Kaplan F1 pg4-633.pdf
Transcript of Kaplan F1 pg4-633.pdf
-
freeaccastudymaterial.blogspot.com
freeaccastudymaterial.blogspot.com
freea
ccas
tudym
ateria
l.blog
spot.
com
-
ACCA
PaperF1
and
FIA
DiplomainAccounting
and
Business
AccountantinBusiness(AB/FAB)
StudyNotes
freeaccastudymaterial.blogspot.com
freeaccastudymaterial.blogspot.com
freea
ccas
tudym
ateria
l.blog
spot.
com
hwiseMyKaplan button
HWiseKaplan QR
hwiseF1
-
British library cataloguinginpublication data
AcataloguerecordforthisbookisavailablefromtheBritishLibrary.
Publishedby:KaplanPublishingUKUnit2TheBusinessCentreMollyMillarsLaneWokinghamBerkshireRG412QZ
KaplanFinancialLimited,2013
ThetextinthismaterialandanyothersmadeavailablebyanyKaplanGroupcompanydoesnotamounttoadviceonaparticularmatterandshouldnotbetakenassuch.Norelianceshouldbeplacedonthecontentasthebasisforanyinvestmentorotherdecisionorinconnectionwithanyadvicegiventothirdparties.Pleaseconsultyourappropriateprofessionaladviserasnecessary.KaplanPublishingLimitedandallotherKaplangroupcompanies expresslydisclaimallliabilitytoanypersoninrespectofanylossesorotherclaims,whetherdirect,indirect,incidental,consequentialorotherwisearisingin relationtotheuseofsuchmaterials.
PrintedandboundinGreatBritain.
Acknowledgements
WearegratefultotheAssociationofCharteredCertifiedAccountantsandtheCharteredInstituteofManagementAccountantsforpermissiontoreproducepastexaminationquestions. TheanswershavebeenpreparedbyKaplanPublishing.
Allrightsreserved.Nopartofthispublicationmaybereproduced,storedinaretrievalsystem,ortransmitted,inanyformorbyanymeans,electronic,mechanical,photocopying,recordingorotherwise,withoutthepriorwrittenpermissionofKaplanPublishing.
ii KAPLAN PUBLISHING
freeaccastudymaterial.blogspot.com
freeaccastudymaterial.blogspot.com
freea
ccas
tudym
ateria
l.blog
spot.
com
-
Contents
Page
Chapter 1 Thebusinessorganisation 1
Chapter 2 Businessorganisationandstructure 17
Chapter 3 Organisationalcultureinbusiness 51
Chapter 4 Informationtechnologyandinformationsystemsinbusiness
67
Chapter 5 Stakeholdersinbusinessorganisations 89
Chapter 6 Externalanalysispoliticalandlegalfactors 103
Chapter 7 Externalanalysiseconomicfactors 127
Chapter 8 Externalanalysissocial,environmentalandtechnologicalfactors
189
Chapter 9 Competitivefactors 213
Chapter 10 Professionalethicsinaccountingandbusiness 231
Chapter 11 Governanceandsocialresponsibilityinbusiness 257
Chapter 12 Lawandregulationgoverningaccounting 285
Chapter 13 Accountingandfinancefunctionswithinbusiness 305
Chapter 14 Financialsystemsandprocedures 327
Chapter 15 Therelationshipbetweenaccountingandotherbusinessfunctions
363
Chapter 16 Auditandfinancialcontrol 379
Chapter 17 Fraud,fraudulentbehaviour,andtheirpreventioninbusiness
405
Chapter 18 Leadership,managementandsupervision 427
Chapter 19 Recruitmentandselectionofemployees 455
Chapter 20 Individual,groupandteambehaviour 485
Chapter 21 Motivatingindividualsandgroups 507
KAPLAN PUBLISHING iii
freeaccastudymaterial.blogspot.com
freeaccastudymaterial.blogspot.com
freea
ccas
tudym
ateria
l.blog
spot.
com
-
Chapter 22 Learningandtrainingatwork 529
Chapter 23 Reviewandappraisalofindividualperformance 553
Chapter 24 Personaleffectivenessatwork 575
Chapter 25 Communicatinginbusiness 603
iv KAPLAN PUBLISHING
freeaccastudymaterial.blogspot.com
freeaccastudymaterial.blogspot.com
freea
ccas
tudym
ateria
l.blog
spot.
com
-
PaperIntroduction
v
chapterIntroduction
freeaccastudymaterial.blogspot.com
freeaccastudymaterial.blogspot.com
freea
ccas
tudym
ateria
l.blog
spot.
com
-
How to Use the Materials TheseKaplanPublishinglearningmaterialshavebeencarefullydesignedtomakeyourlearningexperienceaseasyaspossibleandtogiveyouthebestchancesofsuccessinyourexaminations.
