Business Revision

Why Have A Structure?

• A clear structure makes it easier to see which part of the business does what
• An organisational structure is the way in which a business is arranged to carry out its activities
• The choice of structure impacts the organisations culture-their ethos/beliefs

What Does Organisational Structure Include?

• The routes through which communication passes through the business
• Who has authority/power/responsibility within the business
• The roles and titles of people within the business
• The people whom individual employees are accountable for and for those whom they are responsible

• Delegation is where managers give a portion of their work to their subordinates
• Delegation can allow subordinates to gain more autonomy and become empowered leading to an increase in performance
• Delegation is an aproach used by Democratic managers

• Consultation is where managers ask for and take into account subordinates' views
• Consultation allows a manager to keep more control over a situation
• Consultation is a technique used by Paternalistic managers

• Centralised organisations are where most decisions are taken by senior managers at the top of the hierarchy
• This leads to rapid decisions but low levels of consultation
• Decentralised businesses gives more authority to workers lower down the hiearchy by delegating decisions

• Organisational Design describes how a business is organised
• Tall/Traditional structures have many levels in the hierarchy
• Flat structures have few levels in the hierarchy
• Centralised organisations are where senior managers make key decisions
• Decentralised organisations are where workers have more authority to make decisions
• Delegation is where managers give employees some of their work increasing their responsibilty
• Consultation is where managers ask employees their opinions

• These occur when mass producing a good results in lower average cost...

Average Costs fall per unit-Average Costs per unit=Total Costs/Quantity Produced

• Economies of Scale occur within a firm (internal) or within an industry (external)

• "...an ability to produce units of output more cheaply..."
• As a business grows in scale, its costs will fall due to internal economies of scale
• There are many types of Internal Economies Of Scale:
  • Production/Technical Economies
  • Purchasing/Marketing Economies
  • Financial Economies
  • Managerial Economies
  • Risk-Bearing Economies

• "...those shared by a number of business in the same industry in a particular area..."
• These are advantages gained for the whole industry, not just for individual businesses

i.e. Having specialist skills and labour, or being close to a similar business and being able to work together.

• This looks at the amount a firm is producing compared with how much it could be producing given existing resources...
• To increase capacity utilisation can increase production levels
• It is necessary to ensure that there is a need for excess production

• Diseconomies of scale occur when firms become too large or inefficient
• Average costs per unit start to rise
• Types of Diseconomy of Scale:
  • Communication
  • Coordination and Control Problems
  • Motivation

• Capital Intensive businesses are where there is a high level of capital equipment compared to labour input in the production process
• Labour Intensive businesses are where there is a high level of labour input compared to capital equipment in the production process

• Lean Production looks at reducing all forms of waste throughout the production process...
• Types of Waste:
  • Materials
  • Time
  • Energy
  • Human Effort

• Goods are produced to order so stock levels are minimal