9. Strategy and structure Flashcards
Simple structure
Owner-managed
All decisions are made by the owner
Functional structure
Outgrown simple structure
Organise business on a functional basis
Divisionalised structure (product/ division based)?
Structured in accordance with product lines/ brands or divisions
Divisions are profit centres
Divisionalised structure (geographically based)?
Structured in accordance with location
Matrix structure?
Combines benefits of the divisional structure and the functional structure
Advantages of matrix structure
Improves cross functional communication
Useful for projects and temporary teams
Flexibility
Disadvantages of matrix structure
Dual command
Dilution of functional authority
Time-consuming meetings
Flexible structures
Virtual
Hollow
Modular
Virtual
Remote
Hollow
Non-essential activities are outsourced
Modular
Production processes become separate modules and are outsourced
What does theHandy Shamrock do?
Analyses how companies can improve efficiency and cut costs by considering staffing issues more flexibly
What are the components of the shamrock?
Professional core - main contact
Flexible labour force
Customers - eg airport checking in themselves
Contractual fringe - eg lighting crew
What are Mintzbergs 6 component parts of an organisation?
Operating core
Strategic apex
Middle lin
Technostructure
Support structure
Ideology
Operating core
People who do the work (doctors)
Strategic apex
Higher management with the overall strategic long-term planning and control
Middle line
Managers linking between the strategic apex and operating core
Technostructure
Accountants etc whose role is to design procedures and standards
Support structure
Services which support operations and are often outsourced (eg catering)
Idealogy
Organisations values and beliefs that holds them together
Tall organisations
More number of reporting levels to the CEO
Flat organisations?
Less number of reporting levels to the CEO
Decentralisation
Refers to the degree of decision making ability diffused through an organisation
Burns and Stalker model?
State there are two types of extreme structure: mechanistic and organic
Mechanistic
Rigid - suitable for stable environment
Organic
Flexible - suitable for dynamic environment
How to calculate return on investment?
Profit for the period/ average capital employed during the period
Adv of return on investment?
Widely used and accepted
Allows comparison
Disadv of return on investment?
Accounting policies can make comparisons difficult
ROI increases with the age of assets
How to calculate residual income?
Controllable profit - (Capital employed x target % return)
What is transfer pricing?
Price at which one division in group sells its products or services to another in the same group
Which methods can be adopted when setting transfer prices?
Cost plus pricing
Opportunity cost
Negotiated cost
What is corporate responsibility?
The activities and obligations of a business in achieving sustainability
What is corporate governance?
The rules governing the structure and objectives of the organisation and the relationship between management, the board and shareholders