Theproductrangecontainsanumberoffeaturestohelpyouinthestudyprocess.Theyinclude:
Thesectionsonthestudyguide,thesyllabusobjectives,theexaminationandstudyskillsshouldallbereadbeforeyoucommenceyourstudies.Theyaredesignedtofamiliariseyouwiththenatureandcontentoftheexaminationandgiveyoutipsonhowtobesttoapproachyourlearning.
Thecomplete text or essential textcomprisesthemainlearningmaterialsandgivesguidanceastotheimportanceoftopicsandwhereotherrelatedresourcescanbefound.Eachchapterincludes:
(1) Detailedstudyguideandsyllabusobjectives(2) Descriptionoftheexamination(3) Studyskillsandrevisionguidance(4) Completetextoressentialtext(5) Questionpractice
Thelearning objectivescontainedineachchapter,whichhavebeencarefullymappedtotheexaminingbody'sownsyllabuslearningobjectivesoroutcomes.Youshouldusethesetocheckyouhaveaclearunderstandingofallthetopicsonwhichyoumightbeassessedintheexamination.
Thechapter diagramprovidesavisualreferenceforthecontentinthechapter,givinganoverviewofthetopicsandhowtheylinktogether.
Thecontentforeachtopicareacommenceswithabriefexplanationordefinitiontoputthetopicintocontextbeforecoveringthetopicindetail.Youshouldfollowyourstudyingofthecontentwithareviewoftheillustration/s.Theseareworkedexampleswhichwillhelpyoutounderstandbetterhowtoapplythecontentforthetopic.
Introduction
vi KAPLAN PUBLISHINGvi KAPLAN PUBLISHING
freeaccastudymaterial.blogspot.com
freeaccastudymaterial.blogspot.com
freea
ccas
tudym
ateria
l.blog
spot.
com
-
Test your understandingsectionsprovideanopportunitytoassessyourunderstandingofthekeytopicsbyapplyingwhatyouhavelearnedtoshortquestions.Answerscanbefoundatthebackofeachchapter.
Summary diagrams completeeachchaptertoshowtheimportantlinksbetweentopicsandtheoverallcontentofthepaper.Thesediagramsshouldbeusedtocheckthatyouhavecoveredandunderstoodthecoretopicsbeforemovingon.
Question practiceisprovidedatthebackofeachtext.
Icon Explanations
Definition Keydefinitionsthatyouwillneedtolearnfromthecorecontent.
Key PointIdentifiestopicsthatarekeytosuccessandareoftenexamined.
Expandable textExpandabletextprovidesyouwithadditionalinformationaboutatopicareaandmayhelpyougainabetterunderstandingofthecorecontent.Essentialtextuserscanaccessthisadditionalcontentonline(readitwhereyouneedfurtherguidanceorskipoverwhenyouarehappywiththetopic)
IllustrationWorkedexampleshelpyouunderstandthecorecontentbetter.
Test Your UnderstandingExercisesforyoutocompletetoensurethatyouhaveunderstoodthetopicsjustlearned.
Tricky topicWhenreviewingtheseareascareshouldbetakenandallillustrationsandtestyourunderstandingexercisesshouldbecompletedtoensurethatthetopicisunderstood.
Formoredetailsaboutthesyllabusandtheformatofyourexam,pleaseseeyourCompleteTextorgoonline.
Online subscribers
Paper background
Objectives of the syllabus
Core areas of the syllabus
KAPLAN PUBLISHING vii
freeaccastudymaterial.blogspot.com
freeaccastudymaterial.blogspot.com
freea
ccas
tudym
ateria
l.blog
spot.
com
-
Syllabus objectives and chapter references
The examination
Examination format
Paperbased examination tips
Computerbased examination (CBE) tips
Study skills and revision guidance
Preparing to study
Three ways of taking notes
Revision
Further reading
YoucanfindfurtherreadingandtechnicalarticlesunderthestudentsectionofACCAswebsite.
Introduction
viii KAPLAN PUBLISHING
freeaccastudymaterial.blogspot.com
freeaccastudymaterial.blogspot.com
freea
ccas
tudym
ateria
l.blog
spot.
com
-
ThebusinessorganisationChapter learning objectives
Uponcompletionofthischapteryouwillbeableto:
definebusinessorganisationsandexplainwhytheyareformed describecommonfeaturesofbusinessorganisations outlinehowbusinessorganisationsdiffer listtheindustrialandcommercialsectorsinwhichbusiness
organisationsoperate identifythedifferenttypesofbusinessorganisation:commercial,
notforprofit,publicsector,nongovernmentalorganisations,cooperatives.
