Topic: Business and Organisational Structure

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  • 20 Marks

BMIS – May 2019 – L1 – Q1 – Business and organisational structure

Outline the characteristics of organisations, the public sector, strategic plans, and management information systems.

Outline FIVE (5) characteristics each of the following:
a) Organisation
b) Public Sector
c) Strategic Plans
d) Management Information Systems

(20 marks)

a) Characteristics of Organisations

  • Organisations are preoccupied with performance, and meeting or improving their standards.
  • Organisations contain formal, documented systems and procedures which enable them to control what they do.
  • Different people do different things, or specialise in one activity.
  • They pursue a variety of objectives and goals.
  • Most organisations obtain inputs (e.g., materials), and process them into outputs (e.g., for others to buy).

(5 points for 5 marks)

b) Characteristics of Public Sector

  • Accountability, ultimately to Parliament.
  • Funding: The public sector can obtain funds in three main ways: raising taxes, making charges (e.g., for prescriptions), or borrowing.
  • Demand for services: In the public sector, demand for many services is practically limitless.
  • Limited resources: Despite potentially huge demand for public services, constraints on government expenditure mean that resources are limited and that demand cannot always be met.
  • Public interest: Governments once believed the public interest was best served if the state ran certain services.

(5 points for 5 marks)

c) Characteristics of Strategic Plans

  • They are written down.
  • They are circulated to interested parties in the organisation.
  • They specify the outcomes (e.g., where the business wishes to be in five years’ time).
  • They specify how the outcomes are going to be achieved.
  • They trigger the production of operational plans lower down the hierarchy.

(5 points for 5 marks)

d) Characteristics of Management Information Systems

  • Support structured decisions at operational and management control levels.
  • Designed to report on existing operations.
  • Have little analytical capability.
  • Relatively inflexible.
  • Have an internal focus.

(5 points for 5 marks)

  • 8 Marks

BMIS – Nov 2016 – L1 – Q4a – Business and organisational structure

State reasons that may influence a company or government to undertake a divestiture program.

State FOUR reasons that may influence a company or government to undertake a divestiture programme.

(8 marks)

  • Raise funds: Divestiture programmes are undertaken to raise funds for the company or the government.
  • Focus on core activities: They enable the company to concentrate on its core activities.
  • Bankruptcy process: Divestiture may be part of a company’s bankruptcy process.
  • Lack of synergy: Companies undertake divestiture if there is no synergy between the divested assets and the company’s core activities.

(Any 4 x 2 marks = 8 marks)

  • 14 Marks

BMIS – Nov 2016 – L1 – Q2b – Business and organisational structure

Explain the advantages and disadvantages of adopting a virtual organizational structure for a medium-sized company with global operations.

The management of a medium-sized company has adopted the virtual organizational structure as a result of its expanded activities to different parts of the world.

State FOUR advantages and THREE disadvantages of the adoption of this decision. (14 marks)

Advantages of Virtual Organizations:

  • Lower administrative costs: Virtual organizations often have reduced overhead costs.
  • Reduced salary expenses: The amount of salaries paid to employees will decrease.
  • Access to global specialists: Virtual organizations can attract specialists from around the world.
  • Instant communication: There is an advantage of instant communication within the organization.

(Any 4 x 2 marks = 8 marks)

Disadvantages of Virtual Organizations:

  • Difficulty in controlling working hours: It is challenging to monitor and control employees’ working hours.
  • Service quality issues: There can be problems with the quality of service delivery.
  • Technology dependency: The electronic communication systems can break down, affecting operations.

(Any 3 x 2 marks = 6 marks)

Grand total: 14 marks

  • 20 Marks

BMIS – Nov 2018 – L1 – Q4 – Business and organisational structure

Define functional, divisional, and matrix structures and identify three characteristics of each.

Organisations develop structures to help them to coordinate their activities, provide lines of communication, and help the organisation to operate efficiently. The type of structure chosen will depend on a range of factors including size, age, complexity, scope of activity, and industry structure. Each structure has its own characteristics and benefits which have implications for the way the organisation operates.

Required:
Define the following and identify THREE (3) characteristics of each of them:

a) Functional organisational structure. (6 marks)
b) Divisional organisational structure. (8 marks)
c) Matrix organisational structure. (6 marks)

a) Functional organisational structure
A functional structure is centralized and creates a rigid framework for efficient management control. It is found in private sector organisations that have outgrown a simple structure and in many parts of the public sector.

Characteristics:

  1. Centralized control: Decision-making is concentrated at the top levels of the organisation.
  2. Specialized departments: Departments are organized by function, such as marketing, finance, and operations, each managed by a specialist.
  3. Vertical communication: Communication channels are primarily vertical, with information flowing up and down the hierarchy.

b) Divisional organisational structure
A divisional structure is decentralized, organized around product lines or geographical areas, allowing for greater flexibility and responsiveness to market demands.

