Business Organisation Structure

Types of organisation structure:

1. Entrepreneurial:

• Built around owner manager and this style is mostly found in small businesses in the
early stages of their development
• Benefits include quick assessment of market changes by entrepreneur, quick decision
making as there is only one person making decisions and more goal achieving
consistency as there is small chain of command since there is one person with whole
control.
• Drawbacks include lack of career opportunities for employees, and difficulties in coping
the problems of a big company if there is growth as there is only one person.

2. Functional/Departmental:

• It groups together employees that then perform similar tasks and functions into
departments. Best suited to small companies with few products and locations.
• Benefits include lack of isolation among employees, economies of scale leading to low
costs, better career path for employees, and standardisation of systems.
• Drawbacks include slow decision making due to longer chain of command, conflicts
between functions departments as well as empire building by managers of each
department.

3. Divisional/Product:

• When an organisation is split into divisions, with each division overseeing a product, a
geographic section or even a customer. Each division is a separately identifiable part of
the overall organisation which is often referred to as a strategic business unit.
• Benefits include clear responsibility of products and more room for diversification. Top
management is free to focus on strategy and enables growth.
• Drawbacks include lack of goal achieving consistency and problems in allocating costs.
There may as well be duplication and loss of control.

4. Geographical:

• Similar to divisional structure except for each division covering a specific location.
• Benefits include geographic growth and allows for better local decision making. There is
clear responsibility of locations. Top management is free to focus on strategy and
enables growth.
 • Drawbacks include lack of goal achieving consistency and problems in allocating costs.
There may as well be duplication and loss of control.

5. Matrix:

• It integrates both the features of divisional and functional structures. Includes dual
reporting to two managers.
• Benefits include clear responsibility of products and more room for diversification. Top
management is free to focus on strategy and enables growth. Also lack of isolation
among employees, economies of scale leading to low costs, better career path for
employees, and standardisation of systems.
• Drawbacks include higher admin costs, time consuming meetings and dilution of
functional authority.

6. Boundaryless Structures:

a. Hollow Organisations:
Activities are split into core and non core activities. All non core activities are
outsourced.

b. Virtual Organisations:
When an organisation simply exists as a network of other contracts with minimal
functions being kept in-house. There is only a small central staff, who coordinates third
party organisations and ensure that their needs are met.

c. Modular Organisations:
These are manufacturing companies. The manufacturing process is broken down into
different modules and outsourced from external suppliers.

Other basic organisational concepts:

1. Separation of direction and management

2. Scalar Chain (Chain of command)
3. Span of control
4. Tall and flat organisation
5. Offshoring
6. Shared Services Approach
Centralisation:
Upper levels of management in an organisation retain the power to make decisions.

Decentralisation:
• Power to take decisions is passed down to lower levels of management.
• Benefits include better local decision making, more focus of senior management on
strategy, better career path and motivation of employees and flexibility.
• Drawbacks include training costs, loss of control, lack of goal congruence and extra costs
in maintaining information as decisions are taken by lower management.

Levels of Strategy:

1. Strategic Planning:
Long term. By senior management.

2. Tactical Planning:
Overviews plans, divisions and departments. By middle management.

3. Operational Planning:
Short term/Day to day. By junior management.

Marketing:

1. Product:
- Product definition – what the product should be?
- Product positioning – comparison with competitors.
- Core product referring to what the customer is really buying.
- Actual product is the tangible product or intangible service that serves as the
medium for receiving core product benefits.
- Augmented product consists of helping the consumer to put the actual product in
use like installation services.
 2. Pricing:
- Consider the Cost, Customer, Competition and Corporate objectives.
- Implement the following pricing tactics:
- Cost plus pricing – cost plus mark up
- Penetration pricing – a low price is set to gain market share
- Price discrimination – different prices for same product in different markets
- Going rate pricing – prices are set to match competitors
- Price skimming – high prices are set to skim off consumers willing to pay more
- Loss leaders – one product sold at loss to increase sales of others
- Captive product pricing – when consumers must buy two products
- Perceived quality pricing – high price is set to reflect a high quality of product

3. Promotion:
- Refers to market communication to encourage consumers
- AIDA sequence: Awareness, Interest, Desire, Action

4. Place (Distribution)
- Direct selling
- Indirect selling

Strategic Marketing Process

1. Strategic analysis of
- Brand strength
- Product quality
- Reputation
- Competition
- Customer power and expectations

2. Strategic choice
- Which products to sell
- Market segmentation
- Developing strategies

3. Strategy Implementation
- Budgets for advertising
- Budgets for sales revenue, market share, brand awareness
- Monitoring and control
Types of market research:

1. Desk research:
Research through use of information that already exists

2. Field research:
Normally conducted by asking people at random.

3. Test Marketing:
Small launch of product in a small area before national and international launch.