Chap 6 organizing the business enterprise
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  • 1. Chapter 6 Organizing the Business Enterprise
  • 2. Sr. Chapter Chapter HeadingNo.No.1. 3 Understanding the Global context of business (031012)2. 4 Conducting Business Ethically and Responsibly (250212)3. 6 Organizing the Business Enterprise (030312)4. 7 Understanding Entrepreneurship and Small Business (0312)5. 8 Managing Human Resources6. 9 Understanding Employee Motivating, Satisfying and Leadership7. 11 Understanding Marketing Processes and Consumer Behavior8. 16 Managing Quality and Productivity9. 17 Managing Information Systems and Communication Technology10. 19 Understanding Money and Banking11. 20 Intermediate Term and Lease Financing
  • 3. Marks Distribution50 Terminal Examination20 Mid Term Examination15 Quizzes15 Final Assignment 3
  • 4.  WHAT IS ORGANIZATIONAL STRUCTURE  Determinants of Organization  Chain of Command THE BUILDING BLOCKS OF ORGANIZATIONAL STRUCTURE  Specialization  Departmentalization  Customer Departmentalization  Product Departmentalization  Process Departmentalization  Geographic departmentalization  Functional Departmentalization
  • 5.  ESTABLISHING THE DECISION-MAKING HIERARCHY Assigning Tasks: Responsibility and Authority Performing Tasks: Delegation and Accountability  Fear of Delegating Distributing Authority: Centralization and Decentralization  Tall and Flat organizations  Span of Control  Three forms of authority  Line Authority  Staff Authority  Committee and Team Authority BASIC FORMS OF ORGANIZATIONAL STRUCTURE  Functional Organization  Divisional Organization  Matrix Organization  International Organization Organizational Design for 21st century  Boundary-less organization  The team organization  The virtual organization  The learning organization
  • 6. Organizational Structure The specification of the jobs to be done within a business and how those jobs are related to one another Each organization must develop a structure that meets its specific needs7-6
  • 7. Definitions Determinants of Organization  Purpose, Mission & Strategy  Size, technology and changes in environment Organizational Chart:  Diagram depicting a company’s structure and showing employees where they fit into its operations Chain of Command:  Reporting relationships within a company 7
  • 8. THE BUILDING BLOCKS OFORGANIZATIONAL STRUCTURE Job Specialization  The process of identifying the specific jobs that need to be done and designing the people who will perform them Departmentalization  The process to determine how jobs should be grouped together in logical units to make the workplace more efficient
  • 9. BASIS OF DEPARTMENTALIZATION1. Customer: according to types of customers likely to buy a given product. E.g. women and men departments; wholesale and retail department.2. Product: Departmentalization according to specific products being created. Example: When a computer store has a department for printers, for hardware, for software, etc. often used in manufacturers.3. Process: Departmentalization according to production processes used to create a good or service. Sewing Department, Cutting department etc in a garment factory4. Geographic: Departmentalization according to areas served by a business.5. Functional: Departmentalization according to the function or activities of similar groups. Example: When a company has a different department for marketing, accounting, etc. 9
  • 10. Customer Departmentalization Industrial vs. President & CEO Consumer Travel Ways Inc. Youth vs. Adult Vice President Vice President Vice President Family vs. Market Seniors Travel Market Couples Travel Market Family Travel Singles Managers Managers Managers Staff Staff Staff
  • 11. Product Departmentalization Consumer office President & CEO supplies vs. Business business office Technology Inc. supplies Photocopiers vs. computers Vice President Vice President Vice President Division Division Equipment Division Tax return Photocopier Computer Telecommunications preparation vs. company financial statements Managers Managers Managers Staff Staff Staff 7-11
  • 12. Process Departmentalization President & CEO Groups based Hi-Tech Systems on the Ltd. manufacturing Vice President Vice President process Division Division Vice President Painting Division Parts Fabrication Assembly  assembly  painting  drying Managers Managers Managers  inspection Staff Staff Staff 7-12
  • 13. GeographicDepartmentalization Western vs. President & CEO Eastern region College Publishers Ltd. Canadian vs. American Vice President Vice President Vice President Western Region Central Region Eastern Region North America vs. Europe Managers Managers Managers Staff Staff Staff7-13
  • 14. Functional Departmentalization Based on activities President & CEO Crystal Retailers performed Ltd.  accounting & finance  marketing Vice President Vice President Vice President Finance Resources  human resource Marketing Accounting & Human  production Managers Managers Managers Staff Staff Staff
  • 15. The Combination of VariousOrganizational Structures
  • 16. ESTABLISHING THE DECISION- MAKING HIERARCHY1. Assign tasks2. Perform tasks3. Distribute Authority 16
  • 17. Assign TasksResponsibility: Duty to perform an assigned taskAuthority: Power to make the decisions necessary to complete a task 17
  • 18. Perform TasksDelegation: assignment of a task, responsibility, or authority by a manager to a subordinateAccountability: Liability of subordinates for accomplishing tasks assigned by managers 18
  • 19. Distributing AuthorityCentralized organizationsTop managers hold mostdecision-making authorityDecentralized organizationsLower level managers holdsignificant decision-making authority