1
chapter
1
freeaccastudymaterial.blogspot.com
freeaccastudymaterial.blogspot.com
freea
ccas
tudym
ateria
l.blog
spot.
com
-
1Business organisations and the reason they are formed 1.1 What is a business organisation?
Defininganorganisationisdifficultastherearemanytypesoforganisationswhicharesetuptomeetavarietyofneeds,suchasclubs,schoolscompanies,charitiesandhospitals.
WhattheyallhaveincommonissummarisedinthedefinitionproducedbyBuchanan and Huczynski.
Organisationsaresocialarrangementsforthecontrolledperformanceofcollectivegoals.
Notethethreekeyaspectsofthisdefinition:
collectivegoals socialarrangements controlledperformance
Afootballteamcanbedescribedasanorganisationbecause:
Ithasanumberofplayerswhohavecometogethertoplayagame. Theteamhasanobjective(toscoremoregoalsthanitsopponent). Todotheirjobproperly,themembershavetomaintainaninternal
systemofcontroltogettheteamtoworktogether.Intrainingtheyworkouttacticssothatinplaytheycanrelyontheballbeingpassedtothosewhocanscoregoals.
The business organisation
2 KAPLAN PUBLISHING2 KAPLAN PUBLISHING
What is an organisation?
Illustration 1 Football team
freeaccastudymaterial.blogspot.com
freeaccastudymaterial.blogspot.com
freea
ccas
tudym
ateria
l.blog
spot.
com
-
Eachmemberoftheteamispartoftheorganisationalstructureandisskilledinadifferenttask:thegoalkeeperhasmoreexperienceinstoppinggoalsbeingscoredthanthoseintheforwardlineoftheteam.
Inaddition,theremustbeteamspirit,sothateveryoneworkstogether.Playersareencouragedtodotheirbest,bothonandoffthefield.
Whichofthefollowingwouldbeconsideredtobeanorganisation?
(i) Asoletrader(ii) Atennisclub(iii) AhospitalA (i),(ii)and(iii)B (i)and(ii)onlyC (ii)and(iii)onlyD (i)and(iii)only
1.2 Why do we need organisations?
Organisationsenablepeopleto:
Thisresultsinsynergywhereorganisationscanachievemorethantheindividualscouldontheirown.
Share skills and knowledgethiscanenablepeopletoperformtasksthattheywouldbeunabletoachieveontheirown.Knowledgecanalsobesharedbetweenallthepeoplewithintheorganisation.
Specialiseindividualworkerscanconcentrateonalimitedtypeofactivity.Thisallowsthemtobuildupagreaterlevelofskillandknowledgethantheywouldhaveiftheyattemptedtobegoodateverything.
Pool resourceswhethermoneyortime.
chapter 1
KAPLAN PUBLISHING 3
Test your understanding 1
freeaccastudymaterial.blogspot.com
freeaccastudymaterial.blogspot.com
freea
ccas
tudym
ateria
l.blog
spot.
com
-
Jaredisorganisingasocialevent.Whichofthefollowingwouldbebenefitsofhimformingacommitteetomanagetheplanningprocessandtheeventitself?
(i) Itwouldhelptoovercomehislimitations,bybringingonboardotherpeoplewithdifferentskillstohim.
(ii) Itwouldsavetimethroughthejointeffortsofeveryoneonthecommittee.
(iii) ItwouldhelptosatisfyJaredssocialneeds.(iv) Allmembersofthecommitteewouldhavetobeskilledinallaspects
ofmanagingthesocialevent.A (i),(ii)and(iii)onlyB (i),(iii)and(iv)onlyC AlloftheaboveD Noneoftheabove
2Different types of organisation
Aswehavediscussed,differentorganisationshavedifferentgoals.Wecanthereforeclassifythemintoseveraldifferentcategories.
2.1 Commercial versus notforprofit
Commercial organisations
Commercial(orprofitseeking)organisationsseetheirmainobjectiveasmaximisingthewealthoftheirowners.
Therearethreecommonformsthatacommercialcompanycantake:
Notethatinbothoftheseorganisations,theownerofthebusinessisnotlegallyseparatefromthebusinessitself.Ifapartnershipissuedbyacustomer,thecustomerisactuallysuingtheownerofthebusiness.
Sole traderstheorganisationisownedandrunbyoneperson. Partnershipstheorganisationisownedandrunbytwoormore
individuals.
Limited liability companiesacompanyhasaseparatelegalidentitytoitsowners(whoareknownasshareholders).Theownersliabilityislimitedtotheamounttheyhaveinvestedintothecompany.
