Organizational Life Cycles in Small New Zealand Wineries

Article excerpt

Hanks (1990) noted that the life cycle analogy was developed in order to explain the development of organizations over time. Traditional management theories had failed to take into account issues such as organizational age, size, and complexity when they attempted to explain organizational effectiveness (Quinn and Cameron 1983). A central tenet of life cycle theory is that organizations move through a series of phases. Hanks et al. (1993, p.7) defined a life cycle phase as "a unique configuration of variables related to organization context or structure." In a review of lifecycle models, Hanks et al. (1993) found that common across all models were start-up, expansion, consolidation, and diversification stages. All models stated that organizations grow larger and more complex as they age. As organizations develop, they go through a series of stages, deal with a number of different challenges, conflicts, and problems, and adopt different strategies and skills. Hanks (1990, p. 1) argued that a valid life cycle m odel would be of great value to those managing growing firms:

It could provide a road map, identifying critical organizational transitions, as well as pitfalls the organization should seek to avoid as it grows in size and complexity. An accurate life cycle model could provide a timetable for adding levels of management, formalizing organization procedures and systems, and revising organization priorities. It could help management know when to "let go" of cherished past strategies or practices that will only hinder future growth.

Despite the proliferation of models, attempts to prove the existence of a general model of life cycles have failed (Levie and Hay 1998). They argued that although life cycle models may provide an explanation of firm growth at an industry level, the existence of a general theory is unlikely McMahon (1998), like Hanks et al. (1993), called for the use of qualitative research to attempt to develop inductive models of firm growth.

Life cycle models have also been criticized by small business experts for not taking into account the fact that many small business people may be motivated by factors other than a desire for profit and growth (O'Farrell and Hitchens 1988). Life cycle models assume that economic growth is desired and therefore it would be appropriate to examine whether life cycles occur in growth-oriented firms. The purpose of this article is to examine the developmental patterns of profit-driven wineries in New Zealand through the use of in-depth case studies.

The New Zealand Wine Industry

The current life cycle stage of the New Zealand wine industry is critical for understanding the context within which the sampled firms operate (Swaminathan 1995). Beal (2000, P. 34) argued that an industry's life cycle stage could be characterized by:

(1) Growth in the industry's sales during the past five years; (2) level of demand for the industry's products; (3) stage of development of the industry's products; (4) level of diffusion of information about the industry's products; (5) plant capacity over the past five years; (6) current price level of the industry's products; (7) growth in the different types of distribution channels for the industry's products; (8) level of the industry's advertising expenditures over the past three years.

Some of this information is contained in Table 1. From 1990-1999, the number of export markets for New Zealand wine has increased, opening up a range of new distribution channels. A recent industry survey highlighted increased marketing activities in the industry, and in this context, New Zealand has established a reputation for the production of fine wine (Beverland 1999). This information would support the view by Rabobank (1999) that the industry is in a growth stage. This has attracted a number of new small start-up wineries into the industry. A recent survey by Beverland (1999) found that although most of these start-ups are motivated by a desire for personal fulfilment and economic return, many had little understanding of business issues. …