1. Structures
Understanding Business
Higher Business Management 1

2. Organisation Charts Business Structures
Shows how the business operates
Defines the role and responsibility of employees
Could be formal or informal

3. Organisation Structures
Organisation Charts
Organisation Structures
Hierarchical Structure
Eg Coltness High School
Mr McGilp
Deputes
Faculty Heads
Teaching Staff
Decisions and instructions are passed from one level to another – one level is above another

4. Organisation Structures
Organisation Charts
Organisation Structures
Span of Control – how many staff someone is in charge of
Hierarchical Structure
Managing Director
Senior Managers
Middle Managers
Workers
Lateral Relationships
Line Relationships

5. Organisation Structures
Organisation Charts
Organisation Structures
Flat Structure
Managing Director
Workers

6. Organisation Structures
Organisation Charts
Organisation Structures
Tall Structure
Managing Director
Senior Managers
Middle Managers
Workers
Chain of Command – how instructions are passed from one level to another

7. Organisation Structures
Centralised
Important decisions are made at the head office
Very little delegation
Easier to promote a corporate image
Decentralised
Important decisions made by managers
Employees are motivated and empowered

8. tasks – no hierarchy – everyone is empowered
Organisation Charts
Organisation Structures
Matrix Structure
Specialists are in
project
teams to have
specific
tasks – no hierarchy – everyone is empowered
Marketing
Sales
R&D
Project HR
Production
Finance 8

9. Organisation Structures
Organisation Charts
Decisions are made centrally usually with very little staff input – relies on a few key workers
Entrepreneurial MD
Finance
Production
Sales
Marketing
R&D 9

10. Structure Key Terms Some Key Terms Authority Span of control
the right to make decisions and carry out tasks
Span of control
the number of people a superior is responsible for
Chain of Command
the relationship between different levels of authority in the business
Hierarchy
shows the line management in the business and who has specific responsibilities
Delegation
authority to carry out actions passed from superior to subordinate
Empowerment
giving responsibilities to people at all levels of the business to make decisions
Line relationship
vertical line on an organisation chart
Functional/Lateral relationship
horizontal line on an organisation chart

11. Questions - 1 Some Key Terms What is meant by a Business structure?
What is a Tall Hierarchical Structure?
What is an advantage of a Flat Hierarchical structure
Compare a Matrix structure with a Hierarchical structure.
What is meant by a Span of Control?

12. Grouping of Activities for
a Business Structure
By function:
Arranging the business according to what each section or department does
By product or activity:
Organising according to the different products made
By place:
Geographical or regional structure
By customer:
Where different customer groups have different needs
By process/technology:
Where products have to go through stages as they are made
Features, characteristics, benefits and drawbacks of different organisational structures

13. Functional Structure Functional Structure Managing Director Sales
Marketing
Human Resources
Recruitment
Training
Finance
R and D
Operations
Warehouse Manager
Quality
Company Secretary 13

14. Functional Structure Functional Structure Advantages
Specialisation – each department focuses on its own work
Accountability – someone is responsible for the section
Clarity – know your and others’ roles
Disadvantages
Closed communication could lead to lack of focus
Departments can become resistant to change
Coordination may take too long
Gap between top and bottom

15. Product/Service Structure

16. Organisation by Product/Activity
Product/Service Structure
Advantages
Expertise can develop in dealing with each product/service
Managers can easily identify how each product is performing
Decisions can be more responsive to changes in the business environment
Disadvantages
Duplication of functions (e.g. different sales force for each division)
Divisions may find themselves competing with each other
Lack of central control over each separate division

17. Place Structure
Organisation by Place
Coca Cola

18. Place Structure Organisation by Place Advantages
Serve local needs better
More effective communication between firm and local customers
Better knowledge of local staff
Disadvantages
Conflict between local and central management
Duplication of resources and functions

19. Customer Structure
Organisation by Place
Coca Cola

20. Customer Structure Organisation by Place Advantages
Service, price and promotion are geared towards the specific customer needs
Improved customer loyalty due to the service given
Management can identify poorly performing groupings
Can change responses due to the changing needs of customers
Disadvantages
New groups of customers require a whole new group of staff to be employed
Duplication of equipment, administration and staffing

21. Process/Technology Structure
Organisation by Place
Coca Cola

22. Process/Technology Structure
Organisation by Place
Process/Technology Structure
Advantages
Good for large manufacturing business with different production processes
Increased specialisation of employees as their training is concentrated
Easier for management to identify production problems
Disadvantages
Often technology groupings focus on their own objectives instead of organisational objectives
Duplication of equipment, administration and staffing

23. Questions - 2 Some Key Terms
Give 3 ways of structuring a business according to the grouping of activities.
Why are there lots of ways of organising activities?
What is the difference between Place Structure and Product Structure and give an example of a company who would organise themselves these ways?

24. Your Task Some Key Terms
Use the worksheet and find out companies who would organise their activities in each category of grouping.

25. Past Paper Questions Some Key Terms
Discuss the use of Geographical grouping.
3 marks
Describe the effects of widening the span of control for a manager.
5 marks
Describe the main features of an entrepreneurial structure
Explain the advantages to an organisation of using functional grouping.
4 marks

26. Discuss the use of Geographical grouping. (3)
Some Key Terms

27. Describe the effects of widening the span of control for a manager. (5)
Some Key Terms

28. Describe the main features of an entrepreneurial structure. (3)
Some Key Terms

29. Explain the advantages to an organisation of using functional grouping
Some Key Terms