Business and Technology (RQF Level – 4)
Chapter (1)
Business Organization
Definition produced by Buchanan and Huczynski
Organisation are social arrangements for the controlled performance of collective goals.
(a) Collective goals’ – organizations are defined by their goals. The main goal of a school is to educate pupils. It will
therefore be organized differently to a company that aims to make profits.
(b) Social arrangements’ – someone working alone cannot be classed as an organization. Organisations are
structured to allow people to work together towards a common goal. Usually, the larger the organization, the more
formal its structures.
(c) Controlled performance’ – an organization will have systems and procedures in place to ensure that group goals
are achieved. For company this could involves setting sales targets, or periodically assessing the performance of
staff members.
Why do we need organization?
Organisations enable people to:
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Share skills and knowledge – this can enable people to perform tasks that they would be unable to achieve on
their own. Knowledge can also be shared between all the people within the organization.
Specialise – individual workers can concentrate on a limited type of activity. This allows them to build up a greater
level of skill and knowledge than they would have if they attempted to be good at everything.
Pool resources – whether money or time.
This result is synergy where organization can achieve more than the individuals could on their own.
Difference types of organization
Commercial versus not for profit
Commercial organizations
Commercial (or profit seeking) organization see their main objective as maximizing the wealth of their owners.
There are three common forms that a commercial company can take;
(1) Sole traders
(2) Partnerships
(3) Limited liability companies
Not for profit orgnaisation
Not -for – profit organizations (NFPs or NPOs) do not see profitability as their main objectives. Instead, they seek to satisfy
the particulars needs of their members or the sectors of society that they have been set up to benefit.
NFPs include the following
- Government departments and agencies
- Schools
- Hospitals
- Charities (such as the Red Cross, Oxfam and Doctors Without Borders)
- Clubs
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Public versus private sector organisations
Public sector organization
The public sector is the part of the economy that is concerned with providing basic government services and is controlled by
government organizations/
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Example (i) police
(ii) Military
(iii) Public transport
(iv) primary education
(v) healthcare for the poor
Private Sector organizations
The private sector consists of organisations that are run by private individuals and group rather than the management.
Co-operatives
Co-operatives are organisations that are owned and democratically controlled by their members – the people who buy their
goods or services. Each member usually gets a single vote on key decisions unlike companies where shareholders get one
Chapter (2)
Business organization structure and strategy
Organizational structure
Organizational structure is concerned with the way in which work dividend up an allocated. It outlines the roles
and responsibilities of individual and groups within the organization.
(1) Entrepreneurial Structure
Owner / Entrepreneur
Employees
Entrepreneurial structure is built around the owner manager and is typical of small business in the early stages of
their development.
It is also found where the entrepreneur has specialist knowledge of the product or service that the
organization offers.
Advantages
Disadvantages
Fast decision making
Lack of career structure
More responsive to market
Dependent on the capabilities of the manager/ owner.
Goal congruence
Cannot cope with diversification / growth.
Good control
Close bond to workforce
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(2) Functional / Departmental structure
Functional organisations group together employees that undertake similar tasks into departments.
It is most appropriate for small organisations which have relatively few products or locations and which exist
in a relatively stable environment.
(3)
Advantages
Disadvantages
Economies of scale.
Empire building.
Standardisation.
Slow.
Specialists more comfortable.
Conflicts between functions.
Career opportunities.
Cannot cope with diversification.
Divisional / product structure
Split Division base on – Products (or) Customers (or) Geographic
Each division is likely to have a functional structure, with all the departments it needs in order to operate in its
particular market segment. Divisions are likely to be run as profit centres, with their own revenues, expenditure and
capital investments. Each division is a separately identifiable part of the overall organisation, which is often referred
to as a strategic business unit (SBU).
Advantages
Disadvantages
Enables growth.
Potential loss of control.
Clear responsibility for products/ divisions.
Lack of goal congruence. Duplication.
Training of general managers.
Specialists may feel isolated.
Easily adapted for further diversification.
Allocation of central costs can be a problem.
Top management free to concentrate on strategic matters.
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(4)
Geographically structured
Advantages
Disadvantages
Enables geographic growth.
As for divisional structure above.
Allows local decision-making.