The business organisation
4 KAPLAN PUBLISHING
Test your understanding 2
freeaccastudymaterial.blogspot.com
freeaccastudymaterial.blogspot.com
freea
ccas
tudym
ateria
l.blog
spot.
com
-
IntheUK,therearetwotypesoflimitedcompany:
Private limited companies(withLtdaftertheirname)thesetendtobesmallerbusinesses,oftenownedbyafewshareholders.Sharescannotbeofferedtothegeneralpublic.
Public limited companies(withplcaftertheirname)thesecanbemuchlargerbusinesses.Sharescanbeofferedtothegeneralpublic,meaningthattherecanbemillionsofdifferentshareholders.Thismakesiteasierforthecompanytoraisefinance,enablingfurthergrowth.
Not for profit organisations
Notforprofitorganisations(NFPsorNPOs)donotseeprofitabilityastheirmainobjective.Instead,theyseektosatisfytheparticularneedsoftheirmembersorthesectorsofsocietythattheyhavebeensetuptobenefit.
NFPsincludethefollowing:
governmentdepartmentsandagencies(suchasHMRevenueandCustoms)
schools hospitals charities(suchastheRedCross,OxfamandDoctorsWithout
Borders) clubs.
TheobjectivesofdifferentNFPswillvarysignificantly:
Hospitalsexisttotreatpatients. Councilsmayseetheirmissionascaringfortheircommunities. Governmentorganisationsusuallyexisttoimplementgovernment
policy. Acharitymayhaveprovisionofrelieftovictimsofdisastersasitsmain
objective.
chapter 1
KAPLAN PUBLISHING 5
Illustration 2 NFP examples
freeaccastudymaterial.blogspot.com
freeaccastudymaterial.blogspot.com
freea
ccas
tudym
ateria
l.blog
spot.
com
-
2.2 Public versus private sector organisations
Public sector organisations
Thepublicsectoristhepartoftheeconomythatisconcernedwithprovidingbasicgovernmentservicesandiscontrolledbygovernmentorganisations.
Theorganisationsthatmakeupthepublicsectorvaryfromcountrytocountry,butgenerallyinclude:
police military publictransport primaryeducation healthcareforthepoor
Private sector organisations
Theprivatesectorconsistsoforganisationsthatarerunbyprivateindividualsandgroupsratherthanthegovernment.
Theprivatesectorwillthereforenormallyinclude:
Withinthesewillbebothprofitseekingandnotforprofitorganisations.
businesses charitiesand clubs.
The business organisation
6 KAPLAN PUBLISHING
Illustration 3 Public sector organisations
Illustration 4 Private sector
freeaccastudymaterial.blogspot.com
freeaccastudymaterial.blogspot.com
freea
ccas
tudym
ateria
l.blog
spot.
com
-
Manyschoolsrunfundraisingeventssuchasftes,wheretheintentionistomakeaprofit.Thismakesthemprofitseeking.
Isthisstatement:
A TrueB False
Nongovernmental organisations (NGOs)
Anongovernmentalorganisationisonewhichdoesnothaveprofitasitsprimarygoalandisnotdirectlylinkedtothenationalgovernment.
NGOsoftenpromotepolitical,socialorenvironmentalchangewithinthecountriestheyoperate.
NGOsinclude:
theRedCross DoctorsWithoutBorders Greenpeace AmnestyInternational.
2.3 Cooperatives
Cooperativesareorganisationsthatareownedanddemocraticallycontrolledbytheirmembersthepeoplewhobuytheirgoodsorservices.
Theyareorganisedsolelytomeettheneedsofthememberowners,whousuallyshareanyprofits.
IntheUK,thelargestexampleofacooperativeistheCooperativeGroup,whichhasover5.5millionmembersandoperatesindiversemarkets,suchasbanking,travelandgroceries.
chapter 1
KAPLAN PUBLISHING 7
Illustration 5 NGOs
Illustration 6 Cooperatives
Test your understanding 3
freeaccastudymaterial.blogspot.com
freeaccastudymaterial.blogspot.com
freea
ccas
tudym
ateria
l.blog
spot.
com
-
Whichofthefollowingareusuallyseenastheprimaryobjectivesofcompanies?
(i) Tomaximisethewealthofshareholders(ii) Toprotecttheenvironment(iii) TomakeaprofitA (i),(ii)and(iii)B (i)and(ii)onlyC (ii)and(iii)onlyD (i)and(iii)only
Whichofthefollowingorganisationsismostlikelytobeclassifiedaspartofthepublicsector?
