Lecture 10 Flashcards

1
Q

How is an functional organisation divided in an organisational structure

A

In a functional structure, the organisation is divided based on specific functions or departments

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2
Q

What are the key characteristics of a functional organisation structure

A

Key Characteristics:
- Departments operate independently, but they report to a central executive
- Roles are specialised
- Communication flows vertically within departments
- Suitable for smaller organisations

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3
Q

What are the advantages of a functional organisation structure

A

Advantages:
- Specialisation and expertise in each function
- Clear hierarchy and structure
- Better resource allocation to specific functions

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4
Q

What are the disadvantages of a functional organisation structure

A

Disadvantages:
- Silos can form between departments, reducing cross-functional collaboration.
- Decisions may take time due to the reliance on vertical communication.

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5
Q

How are organisations divided in divisionalised organisational strucutre

A

In a divisionalised structure, the organisation is divided into semi-autonomous units or divisions

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6
Q

In a divisionalised structure what can divisions be based on

A

Divisions can be based on geography, product line, market segment, or customer base

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7
Q

What are the key characteristics of divisionalised organisational structure

A

Key Characteristics:
- Each division operates independently with its own functional teams
- Leaders of divisions report to the top management
- Cross-functional teams may exist across divisions to collaborate on projects or initiatives

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8
Q

What are the advantages of divisionalised organisational structure

A

Advantages:
- Enhanced focus on specific markets or products
- Faster decision-making
- Clear accountability and ownership within divisions

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9
Q

What are the disadvantages of divisionalised organisational structure

A

Disadvantages:
- Duplication of resources across divisions
- Less coordination between divisions
- High administrative overhead at the divisional level.

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10
Q

What does managerial performance focus on

A

Managerial performance focuses on how effectively managers fulfil their roles

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11
Q

What does managerial performance assess

A

It assesses how well management meets strategic and operational objectives

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12
Q

What are the responsibilities of management

A

Planning, organizing, leading, and controlling

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13
Q

What are the metrics for management

A

Employee satisfaction, team efficiency, leadership quality, resource allocation, risk management, and adherence to policies

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14
Q

How are managers evaluated

A

Often assessed through performance appraisals, reviews, and feedback systems

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15
Q

What do economic performances focus on

A

Economic performance focuses on how effectively an organisation utilizes resources to generate profit and financial sustainability

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16
Q

What does economic performance measure

A

It measures the financial health, profitability, and economic outcomes of an organisation’s activities

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17
Q

What are the responsibilities of economic performance

A

Cost management, revenue growth, profitability, return on investment (ROI), shareholder value, and market competitiveness

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18
Q

What are the metrics for economic performance

A

Profit margins, revenue growth, cost efficiency, return on assets (ROA), financial ratios, and market share

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19
Q

How is economic performance evaluated

A

Often assessed through financial statements, audits, market performance, and shareholder expectations

20
Q

What are some factors that need to be considered to create an effective performance measurement system

A

Several factors need to be considered to create an effective performance measurement system:
- Strategic Alignment
- Relevance
- Balanced Approach
- Measurability

21
Q

What is strategic alignment

A

Ensure that performance measures are aligned with the organization’s strategic goals and objectives

22
Q

What does strategic alignment ensure

A

This ensures that individual and team performance contributes directly to the broader business strategy

23
Q

Why is relevance important for designing performance measurement

A

Irrelevant or too many metrics can dilute focus and create confusion

24
Q

Why is balance approach important for designing performance measurement

A

Focusing solely on financial outcomes may overlook critical aspects like customer satisfaction, innovation, and employee engagement

25
Why is measurability important for designing performance measurement
Clear, objective measurements are easier to track, assess, and improve
26
Return on Investment (ROI)
ROI= Net profit/investment X 100
27
What does ROI measure
ROI measures the profitability of an investment relative to its cost. It indicates how efficiently an investment generates profits
28
What is net profit
Net Profit is the profit after deducting all expenses from total revenue
29
What is investment
Investment is the amount of capital invested in a particular project or asset
30
What does a higher ROI indicate
A higher ROI indicates that the investment is generating more profit relative to its cost
31
What does ROI help compare
ROI helps compare the profitability of different investments
32
Residual income (RI) =
RI=Net Operating Income − (Required Return × Invested Capital)
33
What does residual income measure
Residual Income measures the excess profit earned beyond the required return on investment
34
What does residual income show
It shows how well an investment is performing beyond a certain benchmark or minimum expected return
35
What is net operating income
Net Operating Income is the profit earned from ongoing operations
36
What is required return
Required Return is the minimum acceptable rate of return for a given investment
37
What is invested capital
Invested Capital is the amount of capital tied up in the business or project
38
What does a positive residual income indicate
A positive residual income indicates that the investment has exceeded the minimum required return
39
What does residual income help evaluate
Helps evaluate the true value created by the investment after accounting for opportunity costs
40
Economic Value Added (EVA) =
EVA = Net Operating Profit After Taxes (NOPAT) − (Weighted Average Cost of Capital × Invested Capital)
41
What does EVA measure
EVA measures the financial performance of a business by assessing how much value is created beyond the cost of capital
42
What does EVA reflect
It reflects the real economic profit of a company
43
What is net operating profit after tax
Net Operating Profit After Taxes (NOPAT) is the profit generated from operations after taxes
44
What is weighted average cost of capital
Weighted Average Cost of Capital (WACC) is the average rate a company must pay to finance its operations
45
What is invested capital
Invested Capital refers to the total capital invested in the business
46
What does a positive EVA indicate
A positive EVA indicates that the company has created value, exceeding its cost of capital
47
What does a negative EVA mean
A negative EVA means that the business has not generated enough profit to cover the cost of capital, indicating a value loss