Clear responsibility for areas.
Training of general managers.
Top management free to concentrate on
strategic matters.
(5) Matrix Structure (Functional + Divisional)
Advantages
Disadvantages
Advantages of both functional and divisional structures. Dual command and conflict.
Flexibility.
Dilution of functional authority.
Customer orientation.
Time-consuming meetings.
Encourage teamwork and the exchange of opinions Higher admin costs.
and expertise.
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(6) Boundaryless structure
(1) Hollow organizations
- Core (Strategically important) = Undertake
- Non-core
= Outsourced
(2) Virtual organizations
- Outsources many of its functions to other organizations and simply exists as a network.
(3) Modular organizations
- Manufacturing process break down (split component or modular) each component can then be
made by the itself or outsourced to an external supplier.
Mintzberg’s Organizational Configurations
Building block
Strategic apx
Middle line
Operating core
Technostructure
Ideology
Who are they
Senor levels management
Middle management
Worker (professional)
Analysts who plan and control the work of
others.
Organization belief and values
What if they dominate the organization.
Simple structure
Defictionalized
Professional bureaucracy
Machine bureaucracy
Missionary
Scalar chain
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Line of authority or the chain of command
-
Related number of levels of management
Span of control
-
Related number of subordinates under one manager’s control
The factors that influence the span of control
(i)The nature of the work (repetitive work wider span of control)
(ii) The types of personal (manager capabilities (physical and mental)
(iii) The location of personnel – (geographical dispersion of subordinates)
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Tall and flat organisations
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A ‘tall’ organisation has many levels of management (a long scalar chain) and a narrow span of control.
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. A ‘flat’ organisation has few levels of management (a short scalar chain) and a wide span of control.
Offshoring
Offshoring refers to the process of outsourcing or relocating some of an organisation’s functions from one country
to another, usually in an effort to reduce costs.
Shared Services Approach
This involves centralising an internal function that is currently used throughout the organization. (ie. Centralization
of the IT department) and then running it like a separate business within the organization. This often means that
the rest of the organization will be charged for use of this function.
Levels of strategy – The Anthony Triangle
Strategic planning
Board level / senior management
Tactical planning
Middle line
Operational planning
Junior / supervisors
Planning activities
- Long term
- Looks at the whole organization
- Define resources requirement
Control
- Look at the department / division level
- Specific how to use resources
Activities
- Short term
- Very detailed and practical
- Concerned day to day running
Marketing
Marketing is the management process that identifies, anticipates and supplies customer needs efficiently and
profitably.’
Marketing orientation
The key task of the organization is to determine the needs wants and value of a target market (customer) and to
adapt the organization to delivering satisfactions more effectively and efficiently than its competitors.
Product orientation
Add more features to the product- demand will pick-up. Such firms do not research what customers actually want.
Sales orientation
Customer are naturally sales resistant so the product must be sold actively and aggressively and customers must
persuaded to buy them.
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Production orientation
Customer will buy whatever we produce our job is to make many as we can.
The marketing mix
There are four basic elements (the ‘4Ps’)
Product
This includes product features, durability, design, brand name, packaging, range, aftersales service, warranties and guarantees.
Place
Choice of distribution channels, transportation, outlet management, stocks and
warehouses.
Promotion
Advertising, personal selling, publicity, sales promotion techniques
Price
Price levels, discounts, allowances, payment terms, credit policy.
People – this relates to both staff and the need to understand customer needs.
Process – these are the systems through which the service is delivered.
Physical evidence – testimonials and references regarding proposed service.
(1) Product
(2) Core product
Core product is a product’s essential features.
(3) Actual product
The physical and intangible properties or characteristics the product take on.
(4) Augmentations
These are extra attributes and features the are not part of the actual product but may be offered to
make the offering more attractive, to speed purchase decisions, and to match or differentiate the actual
product from the competition.
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(2) Pricing issues
These issues can be blended to give a range of pricing tactics, including the following:
 Cost plus pricing – the cost per unit is calculated and then a mark-up added.
 Penetration pricing – a low price is set to gain market share.
 Perceived quality pricing – a high price is set to reflect/create an image of high quality.
