientation
• Seeking what else to do
• Sales beyond the capability to
deliver
• Insufficient cost controls
• Insufficiently disciplined staff
• No consistent salary administration
• Increasingly remote leadership
• Leadership’s inflated expectations
• Unclear communication
• Hope for miracles
• Unclear responsibilities
• Company subject to criticism
• Internal disintegration
• Cracking infrastructure
• Workable people-centric
organizational structure
• Is everything is a priority?
• Arrogance
• Lack of focus
• Energy too thinly spread
• Sales and premature profit orientation
• No boundaries on what to do
• Selling despite inability to deliver quality
• No cost controls
• No staff meetings
• Overpaid employees
• Leadership paranoia
• No communication
• Reliance on miracles
• Lack of accountability
• Company object of legal action
• Diminishing mutual trust and respect
• Collapsing infrastructure
• Unworkable people-centric
organizational structure
• Everything IS a priority!!!!
Source: Adizes, 2004, p. 73-74.
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The PAEI model can act as an additional and useful tool to evaluate the adequacy of decisions
made by the company's founders at each stage of its life cycle. The PAEI model is a suitable
tool to describe the behavior pattern of Sergey Nikolaev. Being entrepreneurial (E) and
result-oriented (P), he aims for integration (I) and tries to build the company’s team spirit.
cycle.
The problems of the Adolescence stage are the following. Untsiya experienced the
highlighted problems.
Normal
Abnormal
• Conflicts between partners or
decision makers
• Temporary loss of vision
• Founder’s acceptance of
organizational sovereignty
• Incentive systems rewarding wrong
behavior
• Yo-yo delegation of authority
• Policies made but not adhered to
• Board of directors’ attempt to exert
controls
• Love-hate relationship between the
organization and its entrepreneurial
leadership
• Difficulty changing leadership style
• Entrepreneurial role monopolized and
personalized
• Integration role monopolized
• Lack of controls
• Lack of accountability
• Low morale
• Lack of profit-sharing scheme
• Rising profits, flat sales
• Return to Go-Go and the founder’s
trap
• Inconsistent goals
• Founder’s removal
• Bonuses for individual achievement
while the organization is losing money
• Organizational paralysis during
endless power shifts
• Rapid decline in mutual trust and
respect
• Board’s dismissal of the
entrepreneurial leader
• Excessive internal politics
• Unchanging, dysfunctional leadership
style
• Entrepreneur’s refusal to delegate the
role to a depersonalized role
• Divide-and-rule management
• Imposition of excessive and expensive
controls
• Profit responsibility delegated without
capability to manage it
• Excessive salaries to retain employees
• Premature introduction of a profit-
sharing scheme
•
Rising profits, falling sales
Source: Adizes, 2004, p. 91.
TCJ06-01-04TN
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