Characteristics:

  1. Decentralized decision-making: Each division operates semi-independently, making decisions tailored to its specific market or product line.
  2. Separate profit centers: Each division is treated as a separate profit center, with its own income and expenses.
  3. Duplication of functions: Each division may have its own functional departments (e.g., marketing, HR), leading to some inefficiency.

c) Matrix organisational structure
A matrix structure combines aspects of both functional and divisional structures, creating a hybrid that allows for more flexibility and responsiveness.

Characteristics:

  1. Dual reporting relationships: Employees report to both a functional manager and a project or product manager.
  2. Cross-functional teams: Staff from different departments work together on projects, fostering collaboration and innovation.
  3. Complexity in management: The matrix structure can create conflicts in management directives and requires a high degree of cooperation among team members.
  • 10 Marks

BMIS – March 2024 – L1 – Q1b – Business and Organisational Structure

Explain five reasons why Asanko Ltd, a multinational dry dock company, might have adopted a decentralization policy for its operations.

Asanko Ltd is a dry dock company which repairs fishing trawlers. The company has its headquarters in Ghana with subsidiaries in Sierra Leone, Gambia and Liberia. The company has adopted decentralisation policy for its operations.

Required: Explain FIVE (5) reasons which might have accounted for the company’s decision to adopt this policy for its operations.

Reasons for Adopting Decentralisation

  • Quick decision making: There is quick decision making in the decentralised units. This is because the unit or country heads will not require the approval of the headquarters for some decisions to be made.
  • Reduction of operational misunderstanding: There will be reduction in operational misunderstanding between the headquarters and the units because there is some sharing of power to manage between the headquarters and the branches in the various countries.
  • Better supervision: There is better supervision of subordinates at the country branches. This is because managers at the country branches are closer to their subordinates and as a result will be able to supervise them more closely than they being supervised from the headquarters.
  • Improved motivation: Managers at the branches will be motivated to dispense their responsibilities. This is because they will have a sense of ownership and belonging in the operations of the organisation.
  • Accountability: Decentralisation ensures high levels of accountability at the branches. This is because managers at the branches will make good decisions in the allocation of resources because they will be called to account for every decision made in terms of resource allocation.
  • Greater flexibility: Decentralisation results in greater flexibility. This is because the branches do not necessarily require the approval from the headquarters when certain operational changes are needed.
  • 5 Marks

BMIS – Nov 2023 – L1 – Q2c – Business and organisational structure

State five factors that business organizations consider when setting prices for their products to remain competitive and attractive to customers.

Business organisations consider several factors when setting prices for their products. This is to enable them remain competitive and also remain attractive to customers.

Required: State FIVE (5) of these factors. (5 marks)

Factors to consider in setting prices

  • The objectives of the company can influence how it sets prices for products.
  • The total costs of production and any activity involving the marketing mix elements will influence the price to be set for the product.
  • The culture of the company will also affect the price to be set for the product.
  • The life cycle stage in which the company’s product is, will also determine the price set for the product.
  • The price competitors are charging for similar products will influence the price set by the company for its products.
  • The policies and regulations of the government should be considered when setting the price of certain products especially if they are public products.
  • The demand for the product will also affect the setting of the price for that product.
  • The economic situation in the country will also influence the company’s price setting process.
  • 10 Marks

BMIS – Nov 2023 – L1 – Q1b – Business and organisational structure

Explain the disadvantages of the matrix organisational structure.

Despite the many advantages associated with the matrix organisational structure which has made its use almost universal, there are also some challenges that confront a firm which adopts it.
Required:
Explain FIVE (5) disadvantages of the matrix organisational structure.

  • Violation of Unity of Command: A major criticism of the matrix organizational structure is that it violates the basic principle of management, which is unity of command since subordinates will have to report to two superiors simultaneously, leading to organizational conflicts.
  • Higher Costs: It is often more costly to operate the matrix structure since the workers who constitute the project team are drawn from different functional areas, and the organization will have to spend much more resources on communication, etc.
  • Disruption in Departments: Its implementation may lead to situations where departments will be unable to meet set targets because highly efficient employees would have been drafted into a project team.
  • Role Conflict: Employees assigned to a project will still be evaluated by their traditional managers, who may now have little chance of assessing their performance, leading to role conflict on the part of subordinates in the performance of their duties.
  • Inefficiency: The existence of many managers and a host of procedures may lead to inefficiency in the management of the organization, and possibly lower productivity.
  • 10 Marks

BMIS – Nov 2017 – L1 – Q1a – Business and organisational structure

Outline factors to justify the adoption of the matrix organization structure and explain challenges associated with it.

a) Your Chief Executive Officer has suggested that the numerous problems confronting your organization are as a result of the type of organization structure adopted and has requested your advice regarding a change to the matrix structure.

