The role of business culture in modelling the firm’s internal environment

Abstract

A variety of firm’s internal environment models has been formed for about half a century, starting with S. Gibson triad (strategy — structure — systems), which first formulated the sequence of strategic planning stages, and ending with the PEST-atom model, which reflects not only the composition of the elements of internal environment, but also the relationships between them. The article shows that a modern system, which would reflect the structure of the elements of firm’s internal environment, should be built on the basis of its key element, inextricably linked to the essence of the firm and, at the same time, synchronously changing with it in the course of movement along the trajectory of the life cycle. Such element, which directly determines the degree of maturity of a firm, is its culture. Business culture is the central connecting element of the internal environment of a firm, providing a harmonious combination of all its other elements: strategy, organizational structure, motivation system, etc. and making the firm attractive for investment. At the same time the type of business culture is the main indicator of the stage of the life cycle of a firm, and since the diversity of culture types is limited to four types: the cultures of a professional, leader, bureaucrat and entrepreneur, the process of movement of a firm through the stages of its life cycle can be turned into a manageable one. In order to do this in the second half of the firm’s maturity stage the role of professional should be made dominant, and the decline stage should be transformed into the revival stage. This transition will require the transformation of the internal environment of a firm in accordance with the model of intelligent organization, which is a logical development of the concept of a self-learning organization.The paper shows that in the course of movement along the trajectory of its life cycle a firm, by ensuring innovative attractiveness and reducing operating costs per unit, consistently implements the following “chain of criteria”: innovativeness (introduction stage) — efficiency (start-up stage) — productivity (growth stage) — effectiveness (maturity stage). The possibility of applying the theoretical aspects proposed by the authors is confirmed in practice in the study of the life cycle of Rodnik LLC.