A AcharityB AsocialclubC AschoolD Apubliclimitedcompany
3Sectors in which organisations operate
Afurtherdifferencebetweenorganisationsisthemarketinwhichtheyoperate.Therearealargenumberofdifferentsectors,whichinclude:
Thisisnotanexhaustivelist,butitshouldgiveyousomeideaofthewiderangeofactivitiesthatsupportorganisations.
Agriculture production,processingandpackagingoffoodstuffs. Mining extractionandprocessingofminerals. Financethisincludesbanksandothercompaniesthatprofitthrough
investmentsandthelendingofmoneytoothers. Retailerssaleofgoodsproducedbymanufacturerstoconsumers. Serviceproductionofintangiblegoodsandservices. Transportationmovementofgoodsbetweenlocations.
The business organisation
8 KAPLAN PUBLISHING
Test your understanding 4
Test your understanding 5
freeaccastudymaterial.blogspot.com
freeaccastudymaterial.blogspot.com
freea
ccas
tudym
ateria
l.blog
spot.
com
-
4Summary
Insummary,thereareanumberofkeydifferencesbetweenthevarioustypesof organisations.Theseinclude(butarenotlimitedto):
Inspiteofthesedifferences,thedifferenttypesoforganisationsoftenfacesimilarissuestoeachother.Forinstance,mostwillhaveemployeesthatneedtobemotivated.Manyorganisationswillneedtodesignstrategiesforthefuture,orwillneedtoconsiderwhatsystemsshouldbeputinplacetoensuretheaccuraterecordingoftransactions.
Itisthesecommonissuesthatwearegoingtoexamineinmoredetailinthecomingchapters.
Ownershipprivatesectororganisationsarelikelytobeownedbyindividualownersorshareholders(dependingonthetypeoforganisation).Publicsectororganisationswillbecontrolledbythegovernment,whilecooperativeswillbeownedbytheirmembers.
Objectivesasmentioned,eachorganisationhasverydifferentgoals.Thiscanrangefromtheprovisionofsocialservices(forcharitiesandpublicsectororganisations)tothemaximisationofownerwealth(forprofitseekingorganisations).
Activitiestheactivitiesofanorganisationwillbedesignedtosupportitsobjectives.Thismeansthatorganisationalactivitiesareasvariedastheorganisationsthemselves!
Sources of fundingpublicsectororganisationswilltendtoraisemoneyfromthecentralgovernment.Privatesectororganisations,suchascompaniesandcooperatives,willmostlikelyhavetoraisefundsfromtheirowners.Charitiesareusuallyfundedbydonations.
Sizeorganisationsvaryinsizefromlarge,multinationalcompaniestosoletradersconsistingofonlyoneperson.
Liabilitytheownersofsoletradersorpartnershipsareliableforanylossestheirbusinessesmake.Ownersofcompaniesenjoylimited liability.
chapter 1
KAPLAN PUBLISHING 9
freeaccastudymaterial.blogspot.com
freeaccastudymaterial.blogspot.com
freea
ccas
tudym
ateria
l.blog
spot.
com
-
Chapter summary
The business organisation
10 KAPLAN PUBLISHING
freeaccastudymaterial.blogspot.com
freeaccastudymaterial.blogspot.com
freea
ccas
tudym
ateria
l.blog
spot.
com
-
5Practice questions
Whichofthefollowingstatementsregardingtypesofbusinessiscorrect?
A PartnershipsareownedandrunbyoneormorepeopleB PrivatelimitedcompaniescansellsharestothepublicC ShareholdersincompaniestypicallyhavelimitedliabilityD Theownersofsoletraderstypicallyhavelimitedliability
GreenWatchisanindependentenvironmentalcharitysetuptolobbythegovernmentforimprovedenvironmentalregulationonbusiness.WhattypeoforganisationisGreenWatchmostlikelytobeclassedas?
A PublicsectorB CooperativeC NongovernmentalD Commercial
WhichofthefollowingisNOTabenefitthatorganisationshaveoverindividuals?
A TheyallowthesharingskillsandknowledgeB Theyenablepeopletoperformtaskstheywouldbeunableto
achieveontheirownC TheyenablesynergytobeachievedD Theyspeedupthetimetakentomakedecisions
chapter 1
KAPLAN PUBLISHING 11
Test your understanding 6
Test your understanding 8
Test your understanding 7
freeaccastudymaterial.blogspot.com
freeaccastudymaterial.blogspot.com
freea
ccas
tudym
ateria
l.blog
spot.
com
-
Whichofthefollowingstatementsregardingorganisationsarecorrect?
