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Lecture 8. Introduction to business. Organizing the Business. Why organize?. When business grows from a single handed operation to a multi employed and multi handed operation, organizing becomes necessary. Increase in operation size requires more employees to produce and sell more.

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introduction to business

Lecture 8

Introduction to business

Organizing the Business

why organize
Why organize?
  • When business grows from a single handed operation to a multi employed and multi handed operation, organizing becomes necessary.
  • Increase in operation size requires more employees to produce and sell more.
  • When there are multiple tasks and activities in the business, it requires a structured way of doing things.

formal informal organizations
Formal & Informal organizations
  • The formal organization is the one put together by management and created by those who have authority, responsibility and accountability.
  • The informal organization is the one that had been started by a single owner with the help of a network of personal and social relationships.

formal authority
Formal authority
  • Formal authority is the right to give orders, responsibility and authority to a subordinate employee. Formal authority can be of two types:
    • Line authority is an unquestioned & direct authority given to a manager
    • Staff authority is an advisory authority to oversee a situation and to make recommendations but doesn’t have any authority to take actions.

centralized decentralized authority
Centralized & Decentralized authority
  • Centralized authority
    • An organization in which all authority to make decisions is done by a small group of managers.
  • Decentralized authority
    • An organization in which a significant authority is delegated to subordinate managers or supervisors.

sample organization chart
Sample organization chart












Production workers, operators, and all other lower level workforce

principle of organizing
Principle of organizing
  • Principle
    • A guideline that managers can use in making decisions.
  • Division of labor
    • A principle of organization that a job can be performed more efficiently if the job holder is allowed to specialize.
  • Unity of command
    • The principle of organization that no employee should report to more than one superior.

principle of organizing contd
Principle of organizing (contd.)
  • Scalar principle
    • It is a principle that authority and responsibility should flow from highest to the lowest manager.
  • Span of control
    • The principle of organization that limits the number of subordinates reporting to a senior.
  • Downsizing
    • Downsizing is the reduction of layers of management or staffs from the organizational hierarchy.

organizational structures
Organizational Structures
  • Functional Structure
    • A structure in which each unit or department has a different set of activities and responsibilities.
    • Accounting, Sales, Marketing, HR, etc
    • Advantages. Helps in becoming more skilled when working with similar activities
    • Disadvantages. Sometimes there are some jobs that needs helps from other departments. Thus it becomes an obstruct getting the job done by other department

organizational structures contd
Organizational Structures (contd.)
  • Product Structure
    • A structure where a manager and his/her team is in charge of and has a responsibility for a product or product line.
    • Product (beauty soap) Line (all beauty soaps)
    • Advantages. Whole team effort is given on a particular product or product line.
    • Disadvantages. Budget constraints, Authority constraints, & Time constraints.

organizational structures contd1
Organizational Structures (contd.)
  • Territorial Structure
    • An organization structure where units are divided on the basis of territory or geographical region.
    • Long range bus service, Retailers, etc.
    • Advantages. It allows a coordination at the point of sale which means speedier service.
    • Disadvantages. Duplication in product and services often occurs thus reduces the quality.

organizational structures contd2
Organizational Structures (contd.)
  • Matrix Structure
    • A functional structure combined either a product or project structural arrangement
    • Banking, Insurance, Universities, Electronics, etc
    • Advantages. Can handle dual focus on a specific product or service. Communication and work sharing becomes more clear.
    • Disadvantages. Confusion in responsibilities. Excessive costs. Struggle for power and authority between managers.