Industrialization

It is the process of transforming society from an agricultural to an industrial one. In other words,
it's a period during which economic and social changes lead to the growth of factories and an
increase in the production of goods. During this time, there was also a shift in the workforce as
more people moved from rural areas to work in cities. This process has been taking place since
the 18th century and has profoundly impacted social and economic life.

Advantages of Industrialization

Industrialization has brought about many advantages to society. It has increased our standard
of living and made us more productive. It has also created new jobs and industries helped raise
living standards worldwide.

There are many advantages to industrialization, but some of the most notable ones include the
following:

1. Increased standard of living: Industrialization has helped increase our living standards by
providing better products and services. We now have access to a wider range of goods and
services than ever before, and we can enjoy a higher quality of life.

2. Improved healthcare services: Industrialization has led to improvements in public health,

thanks to advances in medicine and sanitation. This has resulted in longer life expectancy and
reduced mortality rates.

What are the Disadvantages of Industrialization?

There are several disadvantages associated with industrialization, including:

1. Environmental pollution: The increased industrialization-related pollution can hurt human

health and the environment.

2. Decline in traditional industries and jobs: The industry's growth can lead to declining
traditional industries and jobs as people move away from rural areas to work in cities.

How Does Industrialization Impact Society?

People move from rural areas to urban areas.

It helps generate more employment.

It leads to the emergence of new social classes.

Businesses of different types emerge depending on the needs of the consumers.

Industrialization is the process of economic and social change that transforms a human group
from a pre-industrial society into an industrial one. Industrialisation is the process of
manufacturing consumer goods and capital goods and of building infrastructure in order to
provide goods and services to both individuals and businesses.

As such Industrialisation plays a major role in the economic development of underdeveloped

countries like India with vast manpower and varied resources.

1. Raising Income: The first important role is that industrial development provide a secure
basis for a rapid growth of income. The empirical evidence suggests a close correspondence
between the high level of income and industrial development. In the industrially developed
countries, for example, the GNP per capita income is very high whereas for the industrially
backward countries it is very low.

2. Changing the Structure of the Economy: In order to develop the economy,

underdeveloped countries need structural change through industrialization. History shows that
in the process of becoming developed economy the share of the industrial sector should rise
and that of the agricultural sector decline. This is only possible through deliberate
industrialization. As a result, the benefits of industrialization will ‘trickle down’ to the other
sectors of the economy in the form of the development of agricultural and service sectors
leading to the rise in employment, output and income.

3. Meeting High-Income Demands: Beyond certain limits, the demands of the people are
usually for industrial products alone. After having met the needs of food, income of the people
is spent mostly on manufactured goods. This means the income-elasticity of demand for the
manufactured goods is high and that of agricultural products is low. To meet these demands
and increase the economy’s output underdeveloped countries need industrialization.

4. Overcoming Deterioration in the Terms of Trade: Underdeveloped countries

like India need industrialization to free themselves from the adverse effects of fluctuations in
the prices of primary products and deterioration in their terms of trade. Such countries mainly
export primary products and import manufactured goods. The prices of primary products have
been falling or are stable whereas the prices of manufactured products have been rising.

5. Absorbing Surplus Labour (Employment Generation): Underdeveloped countries

like India are characterized by surplus labour and rapidly growing population. To absorb all
the surplus labour, it is essential to industrialise the country rapidly. It is the establishment of
industries alone that can generate employment opportunities on an accelerated rate.

6. Bringing Technological Progress: Research and Development is associated with the

process of industrialization. The development of industries producing capital goods i.e.,
machines, equipment etc., enables a country to produce a variety of goods in large quantities
and at low costs, make for technological progress and change in the outlook of the people. This
results in bringing about an industrial civilization or environment for rapid progress which is
necessary for any healthy economy.

7. Strengthening the Economy: Industrialisation of the country can provide the necessary
elements for strengthening the economy. In this regard the following points may be noted.

(a) Industrialisation makes possible the production of goods like railways, dams, etc. which
cannot be imported. These economic infrastructures are essential for the future growth of the
economy.

(b) It is through the establishment of industries that one can impart elasticity to the system and
overcome the historically given position of a primary producing country. Thus, with
industrialization we can change the comparative advantage” of the country to suit its resources
and potentialities of manpower.

(c) Through industrialization the requirements for the development of agriculture can be met.
For example, improved farm-implements, chemical fertilizers, storage and transport facilities,
etc., appropriate to our own conditions can be adequately provided only by our own industries.

(d) The industrial development imparts to an economy dynamic element in the form of rapid
growth and a diversified economic structure which make it a progressive economy.

