1. Internal organisation
Understanding Business

2. 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.

3. 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

4. An Organisation Chart shows how an organisation is structured:

5. 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

6. 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

7. 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

8. 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

9. 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

10. 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!

11. 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.

12. 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

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

14. 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)

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

16. 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

17. 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

18. Task - for each grouping list the advantages and disadvantages

19. 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.

20. 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

21. 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.

22. 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)