Module 1

Business Organization
Its Structure & Culture

Dr Anjali Motwani
 Syllabus
• Need and types of Business organization, stake
holders in Business organizations,
• factors effecting Business organizations –
political – factors- macroeconomics – micro
economics social – social – demographic-
Technological factors – Environment factors –
Competitive factors - formal and informal
business organization – structure and design-
committees in business organizations.
 Business Organization, Its Structure And
Culture
• The need for organization and its types.
• Different structural types.
• Boundary less organizations.
• Mintzberg’s structural configurations.
• Planning levels – The Anthony Triangle.
• The roles of main organisational functions and
coordinating mechanisms between them.
• Marketing.
• Organisational culture.
• The impact of the informal organization.
The Need For
Organization
& Its Types
The Need For Organization & Its Types
Organizations are social arrangements for the controlled
performance of collective goals

Organizations use
Two or more people systems (e.g. swiping All organizations
working together in a in when entering pursue certain goals,
structured way Duties office) and procedures these are considered
and responsibilities (e.g. cash handling to be over and above
being assigned to each rules) to regulate staff individual aspirations
individual behaviour
 Organizations exist:
• To satisfy social needs
• To overcome the individuals’ limitations
• To enable individuals to specialize
• To save time through joint effort
• To pool knowledge and ideas
• To pool expertise
• To provide synergy
 Organisational Types
PROFIT ORIENTATION OWNERSHIP/CONTROL

• Profit-seeking organizations: • Public sector: provision of

seek to maximize the wealth basic governmental services
of their owners (e.g. (e.g. Police, education,
Commercial companies) healthcare)
• Not-for-profit organizations • Private sector limited
(NFPS): seek to satisfy the liability (Ltds and plcs) –
needs of their members, partnerships – clubs
profit is no longer a primary • Cooperatives owned by
objective (e.g. Schools, people who buy or use their
hospitals) services.
 Different Structural Types
Definition
• Structure refers to the way jobs are grouped
into different departments and are allocated
responsibility and authority.
 Type Rationale
Typical in small, owner-managed companies. Allows for fast decision-
Entrepreneurial making and high degree of control, however may restrict growth and
success depends on manager’s capabilities.

Departments are based on common specialization. Best suited to

companies operating in a stable environment, dealing with few
Functional products, this structure often suffers from conflict between
departments and slow decision-making.

Functions are grouped in accordance with product lines or divisions.

Gives more responsibility to general managers, allows senior staff to
Divisional become more strategic, but functions are duplicated and divisions
may lose sight of organization-wide goals.

Activities are grouped according to location. This gives a high degree

Geographical of flexibility necessary to adjust for local customs, but may lead to
sub-optimization.

A combination of functional and divisional structure which allows for

better coordination of activities and more focus on operations. Can
Matrix lead to dual reporting and excessive pressure on staff.
Boundary less Organizations
Definition
• Boundary less organizations are a modern
model of organisational design which adopt a
flexible, unstructured design.
 Type Rationale

Hollow All non-core (i.e. non-strategically important) functions are

organizations outsourced to third party organizations.

Virtual Any, and all, functions can be outsourced – whether core or non-core.
organizations All that is left is a small central staff who co-ordinate the outsourcing
arrangements.

Boundary less manufacturing organizations. Rather than simply

Modular making their own product, they break the manufacturing process
organizations down into modules or components. Each component can then be
either made by the company or outsourced.
 Features of Virtual Organizations
• Technology
• E-mail Integration
• Office System Integration
• Voice Mail Alert
• Mobile Data:
 Span of Control
• Scalar chain – number of management levels
• Span of control – number of subordinates under
one manager’s control
• Span of control depends on:
• Managers capabilities (physical & mental limitations)
• Nature of managers workload
• Nature of work undertaken (how routine is)
• Geographical dispersion of subordinates
• Level of cohesiveness within the team.
 All structures could be divided into two groups