  • 20. Distributing AuthoritySpan of Control: The number of subordinates that a manager is responsible forsupervising Wide span- many subordinates- Flat Organization Narrow span- very few subordinates- Tall OrganizationFlat organizations: Characteristic of decentralized companies with relatively fewlayers of management and relatively wide spans of control.Tall organizations: Characteristic of centralized companies with multiple layersof management and relatively narrow spans of control. 20
  • 21. Organizational Structure and Span of Control
  • 22. Forms of Authority  Line Authority  Line Departments  Staff Authority  Staff Members  Committee and Team Authority
  • 23. Forms of Authority Several different forms of authority develop in most organizations, regardless of the organizational structure. Line authority: When authority flows up and down the chain of command. Classic example: the military. Line departments: Departments with a direct link to the production and sales of a specific product. Examples include: manufacturing, assembly, sales, and distribution. Each line department is essential to an organization’s success. Line employees are the producers in the company. Staff authority: When authority is based on expertise that usually involves advising line managers. Examples include: legal, accounting, human resources. They help line departments in making decisions. E.g. marketing department seeks attorney advice for signing new contract. Staff members: Assist line departments in making decisions, but do not have the authority to make final decisions. Team and committee authority: Authority granted to teams or committees that play central roles in the firm’s daily operations. This form of authority has recently emerged across a wide spectrum of companies.
  • 24. Basic Forms ofOrganizational Structure FunctionalOrganization Divisional Organization Matrix Organization International Organization
  • 25. Basic Forms ofOrganizational Structure Functional organization: Structured around basic business functions such as marketing, operations, and finance. Examples can be found in most small to medium businesses. Divisional organization: Corporate divisions operate as autonomous businesses under the larger corporate umbrella. This structure relies on product departmentalization. Examples include General Electric, and The Walt Disney Company. The create product based divisions. Each may be managed as a separate enterprise. Matrix organization: Teams are formed, and team members report to two or more managers. In some firms the matrix structure is temporary, while in other firms it is permanent. Examples include: Martha Stewart Living, Omnimedia, and many large consulting firms. It was created by NASA. It relies on committee and team authority. International organization: Approach developed in response to the need to manufacture, purchase, and sell in global markets. Typically an international structure evolves as international operations escalate.
  • 26. A Matrix Organization MARTHA STEWART Area Media Group Merchandising GroupSpecialists Radio/ Network/ Kmart Catalog Sears Specialty Magazines Books Internet Newspaper Cable TV line line Paint retailing CookingEntertainment Weddings Crafts Gardening Home Holidays Children
  • 27. An International Organization CEO Retail Retail InternationalDivision A Division B Division Latin Europe Asia America
  • 28. An International Organization Many organizations initiate international expansion with a small team of specialists, evolve into a separate division as shown in the slide, and ultimately (if they experience success in foreign markets) integrate international operations into their standard business units.
  • 29. The Future ofOrganizational Structure  Boundary-less Organizations  Team Organizations  Virtual Organizations  Learning Organizations
  • 30. The Future ofOrganizational Structure Organizational structure continues to change as organizations seek new ways to compete effectively within a rapidly changing business environment. Emerging forms include (these characteristics):1. Boundary-less: Organizations in which traditional boundaries and structures are minimized or eliminated. Example: Wal-Mart has tied its key suppliers into its information system for seamlessfaultless inventory management.2. Team: Organizations that rely almost exclusively on project-type teams. Examples: Xerox and Apple are moving in this direction.3. Virtual: Organizations that have little or no formal structure, relying heavily on temporary workers, leased facilities, and outsourced services. Examples: Global Research Consortium operates this way, and University of Phoenix is moving in this direction.4. Learning: Organizations that strive to integrate continuous improvement with continuous employee learning and development. Example: Shell Oil Company.5. Learning org. works to facilitate the lifelong learning and personal development to all employees and continuous respond to change.
  • 31. The Informal OrganizationA Powerful Dynamic  Informal Groups  The grapevinegossip  Intrapreneuring
  • 32. The Informal OrganizationA Powerful Dynamic The informal organization is the network of everyday social interactions among employees, which do not follow formal lines of communication. The informal organization can be as powerful—if not more so— than the formal organization. Informal groups: Groups of people who decide to interact among themselves. Their impact on the organization can be positive, negative, or neutral. The grapevinegossip: Informal communication network that runs through the organization. You need to have open channels of communication and responding vigorously in order to eliminate its level.
  • 33. The Informal OrganizationA Powerful Dynamic Intrapreneuring: Harnessingtie together the energy of the informal organization to improve productivity by creating the innovation and flexibility of a small-business environment within the confines of a large organization. Compaq, Rubbermaid, 3M, and Xerox are examples of companies that support intrapreneuring.