(i) Companiestendtoraisemoneyfromcentralgovernment.(ii) Mostsoletradersandpartnershipshavetheaimofmaximising
ownerwealth.(iii) Publicsectororganisationsarecontrolledbythecentral
government.(iv) Charitiesformpartofthepublicsector.A (i)and(ii)onlyB (iii)and(iv)onlyC (ii)and(iii)onlyD (ii)and(iv)only
Herearefourstatementsrelatingtothefeaturesofdifferenttypesoforganisation:
Required:
(0.5 marks each, total = 3 marks)
A Thistypeoforganisationcansellitssharestothepublic.B Thistypeoforganisationisownedandrunbytwoormorepeople
whoarelegallyindistinguishablefromtheorganisationitself.C Thistypeoforganisationiscontrolledbythegovernment.D Thistypeoforganisationisownedanddemocraticallycontrolledby
itsmembers.
(a) Identifythedescriptionabovewhichisassociatedwitheachofthefollowingtypesoforganisation,byselectingA,B,C,Dornone.(i) Privatelimitedcompany(ii) Partnership(iii) Publiclimitedcompany(iv) Cooperative(v) Publicsectororganisation(vi) Soletrader
The business organisation
12 KAPLAN PUBLISHING
Test your understanding 9
Test your understanding 10
freeaccastudymaterial.blogspot.com
freeaccastudymaterial.blogspot.com
freea
ccas
tudym
ateria
l.blog
spot.
com
-
Required:
WritedownwhichtwooftheabovearemostlikelytobeclassifiedaspartoftheprivatesectorbyselectingTWOofthelettersfrom(A,B,C,D).
(0.5 marks each, total = 1 mark)
(4 marks)
(b) Belowarefourtypesoforganisation:A CharitiesB SchoolsC LimitedcompaniesD Policeforces
chapter 1
KAPLAN PUBLISHING 13
freeaccastudymaterial.blogspot.com
freeaccastudymaterial.blogspot.com
freea
ccas
tudym
ateria
l.blog
spot.
com
-
Test your understanding answers
The correct answer is C
Asoletraderwouldnormallybesomeoneworkingontheirown,sotherewouldbenocollectivegoals.
The correct answer is A
Statement(iv)wouldnotbetrue,asorganisations(whichthiscommitteecouldbeclassifiedas)allowforspecialisation.Notallofthememberswouldhavetobeskilledatperformingallofthenecessarytasks.
The correct answer is B False
Schoolsrunfundraisingactivitiestohelppayforextrabooks,e.g.toimprovethequalityofeducationgiventopupils.Theprimaryobjectiveiseducational,notprofit.Themoneymadeatthefteisthusameansnotanend.
The correct answer is D
Whileprotectingtheenvironmentistobeencouragedandisreinforcedwithinstatutetosomedegree,itisnotaprimaryobjectiveofthecompany.Companiesexistprimarilytomaximisethereturntotheirowners.
The business organisation
14 KAPLAN PUBLISHING
Test your understanding 2
Test your understanding 3
Test your understanding 4
Test your understanding 1
freeaccastudymaterial.blogspot.com
freeaccastudymaterial.blogspot.com
freea
ccas
tudym
ateria
l.blog
spot.
com
-
The correct answer is C
Publicsectororganisationswillbecontrolledbythecentralgovernment.Thisisunlikelytobeacharity,acompanyorasocialclubwhicharetypicalexamplesoftheprivatesector.
Notethataprivatelyownedandoperatedschoolcouldbepartoftheprivatesector,butschoolsarestillthemostlikelyfromthelisttobepublic.
The correct answer is C
Soletradersdonotenjoylimitedliabilityas,legally,theyarenotseparatefromtheirowners.Onlypubliclimitedcompaniescanissuesharestothepublicandpartnershipscannotbeownedbyoneperson!
The correct answer is C
Asacharity,GreenWatchisnotcommercialasitdoesnothaveaprofitmakingobjective.Itisnotobviouslycontrolledbythecentralgovernment,meaningthatitisnotinthepublicsector.Italsoclearlydoesnotmeetthedefinitionofacooperative,whichisanorganisationthatiscontrolledbythepeoplewhobuyitsgoods.
The correct answer is D
Forminganorganisationmeansthatpeopleworkcollectively.Typicallythiswillmeanthatdecisionmakingwillbecomeslower,asmorepeople(withpotentiallydifferingideas)areinvolvedinthedecisionmakingprocess.
chapter 1
KAPLAN PUBLISHING 15
Test your understanding 8
Test your understanding 7
Test your understanding 5
Test your understanding 6
freeaccastudymaterial.blogspot.com
freeaccastudymaterial.blogspot.com
freea
ccas
tudym
ateria
l.blog
spot.
com
-
The correct answer is C
Companiesusuallyraisemoneyfromsourcesotherthanthecentralgovernmentandcharitiesarepartoftheprivatesector,ratherthanthepublicsector.