(e) Providing for Security: Industrialisation is needed to provide for the country’s security. This
consideration becomes all the more critical when some international crisis develops. In such
situation, dependence of foreign sources for defence materials is a risky affair. It is only through
industrial development in a big way that the national objective of self-reliance in defence
materials can be achieved.
Formal and Informal Organization

1. Formal Organisation:
Formal organisation refers to the structure of well-defined jobs, each bearing a definite measure
of authority, responsibility and accountability.

The structure is consciously designed to enable the people of the organisation to work together
for accomplishing common objectives.

Thus, formal organisation is more or less an arbitrary structure to which the individual must
adjust. It tells him to do certain things in a specified manner, to obey orders from designated
individuals and to co-operate with others. Co-ordination also proceeds according to a
prescribed pattern in the formal organisation structure.

Formal organisation is a system of consciously co-ordination of activities or forces of two or

more persons. Thus, formal organisation is created through the co-ordination of efforts of
various individuals. The formal organisation facilitates the determination of objectives and
policies.

The degree of success of these objectives will be determined by the capacities and attitudes of
the people within the organisation. Formal organisation is the official hierarchy as it appears
on paper. It is the basic and official version of the organisation.

Thus, formal organisation is more or less an arbitrary structure to which the individual must
adjust. It tells him to do certain things in a specified manner, to obey orders from designated
individuals and to co-operate with others. Co-ordination also proceeds according to a
prescribed pattern in the formal organisation structure.

Formal organisation is a system of consciously co-ordination of activities or forces of two or

more persons. Thus, formal organisation is created through the co-ordination of efforts of
various individuals. The formal organisation facilitates the determination of objectives and
policies.

The degree of success of these objectives will be determined by the capacities and attitudes of
the people within the organisation. Formal organisation is the official hierarchy as it appears
on paper. It is the basic and official version of the organisation.
Formal organization is deliberately constructed to achieve some goals. They are not changeable
with the passage of time. This is another point of criticism put forward by its critics. The rules
and regulations of this may be too rigid that is becomes difficult to achieve the goals.

Moreover, former organisation does not consider the goals of the individuals. Because of these
reasons formal organisation usually gives birth to informal organisations which cannot be
separated from it. As a matter of fact, there is a close relationship between the formal and
informal organisation.

2. Informal Organisation:
Informal organisation refers to the relationship between people in the organisation based on
personal attitudes, emotions, prejudices like-dislikes, etc. These relations are not developed
according to procedures and regulations laid down in the formal organisation structure.

Generally, large formal groups give rise to small informal or social groups. These groups may
be based on some taste, language, culture or any other factor. These groups are not pre-planned,
but they develop automatically within the organisation.

Informal organisations are small groups and these groups can overlap because a person may be
member of more than one group. A manager cannot eliminate the informal organisations
because he does not create them. Many a times informal organisations came into being to
support and supplement the formal organisation. For instance, informal communication is very
fast and it can break the barriers in the formal communication.

Informal organisation may also create problems for the management by spreading rumours and
resisting the introduction of change. That is why some people do not favour the recognition of
informal groups by the management.

Both formal and informal relations are indispensable components of any organisation. It is true
that while laying out the organisational plan management can only develop the formal structure
of relationships. But it does not imply that informal relations cannot work alongside, the formal
ones.

In-fact, informal organisation is a valuable component of the formal organisation and in some
of the vital gaps in the latter. Therefore, management should not consider informal organisation
hostile to formal organisation. Every manager should try to gain an intelligent insight into the
informal group interactions to be able to influence the organisational behaviour.

Management can use informal organisations for communicating its programmes and policies
to the workers and know their reactions. It can also make their use for introducing change in
the organisation without much resistance on the part of the workers.

In short, it can be concluded that management should encourage the informal organisations for
keeping harmonious relations in the organisation and for achieving the organisational
objectives.

Formal organisational structures are categorised as:

i) Line organisational structure.

(ii) Staff or functional authority organisational structure.

(iii) Line and staff organisational structure.

(iv) Committee organisational structure.

(v) Divisional organisational structure.

(vi) Project organisational structure.

(vii) Matrix organisational structure and

(viii) Hybrid organisational structure.

These organisational structures are briefly described in the following paragraphs:

1. Line Organisational Structure:
A line organisation has only direct, vertical relationships between different levels in the firm.
There are only line departments-departments directly involved in accomplishing the primary
goal of the organisation. For example, in a typical firm, line departments include production
and marketing. In a line organisation authority follows the chain of command.

