Internal organisation Understanding Business

ORGANISATION STRUCTURE The structure defines how the organisation operates - ie the roles of individuals and their levels of authority. It also defines the relationships that exist between individuals and groups. Can help an organisation make best use of scarce resources and skills of staff.

Factors affecting an organisation’s internal structure: SIZE - growing business become harder to control TECHNOLOGY - introduction of IT can require the organisation to be restructured (eg internet sales) PRODUCT - nature of output (eg teams working on different projects) MARKET - ie the quantity and distribution of customers

An Organisation Chart shows how an organisation is structured:

Find a definition for each key term It shows: Authority Responsibility Accountability Chain of command Span of control Lines of delegation Find a definition for each key term

Authority – the power to give other instructions and tell them what to do. Responsibility – carrying out duties and tasks assigned to you. Putting the obligation on you to complete them. Accountability – being answerable for you actions. Explaining why you took a particular course of action. Chain of command – the way instructions are passed down through the levels of management Span of control – the number of staff that report directly to a person. Lines of delegation – the passing on of tasks and duties to subordinates

Forms of organisational structure: Hierarchical Tall Flat Centralised Decentralised Matrix Entrepreneurial Groups of 3 Choose 2 structures each Makes notes: Definition Example(s) Costs and benefits Bitesize – Higher BM – Enterprise - definitions

Distinguish between centralised and decentralised decision-making (5 marks) Decision making responsibility of senior management Decision making delegated to departments Managers carry whole burden of decision making Relieves daily tasks of management Subordinates less motivated Responsibility given to lower level staff Slower decision making – many decisions to be made Decision making faster as no consultation required Standardised procedures throughout organisation Mixture of procedures used Decisions taken for whole organisation Decisions made for separate areas/departments Corporate identity exists Corporate culture is harder to impose

GROUPING OF ACTIVITIES There is no single structure that suits all businesses. Most businesses use one or a mixture of groupings (a hybrid structure). The 5 main groupings are by: function product/service customer place/territory/location technology

Give a definition for each function FUNCTIONAL GROUPING “The organisation is split into departments which represent the main functions of business.” These departments are: Human Resources Finance Marketing and Sales Operations Administration R&D Give a definition for each function N5 knowledge!

PRODUCT/SERVICE GROUPING “Divisions or departments that deal with a different product or product range. Each division has its own functional staff.” This method is often seen as a “business within a business” - each division is like a separate firm.

Often divisions will have a separate company name eg Top Shop, Wallis. These subsidiary companies are owned by a parent company eg Arcadia Group. Examples of organisations: Unilever - washing powders, ice-cream, etc Nestle - Buitoni, Perrier, etc Virgin Group - trains, mobile network, etc Government

CUSTOMER GROUPING “Divisions dealing with different types of customers.” A market-orientated business puts their customers first and tailor their products to individual needs.

Examples of organisations: Insurance companies - home, life, car insurance, etc Banks - personal, business banking, etc Building companies - commercial or private property Baxters - retail and trade (home and overseas)

LOCATION/PLACE GROUPING “Divisions dealing with different geographical locations.” Customers are spread over a wide area of a country, or over many countries.

Examples of organisations: Oil companies - ie where their source of raw materials exists National companies - eg Kwikfit, Morrisons, etc Unilever - frozen food companies throughout Europe Housing market Travel companies

TECHNOLOGY GROUPING “Activities are grouped around the technological requirements of the product, mostly in its manufacture or delivery to the customer.” Examples of organisations: W H Smith - retail, wholesale and internet sales Car manufacturers - flow production Banks - telephone, internet and High Street

Task - for each grouping list the advantages and disadvantages

CHANGING STRUCTURES The increasing rate of change in the business environment has forced organisations to re-organise so that they can be much more responsive to these changes. Modern management issues centre around change, quality, cost and most importantly survival.

See handout for explanations and examples Some successful survival strategies are: empowerment outsourcing downsizing delayering business process re-engineering See handout for explanations and examples

There is no “RIGHT” organisation structure. Each organisation adopts a structure which reflects its aims and objectives An organisation may change its structure as it grows and responds to changes in the external environment.

Discuss the effects of outsourcing on an organisation (5 marks) +ve effects Specialists have professional equipment to produce high quality work May reduce costs – lower wages Service only paid for when required Can concentrate on core activities Cheaper if used infrequently -ve effects May increase costs to use services Loss of control over work Loss of confidentiality More expensive if used often Slower production of work (on-going checking of work)