Required:
i) Outline FIVE factors to justify the adoption of the matrix organization structure.
(5 marks)

ii) Explain FIVE challenges associated with matrix organization structure.
(5 marks)

i) Factors to justify the adoption of matrix organizational structure:

  • Knowledge Pool: Matrix organizations are effective at knowledge management since individuals with specialist skills are brought together to undertake specific duties, leading to lower costs and increased productivity.
  • Training Grounds: It serves as a good training ground for managers, enabling them to acquire skills from project colleagues for future performance.
  • Creativity: The pooling of different skills enhances creativity and diversity among employees, leading to higher employee morale and productivity.
  • Information Flow: The matrix structure facilitates effective information flow by bringing together employees from different functional areas, allowing for quicker transmission of information.
  • Flexibility: It enables the organization to share its human resources across different project sites, enhancing efficiency, lowering costs, and increasing profitability.

ii) Challenges of Matrix Organizational Structure:

  • Violates Unity of Command: The matrix structure violates the basic principle of unity of command, as subordinates report to two superiors simultaneously, potentially creating organizational friction.
  • Costly: Implementing a matrix structure is often more costly, as employees from different functional areas are drawn into project teams, leading to increased communication expenses.
  • Role Conflict: Personnel assigned to a project may experience role conflict as they are still evaluated by functional managers who have little chance to assess their work.
  • Inefficiency: Multiple managers and numerous procedures may result in inefficiency in managing the organization, lowering productivity.
  • Information Logjams: The adoption of a matrix structure may lead to information logjams due to work overload on employees.
  • 10 Marks

BMIS – Mar 2023 – L1 – Q1b – Business and organisational structure

Explains five factors the government should consider in determining the structure for the National Youth Employment Programme.

The government of Ghana, on realizing the high levels of unemployment among the youth, decided to establish the National Youth Employment Programme with the sole objective of reducing this unemployment among the youth.

Required:
Elaborate on FIVE (5) factors the government should consider in deciding the appropriate structure for the operations of this organization.

Factors to Consider in Deciding the Appropriate Organizational Structure:

  1. Strategy:
    The strategy of an organization refers to the course of action adopted by an organization to achieve its objectives. The strategy pursued will determine the structure to be adopted. For example, if the government intends to involve grassroots decision-making in the NYEP, a decentralized structure would be appropriate.
    (2 marks)
  2. Size:
    The size of the organization will influence the structure to be adopted. If the NYEP employs a large number of people, a more mechanistic structure, with more specialization, vertical levels, and rules, would be appropriate.
    (2 marks)
  3. Technology:
    The technology used by the organization impacts its structure. Complex technological processes may require more stringent rules and applications, thus necessitating a mechanistic structure. In the case of NYEP, which may not involve complex technology, a simpler structure could be more suitable.
    (2 marks)
  4. Age:
    The age of the organization also determines the structure. Newly formed organizations like the NYEP will require different structures as they evolve through stages such as birth, youth, midlife, and maturity. At the birth stage, a simpler structure with less specialization might be appropriate.
    (2 marks)
  5. Environment:
    The environment in which the organization operates affects its structure. Stable environments may lead to mechanistic structures, while volatile environments may require more flexible structures to adapt to changes effectively.
    (2 marks)
  • 10 Marks

BMIS – May 2017 – L1 – Q3a – Business and organizational structure

Identify and explain three advantages and two disadvantages of centralization.

a) Djaba Ltd uses an organisational structure in which most power and critical decision-making responsibilities are concentrated with a few key leaders. The organisation often houses its primary decision makers or executives in a central headquarters with offices and meeting areas for leaders to discuss business.

Required:
Identify and explain THREE advantages and TWO disadvantages of this organisational structure to Djaba Ltd. (10 marks)

Advantages:

  1. Better Coordination: Decisions are coordinated more easily, and management has better control over decisions.
  2. Goal Congruence: Decisions taken centrally are based on overall objectives, whereas decentralized decisions may be influenced by short-term or local objectives.
  3. Standardization: Ensures consistency in processes like pricing and menus across locations. For example, McDonald’s customers expect to find standard menus and pricing.

Disadvantages:

  1. Reduced Morale and Job Satisfaction: Local managers and divisional staff may be frustrated at their inability to take decisions, reducing their job satisfaction and motivation.
  2. Imperfect Information: Local managers may have greater knowledge about operational activities or local market conditions than senior management or head office staff, leading to potentially suboptimal decisions.

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