A Report on Organizational Life Cycle Zydus Cadila HealthCare Limited

Group 12 Sec C

Anirban Das Priyadarshi Guin Vatan Vindal

Organizational Theory
Organizations are born when individuals, called entrepreneurs, recognize opportunities to use their skills to create value. Organizational birth is a dangerous life cycle stage, associated with the greatest chance of failure.

About Zydus Cadila

Cadila Healthcare is an Indian pharmaceutical company headquartered at Ahmedabad in Gujarat state of western India. The company is the fifth largest pharmaceutical company in India, with US$290m in turnover in 2004. It is a significant manufacturer of generic drugs. Cadila Laboratories was founded in 1952 by Shri Ramanbhai Patel (1925-2001), formerly a lecturer in the L.M. College of Pharmacy, and his business partner Shri Indravadan Modi. The company evolved over the next four decades into one of India's established pharmaceutical companies. In 1995 the Patel and Modi families split, with the Modi family's share being moved into a new company called Cadila Pharmaceuticals Ltd. and Cadila Healthcare became the Patel family's holding company. Cadila Healthcare did its IPO on the Bombay Stock Exchange in 2000. Its stock code on the Bombay exchange is 532321. In 2001 the company acquired another Indian pharmaceutical company called German Remedies. On June 25, 2007, the company signed an agreement to acquire 100 per cent stake in Brazils Quimica e Farmaceutica Nikkho do Brasil Ltda (Nikkho) for around 26 million dollars.

Greiner Model of Organizational Growth

Many organizational life cycle theorists believe that organizations encounter a predictable series of problems that must be managed if organizations are to grow and survive in a competitive environment. Greiner developed a life-cycle model of growth, proposing that organizations pass through five stages, and that each stage ends in a crisis. To advance from one stage to the next, an organization must successfully manage and solve the problem associated with each crisis.

Large

Stage 1

Stage 2

Stage 3

Stage 4

Stage 5 5. Crisis of ?

4. Crisis of red tape Size of organization 3. Crisis of control 2. Crisis of autonomy 1. Crisis of leadership 5. Growth through collaboration 4. Growth through coordination

3. Growth through delegation

2. Growth through direction

Small Young

1. Growth through creativity Mature Age of organization

The Model
As suggested by Larry E. Greiners growth phases model the organization must go through 5 (now 6) stages of growth. The phases are: 1. Growth through creativity 2. Growth through direction 3. Growth through delegation 4. Growth through coordination 5. Growth through collaboration 6. Growth through extra-organizational Every stage of growth needs appropriate strategies and structures to cope. It is a descriptive framework that can be used to understand why certain management styles, organizational structures and coordination mechanisms work, and why some don't work at certain phases in the development of an organization There are crisis associated with growth stages. Without overcoming a crisis an organization cannot move to next level of growth stage. The crises are as follows: 1. Crisis of Leadership 2. Crisis of Autonomy 3. Crisis of Control 4. Crisis of Red Tape 5. Crisis of Internal Growth

Phases
1. Growth through Creativity: It is the first stage in the cycle. It is a stage which includes the birth of the organization. In this stage innovation and entrepreneurship goes hand in hand. This stage is characterized by hard work and low earnings. The crisis associated with this stage is crisis of leadership. There lies a difference between entrepreneurship and management, and when the entrepreneur takes control of the management, significant problem arises that eventually lead to crisis of leadership. Cadila Laboratories was founded in 1952 by Shri Ramanbhai Patel (1925-2001), formerly a lecturer in the L.M. College of Pharmacy, and his business partner Shri Indravadan Modi. The company evolved over the next four decades into one of India's established pharmaceutical companies. Year 1952 marks the birth of the organization. After 4 decades of hard work, the crisis of leadership began to creep in. In 1995, after a disagreement between Patel and Modi, Cadila Laboratories was restructured with the business being split two ways. Cadila Healthcare was set up to take the Patel's share of the business and Cadila Pharmaceutical took Modi's share. Patel was Chairman and Managing Director of Cadila Healthcare until his death. Cadila Healthcare went public on the Bombay Stock Exchange in 2000. 2. Growth through Direction: The next stage of the organizational growth is the growth through direction. The newly recruited strong top management team takes the responsibility for directing the companys strategy. The lower level managers assume key responsibilities. This phase is marked by sustained growth and functional organizational structure. Decision making becomes more centralized and

standardized processes are being adopted. When the professional managers start running the organization crisis of autonomy begins to creep in. The creative people of various departments are not able to exercise the freedom to experiment or to take risk, as it is limited by the top level managers. The increased level of bureaucracy lowers entrepreneurial motivation. After splitting Shri Ramanbhai Patel headed the group as CEO. Zydus Cadila's major shareholder remains the Patel family. Pankaj Patel (1951 - ), son of the founder, became the CEO after his fathers death. There is a team of 9 senior level executives - Known as The Executive Committee, who are heads of different operations look after the overall management processes. None of the members except Pankaj Patel are on Board of Directors. This era was marked by sustained growth. In 2001 the company acquired another Indian pharmaceutical company called German Remedies. On June 25, 2007, the company signed an agreement to acquire 100 per cent stake in Brazils Quimica e Farmaceutica Nikkho do Brasil Ltda (Nikkho) for around 26 million dollars. 3. Growth through Coordination: This stage is marked by: Formation of product groups Thorough review of formal planning Centralization of support functions Corporate staff oversees coordination Corporate capital expenditures Accountability for ROI at product group level Motivation through lower-level profit sharing This stage ends with a red tape crisis. When the organization fails to manage the complex coordination processes of achieving growth, they are plunged into a crisis of red tape.

4. Growth through Collaboration: This stage is characterized by: New evolutionary path Team action for problem solving Cross-functional task teams Decentralized support staff Matrix organization Simplified control mechanisms Team behavior education programs Advanced information systems Team incentives. It ends by an internal growth crisis.