Features:
Has only direct vertical relationships between different levels in the firm.
Advantages:
1. Tends to simplify and clarify authority, responsibility and accountability relationships

2. Promotes fast decision making

3. Simple to understand.

Disadvantages:
1. Neglects specialists in planning

2. Overloads key persons.

3. There is a tendency to become overly dependent on the few key people who an perform
numerous jobs.

2. Staff or Functional Authority Organisational Structure

The jobs or positions in an organisation can be categorized as:

(i) Line position:

A position in the direct chain of command that is responsible for the achievement of an
organisation’s goals and

(ii) Staff position:

A position intended to provide expertise, advice and support for the line positions.

The line officers or managers have the direct authority (known as line authority) to be exercised
by them to achieve the organisational goals. The staff officers or managers have staff authority
(i.e., authority to advice the line) over the line. This is also known as functional authority.

An organisation where staff departments have authority over line personnel in narrow areas of
specialization is known as functional authority organisation.

In the line organisation, the line managers cannot be experts in all the functions they are
required to perform. But in the functional authority organisation, staff personnel who are
specialists in some fields are given functional authority (The right of staff specialists to issue
orders in their own names in designated areas).
The principle of unity of command is violated when functional authority exists i.e., a worker
or a group of workers may have to receive instructions or orders from the line supervisor as
well as the staff specialist which may result in confusion and the conflicting orders from
multiple sources may lead to increased ineffectiveness. Some staff specialists may exert direct
authority over the line personnel, rather than exert advice authority (for example, quality
control inspector may direct the worker as well as advise in matters related to quality).

While this type of organisational structure overcomes the disadvantages of a pure line
organizaional structure, it has some major disadvantages:

They are: (i) the potential conflicts resulting from violation of principle of unity of command
and (ii) the tendency to keep authority centralized at higher levels in the organisation.

3. Line and Staff Organisational Structure:

Most large organisations belong to this type of organisational structure. These organisations
have direct, vertical relationships between different levels and also specialists responsible for
advising and assisting line managers. Such organisations have both line and staff departments.
Staff departments provide line people with advice and assistance in specialized areas (for
example, quality control advising production department).

The line functions are production and marketing whereas the staff functions include personnel,
quality control, research and development, finance, accounting etc. The staff authority of
functional authority organisational structure is replaced by staff responsibility so that the
principle of unity of command is not violated.

Three types of specialized staffs can be identified:

(i) Advising,

(ii) Service and

(iii) Control.

Some staffs perform only one of these functions but some may perform two or all the three
functions. The primary advantage is the use of expertise of staff specialists by the line
personnel. The span of control of line managers can be increased because they are relieved of
many functions which the staff people perform to assist the line.

Some advantages are:

(i) Even through a line and staff structure allows higher flexibility and specialization it may
create conflict between line and staff personnel.

(ii) Line managers may not like staff personnel telling them what to do and how to do it even
though they recognize the specialists’ knowledge and expertise.

(iii) Some staff people have difficulty adjusting to the role, especially when line managers are
reluctant to accept advice.

(iv) Staff people may resent their lack of authority and this may cause line and staff conflict.

Features:
1. Line and staff have direct vertical relationship between different levels.

2. Staff specialists are responsible for advising and assisting line managers/officers in
specialized areas.

3. These types of specialized staff are (a) Advisory, (b) Service, (c) Control e.g.,

(a) Advisory:
Management information system, Operation Research and Quantitative Techniques, Industrial
Engineering, Planning etc

(b) Service:
Maintenance, Purchase, Stores, Finance, Marketing.

(c) Control:
Quality control, Cost control, Auditing etc. Advantages’

(i) Use of expertise of staff specialists.

(ii) Span of control can be increased

(iii) Relieves line authorities of routine and specialized decisions.

(iv) No need for all round executives.

Disadvantages:
(i) Conflict between line and staff may still arise.

(ii) Staff officers may resent their lack of authority.

(iii) Co-ordination between line and staff may become difficult.

4. Committee Organisational Structure Features:

(a) Formed for managing certain problems/situations

(b) Are temporary decisions.

Advantages:
1. Committee decisions are better than individual decisions

2. Better interaction between committee members leads to better co-ordination of activities

3. Committee members can be motivated to participate in group decision making.

4. Group discussion may lead to creative thinking.

Disadvantages:
1. Committees may delay decisions, consume more time and hence more expensive.

2. Group action may lead to compromise and indecision.

3. ‘Buck passing’ may result.

5. Divisional Organisational Structure:

In this type of structure, the organisation can have different basis on which departments are
formed. They are:

(i) Function,
(ii) Product,

(iii) Geographic territory,

(iv) Project and

(iv) Combination approach.

