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
Centralistion & Decentralisation
- 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
Summary so far...
- 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
Economies Of Scale
- 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)
Internal Economies Of Scale
- "...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
External Economies Of Scale
- "...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
- Diseconomies of scale occur when firms become too large or inefficient
- Average costs per unit start to rise
- Types of Diseconomy of Scale:
- Coordination and Control Problems
Capital Vs. Labour Intensity
- 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:
- Human Effort
Just In Time [JIT]
- Goods are produced to order so stock levels are minimal