By composition By level of decision-

(in relation to its size) making
• Centralized – decisions are
• Tall with many levels of
made by senior
hierarchy & narrow span of management (e.g.
control (e.g. functional, functional, entrepreneurial).
divisional, geographic)
• Decentralized – decision-
• Flat with few levels of
making is delegated to
hierarchy & wide span of lower levels (e.g. matrix,
control(e.g. geographical).
entrepreneurial, matrix).
 Offshoring
• This refers to the process of outsourcing or
relocating some of an organization's functions
from one country to another, usually in an
effort to reduce costs.
 Shared services approach
• This involves centralizing an internal function that is
currently used throughout the organization (i.e.
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.
• Hundreds of global corporations and almost every
international bank have established Shared services center
in India. It may be worthwhile to note some names – GE,
American Express, Bank of America, HSBC, Barclays, RBS,
ANZ, Deloitte, Thomson Reuters, Siemens, Amazon,
Ericson, Vodaphone, Dell, Steria, Ford etc.
Mintzberg’s Structural Configuration
Operating Core
• Those who perform basic form of producing products and rendering services
Strategic apex
• Full time managers who supervise and ensure that the organization serves its
mission in an effective way
Middle line
• Delegated formal authority between operating core & strategic apex.
Techno structure
• Are analysts in charge of standardization. Outside the hierarchy of line
authority.
Support staff
• Specialized units who provide support to the organization. Outside the
operating work flow.
 What if they dominate
Building block Who are they? the company?

Strategic Apex Senior levels of management Simple Structure

Middle Line Middle management Divisionalized

Operating Core Workers Professional Bureaucracy

Techno Structure Analysts who plan and control the Machine Bureaucracy
work of others

Support Staff Admin support and indirect Adhocracy/ Innovative

services

Ideology Organisational beliefs and values Missionary

 PLANNING LEVELS –
THE ANTHONY TRIANGLE
 Long term
 Looks at the whole
organization
 Defines resource
requirements

 Medium term
 Looks at the
department/ divisional
Level
 Specifies how to use
resources
 • Short term
 • Very detailed
 • Concerned day-to-day
running of the company
 Strategy
• Strategy is a course of action, including the
specification of resources required, to achieve
a specific objective.
 Levels of Strategy
• Corporate – directions for the whole of the
organization.
• Business – how to approach a particular
market.
• Operational – specific to each department.
 The Roles Of Main Organisational Functions
And Coordinating Mechanisms Between Them
Departments and their roles
Marketi
Purcha Producti
ng Services
R&D on HR
sing Admin Financ
Product Custome e
Converti
Develo Acquiring Design, r Financial
Input ng
Pricing, Services, Back
ping Materials, Supplies Reportin
Distribut Dealing office, g, Deali
& Negotiati Into
ion,
ng
Finished
with Suppo Treasury ng
Impro Trading Promoti Complai ,
Goods, rting With
ving terms
Adding
on nts Manage
(E.G. (4ps of And Functi ment Staff
Produ Quantity Value in
Marketi Enquirie ons Accounti
cts Quality, the
ng s ng
Issues
price) Process
Mix)

Coordination through:
• Standardized: Work processes (aiming for single best practice), Output (developing
product/service specifications), Skills and knowledge (staff training)
• Direct supervision (managerial oversight)
• Mutual adjustment (via communication)
Stakeholders
 INTERNAL
STAKEHOLDERS
 EXTERNAL
STAKEHOLDERS
FACTORS EFFECTING
BUSINESS
ORGANIZATIONS
 Economic Influences
• Fluctuations in the level of economic activity create business
cycles that affect businesses and individuals in many ways.
• When the economy is growing, for example, unemployment
rates are low, and income levels rise. Inflation and interest
rates are other areas that change according to economic
activity. Through the policies it sets, such as taxes and
interest rate levels, a government attempts to stimulate or
curtail the level of economic activity.
• In addition, the forces of supply and demand determine how
prices and quantities of goods and services behave in a free
market.
 Economics