(a) Thecorrectanswersare:(i) None
(ii) B
(iii) A
(iv) D
(v) C
(vi) None
(b) Theprivatesectorreferstoorganisationsthatarerunbyprivateindividualsandgroupsratherthanthegovernment.Therefore,thecorrectanswersare AandC.
The business organisation
16 KAPLAN PUBLISHING
Test your understanding 10
Test your understanding 9
freeaccastudymaterial.blogspot.com
freeaccastudymaterial.blogspot.com
freea
ccas
tudym
ateria
l.blog
spot.
com
-
BusinessorganisationandstructureChapter learning objectives
Uponcompletionofthischapteryouwillbeableto:
describethedifferentwaysinwhichformalorganisationsmaybestructured:entrepreneurial,matrix,functional,divisional(bygeographicalarea,byproductorbycustomertype),boundaryless(virtual,hollowormodular)
explainbasicorganisationalstructureconcepts:separationofownershipandcontrol,separationofdirectionandmanagement,spanofcontrolandscalarchain,tallandflatorganisations,outsourcingandoffshoring,sharedservicesapproach
explainthecharacteristicsofthestrategic,tacticalandoperationallevelsintheorganisationinthecontextoftheAnthonyhierarchy
explaincentralisationanddecentralisationandlisttheiradvantagesanddisadvantages
describetherolesandfunctionsofthemaindepartmentsinabusinessorganisation:researchanddevelopment,purchasing,production,directserviceprovision,marketing,administrationandfinance
explaintheroleofmarketinginanorganisation: thedefinitionofmarketing themarketingmix therelationshipofthemarketingplantothestrategicplan.
17
chapter
2
freeaccastudymaterial.blogspot.com
freeaccastudymaterial.blogspot.com
freea
ccas
tudym
ateria
l.blog
spot.
com
-
1Organisational structure
Organisationalstructureisconcernedwiththewayinwhichworkisdividedupandallocated.
Itoutlinestherolesandresponsibilitiesofindividualsandgroupswithintheorganisation.
Thereareseveralpossiblewaysinwhichanorganisationcanbestructured.Forthisexamyouneedtobefamiliarwitheachofthem,aswellasbeingabletoweighuptheiradvantagesanddisadvantages.
Thestructureofmostorganisationswillchangeovertimeasthecompanygrows.Atypicalpatternofstructuralchangewouldbeasfollows:
1.1 Entrepreneurial
Thisstructureisbuiltaroundtheownermanagerandistypical of small businesses in the early stages of their development.
Itisalsooftenfoundwheretheentrepreneurhasspecialistknowledgeoftheproductorservicethattheorganisationoffers.
Advantages Disadvantages
Fastdecisionmaking. Moreresponsivetomarket. Goalcongruence. Goodcontrol. Closebondtoworkforce.
Lackofcareerstructure. Dependentonthecapabilities
ofthemanager/owner. Cannotcopewith
diversification/growth.
Business organisation and structure
18 KAPLAN PUBLISHING18 KAPLAN PUBLISHING
freeaccastudymaterial.blogspot.com
freeaccastudymaterial.blogspot.com
freea
ccas
tudym
ateria
l.blog
spot.
com
-
1.2 Functional/departmental structure
Functionalorganisationsgrouptogetheremployeesthatundertakesimilartasksintodepartments.
Thistypeofstructureisoftenfoundinorganisationsthathaveoutgrowntheentrepreneurialstructure.
Itismostappropriateforsmallorganisationswhichhaverelativelyfewproductsorlocationsandwhichexistinarelativelystableenvironment.
Advantages Disadvantages
Economiesofscale. Standardisation. Specialistsmorecomfortable. Careeropportunities.
Empirebuilding. Slow. Conflictsbetweenfunctions. Cannotcopewith
diversification.
1.3 Divisional/product structure
Thisstructureoccurswhereanorganisationissplitintoseveraldivisionseachoneautonomouslyoverseeingaproduct(i.e.separatedivisionsforcarsandmotorbikes),ageographicsection(i.e.separatedivisionsforUSandEurope)orevenbycustomer(i.e.separatedivisionsthatlookaftercorporateclientsandprivateclients).
Eachdivisionislikelytohaveafunctionalstructure,withallthedepartmentsitneedsinordertooperateinitsparticularmarketsegment.