6. Project Organisational Structure:

The line, line and staff and functional authority organisational structures facilitate
establishment and distribution of authority for vertical coordination and control rather than
horizontal relationships. In some projects (complex activity consisting of a number of
interdependent and independent activities) work process may flow horizontally, diagonally,
upwards and downwards. The direction of work flow depends on the distribution of talents and
abilities in the organisation and the need to apply them to the problem that exists. The cope up
with such situations, project organisations and matrix organisations have emerged.

A project organisation is a temporary organisation designed to achieve specific results by using

teams of specialists from different functional areas in the organisation. The project team
focuses all its energies, resources and results on the assigned project. Once the project has been
completed, the team members from various cross functional departments may go back to their
previous positions or may be assigned to a new project. Some of the examples of projects are:
research and development projects, product development, construction of a new plant, housing
complex, shopping complex, bridge etc.

Feature:
Temporary organisation designed to achieve specific results by using teams of specialists from
different functional areas in the organisation.

Importance of Project Organisational Structure:

Project organisational structure is most valuable when:

(i) Work is defined by a specific goal and target date for completion.

(ii) Work is unique and unfamiliar to the organisation.

(iii) Work is complex having independent activities and specialized skills are necessary for
accomplishment.

(iv) Work is critical in terms of possible gains or losses.

(v) Work is not repetitive in nature.

Characteristics of project organisation:

1. Personnel are assigned to a project from the existing permanent organisation and are under
the direction and control of the project manager.

2. The project manager specifies what effort is needed and when work will be performed
whereas the concerned department manager executes the work using his resources.

3. The project manager gets the needed support from production, quality control, engineering
etc. for completion of the project.

4. The authority over the project team members is shared by project manager and the respective
functional managers in the permanent organisation.

5. The services of the specialists (project team members) are temporarily loaned to the project
manager till the completion of the project.

6. There may be conflict between the project manager and the departmental manager on the
issue of exercising authority over team members.

7. Since authority relationships are overlapping with possibilities of conflicts, informal

relationships between project manager and departmental managers (functional managers)
become more important than formal prescription of authority.

8. Full and free communication is essential among those working on the project.

7. Matrix Organisational Structure:

It is a permanent organisation designed to achieve specific results by using teams of specialists
from different functional areas in the organisation.

Feature:
Superimposes a horizontal set of divisions and reporting relationships onto a hierarchical
functional structure

Advantages:
1. Decentralised decision making.

2. Strong product/project co-ordination.

3. Improved environmental monitoring.

4. Fast response to change.

5. Flexible use of resources.

6. Efficient use of support systems.

Disadvantages:
1. High administration cost.

2. Potential confusion over authority and responsibility.

3. High prospects of conflict.

4. Overemphasis on group decision making.

5. Excessive focus on internal relations.

This type of organisation is often used when the firm has to be highly responsive to a rapidly
changing external environment.

In matrix structures, there are functional managers and product (or project or business group)
managers. Functional manager are in charge of specialized resources such as production,
quality control, inventories, scheduling and marketing. Product or business group managers are
in-charge of one or more products and are authorized to prepare product strategies or business
group strategies and call on the various functional managers for the necessary resources.

The problem with this structure is the negative effects of dual authority similar to that of project
organisation. The functional managers may lose some of their authority because product
managers are given the budgets to purchase internal resources. In a matrix organisation, the
product or business group managers and functional managers have somewhat equal power.
There is possibility of conflict and frustration but the opportunity for prompt and efficient
accomplishment is quite high.

8. Hybrid Organisational Structure:

Advantages:
1. Alignment of corporate and divisional goals.

2. Functional expertise and efficiency.

3. Adaptability and flexibility in divisions.

Disadvantages:
1. Conflicts between corporate departments and units.

2. Excessive administration overhead.

3. Slow response to exceptional situations.

Uses:
Used in organisations that face considerable environmental uncertainty that can be met through
a divisional structure and that also required functional expertise or efficiency

This type of structure is used by multinational companies operating in the global environment,
for example, International Business Machines USA. This kind of structure depends on factors
such as degree of international orientation and commitment. Multinational corporations may
have their corporate offices in the country of origin and their international divisions established
in various countries reporting to the CEO or president at the headquarters. The international
divisions or foreign subsidiaries may be grouped into regions such as North America, Asia,
Europe etc. and again each region may be subdivided into countries within each region.

While the focus is on international geographic structures, companies may also choose
functional or process or product departmentation in addition to geographic pattern while at the
head quarter’s the departmentation may be based on function.