B2. Business Organisational Structure

Departmentalisation

The process of dividing and grouping the tasks which have to be performed into convenient units of management.

Economies of scale

Economies of scale refer to the cost advantages that a business obtains due to the scale of operation, with cost per unit of output generally decreasing with increasing scale as fixed costs are spread out over more units of output.

Types:

1. Internal Economies of Scale: Cost savings that accrue to a firm regardless of the industry, such as improved production techniques or bulk purchasing.

2. External Economies of Scale: Cost benefits that accrue to all firms in an industry as the industry grows, such as improved infrastructure or supplier networks.

Benefits:

• Lower average costs

• Increased competitiveness

• Higher profit margins

Limitations:

• Diseconomies of scale can occur if a company becomes too large, leading to inefficiencies.

Entrepreneurial structure

Typical in small, owner-managed companies. Allows for fast decision-making and high degree of control, however may restrict growth and success depends on manager’s capabilities.

Functional (departmental) structure

Departments are based on common specialisation. Best suited to companies operating in a stable environment, dealing with few products, this structure often suffers from conflict between departments and slow decision-making.

Divisional structured

Functions are grouped in accordance with product lines or divisions. Gives more responsibility to general managers, allows senior staff to become more strategic, but functions are duplicated and divisions may lose sight of organisation-wide goals.

Geographically structure

Activities are grouped according to location. This gives a high degree of flexibility necessary to adjust for local customs, but may lead to sub-optimisation.

Matrix structure

A combination of functional and divisional structure which allows for better coordination of activities and more focus on operations. Can lead to dual reporting and excessive pressure on staff.

The Shamrock Approach

Теория трилистника, или лизинг персонала:

1. Core Workers – receive good promotion, security and status prospects relative to others and are often managers, team leaders and professional staff.

2. Interface Workers – low skilled labour that are generally called when needed for example part-time, seasonal staff – these type of workers are becoming more dominant and more demanded.

3. Suppliers – temporary and self-employed with general skills as needed, for example, consultants.

Boundaryless structure

1. Hollow organisations – all non-core (i.e. non-strategically important) functions are outsourced to third party organisations.

2. Virtual organisations – any, and all, functions can be outsourced – whether core or non-core. All that is left is a small central staff who co-ordinate the outsourcing arrangements.

3. Modular organisations – boundaryless manufacturing organisations. Rather than simply making their own product, they break the manufacturing process down into modules or components. Each component can then be either made by the company or outsourced.

Scalar chain

It relates to the number of levels of management within an organisation.

Span of Control

A manager’s span of control is the number of employees/subordinates for whom he or she is directly responsible.

“A business with highly skilled, motivated members of staff will tend to have a wider span of control than a business with demotivated employees.”

Delayering

This is the process of reducing the number of management levels from the bottom to the top. (Business becomes flatter).

Tall and Flat organisations

• Tall – long scalar chain & narrow span of control (e.g. functional, divisional, geographic).

• Flat – short scalar chain & wide span of control (e.g entrepreneurial, matrix).

Anthony triangle

1. Strategic planning – senior managers:

• long term;

• looks at the whole organisation;

• defines resource requirements.

2. Tactical planning – middle management:

• medium term;

• looks at the department / divisional level;

• specifies how to use resources.

3. Operational planning – junior managers and supervisors:

• short term;

• very detailed;

• concerned day-to-day running of the company.

Centralisation & Decentralisation

• Centralisation implies that there exists more than one level within an organisation and that decisions are made only by the highest level.  

  Therefore, one may say that a centralised organisation has a central authority and no decisions are made at lower levels.

• Decentralisation encourages the existence of more than one centre of decision-making.  

  A decentralised company empowers lower levels within the hierarchy to take decisions.

Roles & Functions of the main departments

1. Research & Development (R&D) 

   • Improve and;

   • Invent products;

   • Anticipate customer needs.

2. Purchasing  

   The purchasing manager has to obtain the best purchasing mix.

   • Quantity

   • Quality

   • Price

   • Delivery

3. Production or Operations

   The main job of the production department is to convert raw materials into finished goods.  

4. Direct service provision

   This department or function has to do with the delivery of a service directly to the end consumer.  

5. Marketing

   This department tries to identify customer needs and wants.

6. Administration

   The Administration department should support the other departments by processing administrative requests such as correspondence, photocopying etc. 

7. Finance

8. Human Resources

The Definition of Marketing

Marketing is a management process that identifies, anticipates and satisfies customer needs efficiently and profitably.

A feature of marketing rather than sales

It tends towards long term satisfaction of customer needs.
Is Marketing all about selling? – No!

The Marketing Mix

4 P’s

PRODUCT – PLACE – PRICE – PROMOTION

+

PEOPLE – PROCES - PHYSICAL EVIDENCE

Product definition

A product is anything that can be offered to a market for attention, for acquisition, use or consumption that might satisfy a want or a need.

It can be either a good or a service!

Levels of Products

• THE CORE PRODUCT - the overall benefit of buying the product;

• THE ACTUAL PRODUCT – the brand and quality you are purchasing;

• THE AUGMENTED PRODUCT - anything over and above the purchase such as delivery.

Pricing issues

4 C's

COST – CUSTOMERS – COMPETITION - CORPORATE OBJECTIVES

8 Pricing issues (main examples)

Place (distribution) issues

Product issues

Promotional issues

The main 3 steps in a strategic plan are

1. Analysis (e.g. SWOT)

2. Choice

3. Implementation

Mintzberg’s Organisational Configurations

Definitions of blocks which dominates (Mintzberg’s)

Centralisation & decentralisation advantages

Advantages of centralisation:

• Easy co-ordination of decision

Advantages of decentralisation:

• More accountability at lower levels

• Improves motivation