Micro Macro

Demand and Supply Fiscal V/s Monetary Policy Economic Growth

Price elasticity Classical v/s supply side v/s Inflation
Demand side
Cost Unemployment
Expenditure reducing v/s
Markets Expenditure switching Balance of Payments
 Political and Legal Influences
• The political climate of a country is another critical factor for
managers to consider in day-to-day business operations. The
amount of government activity, the types of laws it passes, and
the general political stability of a government are three
components of political climate.
• For example, a multinational company such as General
Electric will evaluate the political climate of a country before
deciding to locate a plant there.
• Is the government stable, or might a coup disrupt the country?
How restrictive are the regulations for foreign businesses,
including foreign ownership of business property and taxation?
Import tariffs, quotas, and export restrictions also must be taken
into account.
 Political &
legal

Government Political
Legislation
policy system

Data
Employee Health & Consumer
protection &
protection Safety Protection
security
 Demographic Factors
• Demographic factors are an uncontrollable factor in
the business environment and extremely important
to managers.
• Demography is the study of people’s vital statistics,
such as their age, gender, race and ethnicity, and
location.
• Demographics help companies define the markets for
their products and also determine the size and
composition of the workforce. You’ll encounter
demographics as you continue your study of business.
 Social Factors
• Social factors—our attitudes, values, ethics, and lifestyles—influence what, how,
where, and when people purchase products or services.
• They are difficult to predict, define, and measure because they can be very
subjective. They also change as people move through different life stages.
People of all ages have a broader range of interests, defying traditional
consumer profiles.
• They also experience a “poverty of time” and seek ways to gain more control
over their time. Changing roles have brought more women into the workforce.
• This development is increasing family incomes, heightening demand for time-
saving goods and services, changing family shopping patterns, and impacting
individuals’ ability to achieve a work-life balance.
• In addition, a renewed emphasis on ethical behavior within organizations at all
levels of the company has managers and employees alike searching for the right
approach when it comes to gender inequality, sexual harassment, and other
social behaviors that impact the potential for a business’s continued success.
 Technology
• The application of technology can stimulate growth under capitalism or
any other economic system.

• Technology is the application of science and engineering skills and

knowledge to solve production and organizational problems. New
equipment and software that improve productivity and reduce costs can
be among a company’s most valuable assets.
• Productivity is the amount of goods and services one worker can produce.

• Our ability as a nation to maintain and build wealth depends in large part
on the speed and effectiveness with which we use technology—to invent
and adapt more efficient equipment to improve manufacturing
productivity, to develop new products, and to process information and
make it instantly available across the organization and to suppliers and
customers.
 Social, Environmental & Technical

Social Environmental Technological

Demographic Business effects on Downsizing

environment
Social Trends Environmental effects
Delayering
Government policy on business Outsourcing
Sustainability
 Competitive Factors

Competitive Porters 5 forces Porters value

SWOT
Advantage model chain

Strength
Cost leadership Weakness
Differentiation Opportunities
Focus Threat
 Committee
Organization
• https://www.youtube.com/watch?
v=WTvVncwnENw
 Organization Culture

Influences Writers Components

1. Norms
1. Size
1. Schein 2. Symbols
2. Technology (https://www.youtube.c
3. Diversity om/watch?v=4cBN8xH- 3. Shared values
5Qw)
4. Age 2. Handy https://
(https://www.youtube.c
5. History om/watch? www.youtube.com/
6. Ownership 3.
v=kRIc0W48qYY)
Hofstede
watch?
https:// (https://www.youtube.c v=Fe3zqcAFBoU
om/watch?
www.youtube.com/ v=Fwa1tkH7LEI)
watch?v=xChi9_5W-Y8
7 P’s OF MARKETING

• youtube.com/watch?v=ys7zx1Vc9po
 https://www.icmrindia.org/
CaseStudies/catalogue/Human
%20Resource%20and%20Organization
%20Behavior/HROB154.htm