Introduction to business
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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

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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.

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