Organizational Absorption

Description of Organizational Absorption. Explanation.

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Definition Organizational Absorption. Description.

Organizational Absorption is the ability or capacity of a company or organization to withstand hard, severe or turbulent circumstances by creating buffers or defense mechanism against these sudden shifts in the external or Competitive Environment. While Organizational Agility tries to deal with these circumstances in an adapting, flexible and offensive way, the focus of organizational absorption is on defensive mechanisms.

Typical ways in which organizations can build absorption capacity and weather storms or unexpected crises are (Donald Sull in HBR, February 2009):

Low fixed costs
War Chest
Diversification
Vast Size (Economies of Scale)
Tangible Assets (raw materials deposits, real estate)
Intangible Assets (brand, expertise, technologies)
Customer Lock-in (high Switching Costs)
Protected Core Market (provides safe stream of cash)
Powerful Patron (supporting government, regulator, investor or Loyal Customers)
Excess Staff (can be shed)

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End of description Organizational Absorption. An explanation.