1.3 Internal Organisation And Grouping Of Activites- Understanding Business

Question 1

Functional groupings (departments)

Answer 1

The organisation is split into departments which include people performing similar tasks and/ or using similar skills.

Question 2

Advantages of Functional groupings

Answer 2

Specialist staff become experts in their business function and can make more informed decisions in relation to their specialism.
Employers can offer specialist training to each functional department.
Staff know exactly who to ask or where to go if they have any particular problem or need advice.

Question 3

Disadvantages of functional groupings

Answer 3

Each department depend on each other, so if one is running behind it may hold up the other departments. This can slow down decision making and can make organisations less responsive.
There may be rivalry or a conflict of interests between different functional areas.
Staff met get bored and de-motivated by carrying out similar work all day.

Question 4

Product/service groupings

Answer 4

Activities are grouped around a particular product range. Each division will employ the functional specialists necessary to produce their product. Organisations using this type of grouping must be involved in the production of more than one distinct product.

Question 5

Advantages of product groupings

Answer 5

Each division has ownership of its product range and staff see the process from start to finish and so have greater job satisfaction. This may improve motivation and commitment leading to a higher quality output.
Each division will understand the market for their particular product.

Question 6

Disadvantages of product groupings

Answer 6

Each product division employs their own functional specialists, which can lead to unnecessary duplications of some functions.
Product divisions may have to compete with each other for investment in research and development.

Question 7

Customer groupings

Answer 7

Organisations are structured into divisions which focus on providing a good or service that meets the different needs of distinct groups of customers.

Question 8

Advantages of customer groupings

Answer 8

Ability to provide a specialist service or product tailored to specific requirements of the customer, customers are going to be willing to pay a premium price.
The service is likely to be more personalised meaning that customers feel ‘looked after’

Question 9

Disadvantages of customer groupings

Answer 9

Likely duplication of business functions, e.g. HR within each division.
Problems of continuity may arise if key staff build up relationships with their customers and then move on to other organisations. May take the customers with them.

Question 10

Location (geographical) groupings

Answer 10

Activities are grouped into geographical regions, e.g. UK, Europe, Asia.
Example multinational organisations often operate in this way. Car manufacturing often divided into regions e.g. Ford.

Question 11

Advantages of geographical groupings

Answer 11

As each division operates separately, this spreads risks and means that poor performance in one geographical area does not compromise success in another.
Divisions get to know their local market and may adapt their product to meet local needs.
Businesses can take advantage of favourable wage costs in particular geographical areas.

Question 12

Disadvantages of geographical groupings

Answer 12

It can be difficult to get all divisions working towards the central objectives that Head office may have.
Possible communication difficulties due to different languages and work cultures.

Question 13

Tall (hierarchical) Structure

Answer 13

Traditional structure for many large/medium organisations.
Decisions and instructions are passed down through line relationships from senior staff to the workforce (chain of command).
Workers are accountable to their line manager.

Question 14

Advantages of Tall (hierarchical) structure

Answer 14

Each employee is directly accountable to their line manager.
Closer supervision and monitoring of performance of staff.
Managers and their subordinates enjoy a closer working relationship, with high levels of support and job satisfaction.
Greater scope for promotion in a business with many layers.

Question 15

Disadvantages of Tall (hierarchical) structure

Answer 15

A long chain of command can slow down the flow of information and therefore the decision making process. This can lead to a lack of responsiveness.
Management salary bill can be high.

Question 16

Flat Structure

Answer 16

Relatively fewer levels in the hierarchy.
The chain of command will be shorter with fewer individuals linked by a vertical line between the top and the bottom of the organisation.
Each manager will be responsive for a larger number of people

Question 17

Advantages of Flat structure

Answer 17

Shorter chain of command means that information passes more quickly from top to the bottom of the organisation.
It can be more cost effective in terms of the overall management wage bill (not as may managers).
A wider span of control gives greater freedom of staff.

Question 18

Disadvantages of Flat structure

Answer 18

Employees struggle with less supervision and may not want the additional responsibility.
It may be difficult to monitor the quality of work of a large number of people.
Fewer opportunities for promotion.

Question 19

Matrix structure

Answer 19

People with particular skills are combined into project teams to complete a specific project.
Individuals within the team perform their own specialist function within the overall project brief.

Question 20

Advantages of Matrix structure

Answer 20

Individuals use their talents leading to high levels of job satisfaction.
Individuals get the opportunity to work in a variety of project teams over a period of team. Team members can learn from each other.

Question 21

Disadvantages of Matrix structure

Answer 21

Costly in terms of support staff, e.g. administration staff, as each project team may need its own back-up team.
May be difficult to resolve disagreements within the team as authority and responsibility are more equal.

Question 22

Entrepreneurial structure

Answer 22

Common structure in small businesses where decisions have to be made quickly for flexibility.
Decisions made centrally based on the expertise of one to two individuals with little involvement of the rest of the staff in decision making.
Staff are rarely consulted as part of the decision making process.

Question 23

Advantages of Entrepreneurial structure

Answer 23

Organisation may benefit from clear leadership from the decision makers, thus removing uncertainty on the direction of the business.
Decisions are usually made by the most experienced people in the organisation.
Decisions can be made quickly as there is little consultation with staff.

Question 24

Disadvantages of entrepreneurial structure

Answer 24

Too large a workload being placed on a few individuals.
Decisions made quickly might not be fully considered.
Organisation may. Miss out on good ideas from its staff who do not. Have the opportunity to take initiative or suggest improvements.