 Price discrimination – different prices are set for the same product in different markets, e.g. peak/off-peak
rail fares.
 Going rate pricing – prices are set to match competitors.
 Price skimming – high prices are set when a new product is launched. Later the price is dropped to increase
demand once the customers who are willing to pay more have been ‘skimmed off.
 Loss leaders – one product may be sold at a loss with the expectation that customers will then go on and buy
other more profitable products.
 Captive product pricing – this is used where customers must buy two products. The first is cheap to attract
customers but the second is expensive, once they are captive.
(3)-Promotional issues
AIDA
- Awareness of the product
- Interest in the product
- Deise to buy
- Action an actual purchase
(4). Place (distribution) issues
- Selling direct
- Selling indirect
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The strategic marketing processes
Strategic analysis of the firm and its business environment
Marketing analysis will include:
 analysis of brand strength, product quality, reputation, etc.
 analysis of competition
 market research to determine market attractiveness
 detailed analysis of customer expectations and power
Strategic choice
Marketing decisions will include:
 decisions regarding which products to sell
 segmenting potential markets (e.g. by age) and then targeting attractive segments
 developing strategies for each of the marketing mix variables.
Strategy implementation
Implementing marketing strategies will include:
 setting budgets for advertising, etc.
 setting targets for sales revenue, market share, brand awareness, etc.
 monitoring and control.
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Chapter (3)
Organizational Cultures in business
Handy – The way we do things around here.
Component of culture
- A set of norms of behaviors
- Symbols or symbolic action
- Share values and beliefs
Schein argues that the first leaders of a company create its culture. Future leaders will only be selected if they
support this original culture. Thus, the link between culture and leadership is very strong and it can be very difficult
to change.
Artefacts
Can be easily seen but not easy to interpret from
(Example – Office layout / /design of the organization’s premises/ dress code)
Espoused value
Play a supporting role in bringing people
(Example – Strategies and goals and slogan of the organization)
Basic assumption and values
Difficult to identify, work at unconscious level
Handy
Handy popularised four cultural types
1. Power Culture (Zeus)
Power culture shaped by one individual. (one major sources of influence eg. Founder)
Found in smaller, entrepreneurial organization
Few formal rules and procedures.
2. Role Culture (Apollo)
Role culture is a bureaucratic culture shaped rationality, rule and procedures.
Common in bureaucratic organizations (eg. Government)
People follow predetermine procedures without questioning their purpose.
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3. Task Culture (Athena)
Task culture shaped by a focus on output and results.
Project based and creative work (team based)
Suitable is a rapidly changing environment.
4. Person Culture (Dionysius)
Person culture is shaped by the interest of individuals.
Hofstede
Individualism
Uncertainty
avoidance (UA) index
Power distance (PD)
index
Masculinity
Long-term orientation
Indulgence vs
restraint
High individualism
- Indicates that staff expect to be assessed on their own achievements and
performance.
Low individualism (or collectivist)
- Mean that staff expect to be assessed on a group basis and prefer the
organization to set group goals.
High UA
- High UA culture will not like act outside their normal job descriptions or roles.
They prefer to be directed by management and like formal rules and
guidelines.
Low UA
- Low UA culture will be prepared to take more risks and go beyond their
“comfort zones”. They tend to dislike bureaucracy as it stifles initiative.
High PD
- High PD culture expect answer to powerful managers and do not expect to
have any democratic input into decisions that are made.
Low Pd
- Low PD culture expect to be involved with decision making process and want
less direct supervision by managers.
High Masculintiy
- Employees in masculine culture can be motivated by offering them job titles,
increased status and pay rises, as this is what the culture values.
Low Masculinity (femininity)
- Staff in feminine cultures will be motivated more by work life balance, quality
of life and relationships at work.
Long-term orientation
- Long term orientation focus on future rewards, with a particular focus on
saving, persistence and the ability to adapt to changing circumstances.
Short- term orientation
- Short-term oriented cultures focus on past and present concerns, such as
respect for tradition, social obligations and saving ‘face’.
Indulgences
- Indulgences societies allow relatively free gratification of basic and natural
human drives related to enjoying life and having fun.
Restraint
- Restrained societies suppress gratification of needs and regulate it by means
of strict social norms.
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