Internal Organisations

Higher/Int 2 Business Management

2009-2010

Organisation?• Relationships between people

form the structure

• A name which gives a corporate identity

• Resources are organised to achieve objectives

Importance?• Defines how the organisation operates

• Role(s) of individuals & authority

• Relationships between people

• Channels activities towards the goals

• Best use of scarce resources

Large Business• Impossible for one person to make

all the decisions

• Put people in charge of their expert areas eg accountant for finance

Who makes which decisions?

Who is responsible

for what?

Grouping of Activities

There are lots of options available!

Functional Grouping• Activities are grouped into departments

based on similar skills, expertise and resources used:– Marketing– Operations– Human Resources– R&D– Administration

• Size depends on importance to organisation eg 1 or 2 customers = smaller marketing dept

Functional GroupingAdvantages

• No duplication of resources

• Become experts in field

• Career paths developed

• Communication and cooperation

• Teamworking

• Decision-making improved

Disadvantages

• Loyalty to department vs organisation

• Communication barriers

• Slow to respond to change

• Decision-making time consuming

• One problem vs >1 department

Product/Service Grouping

• Grouped around product or service offered

• Each product requires specialist knowledge and expertise

Product/Service Grouping

Advantages

• Self-contained units

• Expertise develops

• Which parts are doing well?

• Quicker response to external changes

Disadvantages

• Duplication of resources

• Difficult to share research or equipment

• In competition with other divisions

Customer Grouping• Putting the needs of customers

first

• eg suppliers for oil companies create teams which work closely with the oil companies in their offices and on the platforms

Customer GroupingAdvantages

• Price/promotion suit customer

• Customer loyalty develops

• Quick response to changing needs

Disadvantages

• Expensive – staff costs

• New group for new customer eg ecommerce

• Duplication of resources

Place/Territory Grouping• Organised by geographical region

• eg North-East Scotland and Midlands group

Needs of customer in that area

Place/Territory GroupingAdvantages

• Local offices = local knowledge

• Language and cultural differences

• Accountable for success/failure in area

• Customer loyalty

• Responsive to customer needs

Disadvantages

• Administration is time consuming

• Staff change = loss of personal contact

• Duplication …

Technology Grouping

• Grouped around the technical requirements of the product

• eg car manufacturers – workers in the paint area need to focus on the high skill to ensure defects in finish are kept to a minimum

• They do not need to learn other skills – easier to train more staff

Advantages

• Increased sophistication in production process

• Problems with technology easily identified

Disadvantages

• Specialist training required

• Industries tend to be capital-expensive - expense

Technology Grouping

Line/Staff GroupingDividing the organisation into

• line departments (generating revenue)

and

• staff departments (providing specialist support for the whole organisation eg Finance and Human Resources)

Combinations of Groupings

A business may use more than one type of grouping to organise its business

eg geographically and then functionally

Types of Organisation Structures

• Hierarchical – Traditional tall pyramid structure

• Flat – Pyramid with few management levels

• Entrepreneurial – decisions made by a few people at the core

• Matrix – used for project work

• Decentralised – control and decision-making delegated

• Centralised – control and decision-making lies with senior management

Types of Organisation Structures

Task:

Research the different structures available and prepare a display to illustrate the key ideas of each structure.

• Organisation Charts• Choosing Formal Structure• Relationshi Definitions• Changes in Structure• Empowerment• Corporate Culture

CongratulationsYou have completed

Internal Organisations

in

Higher/Int 2 Business Management