Divisionsarelikelytoberunasprofitcentres,withtheirownrevenues,expenditureandcapitalinvestments.Eachdivisionisaseparatelyidentifiablepartoftheoverallorganisation,whichisoftenreferredtoasastrategic business unit(SBU).
chapter 2
KAPLAN PUBLISHING 19
Advantages & disadvantages of functional structures
Advantages & disadvantages of entrepreneurial structures
freeaccastudymaterial.blogspot.com
freeaccastudymaterial.blogspot.com
freea
ccas
tudym
ateria
l.blog
spot.
com
-
ALtdisacompanythatmanufacturestwodifferentproductstoastersandtelevisions.Theproductsrequiredifferentcomponentsandrequiredifferentadvertisingandsales.
ALtdthereforeoperatesadivisionalstructure,withatoastersdivisionandatelevisiondivision.Eachdivisionhasitsownsales,purchasing,HRandadvertisingdivisions.
Thefinancedepartment,however,isstilloperatedcentrally.
Advantages Disadvantages
Enablesgrowth. Clearresponsibilityfor
products/divisions. Trainingofgeneralmanagers. Easilyadaptedforfurther
diversification. Topmanagementfreeto
concentrateonstrategicmatters.
Potentiallossofcontrol. Lackofgoalcongruence. Duplication. Specialistsmayfeelisolated. Allocationofcentralcostscan
beaproblem.
Business organisation and structure
20 KAPLAN PUBLISHING
Illustration 1 Divisional structure
Advantages & disadvantages of divisional structures
freeaccastudymaterial.blogspot.com
freeaccastudymaterial.blogspot.com
freea
ccas
tudym
ateria
l.blog
spot.
com
-
1.4 Geographically structured
Thisissimilartothedivisionalstructure,butinvolveseachdivisioncoveringaspecificlocation.
Forexample,aglobalcompanymaybesplitintodifferentdivisionsbasedongeographicareas.TheremaybeadivisionthatlooksaftertheorganisationsAsianoperations,onethatcoversEuropeandanotherdivisionforAmerica.
Advantages Disadvantages
Enablesgeographicgrowth. Allowslocaldecisionmaking. Clearresponsibilityforareas. Trainingofgeneralmanagers. Topmanagementfreeto
concentrateonstrategicmatters.
Asfordivisionalstructureabove.
1.5 Matrix structure
Matrixstructuresareacombinationofthefunctionalanddivisionalstructures.
chapter 2
KAPLAN PUBLISHING 21
Product v geographic divisional structure
freeaccastudymaterial.blogspot.com
freeaccastudymaterial.blogspot.com
freea
ccas
tudym
ateria
l.blog
spot.
com
-
Thematrixrequiresdualreportingtotwodifferentmanagers.Forexample,lookingatthediagramabove,anemployeemanufacturingproductAwouldhavetoreporttothemanageroftheproductiondepartmentandthemanagerinchargeofproductA.
Theaimofthematrixstructureistocombinethebenefitsofboththedivisionalandfunctionalstructures.
Advantages Disadvantages
Advantagesofbothfunctionalanddivisionalstructures.
Flexibility. Customerorientation. Encourageteamworkandthe
exchangeofopinionsandexpertise
Dualcommandandconflict. Dilutionoffunctionalauthority. Timeconsumingmeetings. Higheradmincosts.
Considerthefollowingstatements:
(i) Underthefunctionalstructure,eachdepartmentoperatesasastrategicbusinessunit.
(ii) Thematrixstructurewillenablerapiddecisionmakingwithintheorganisation.
Business organisation and structure
22 KAPLAN PUBLISHING
Advantages and disadvantages of matrix structures
Test your understanding 1
freeaccastudymaterial.blogspot.com
freeaccastudymaterial.blogspot.com
freea
ccas
tudym
ateria
l.blog
spot.
com
-
Whichofthestatementsis/arecorrect?
A (i)onlyB (ii)onlyC BothD Neither
MplcisalargecompanythatoperatesincountryG.Itmanufacturesseveraldifferentproducts,eachofwhichishighlycomplexandextremelyspecialised.Itssaleshavegrownsignificantlyoverthelastseveralyears,witheachofitsproductsproducingaroughlyequalamountofM'soverallrevenue.
WhichorganisationalstructureismostlikelytobeappropriateforM?
A GeographicB DivisionalC FunctionalD Entrepreneurial
1.6 Boundaryless structure
Thisisacontemporarymodeloforganisationaldesign,whichadoptsamoreflexibleapproachtostructure.
Boundarylessorganisationsare,essentially,anunstructureddesignthatisnotconstrainedbyhavingachainofcommandorformaldepartments,withthefocusinsteadbeingonflexibility.
Thereareanumberofdifferenttypesofboundarylessorganisationsthatyouneedtobeawareofhollow,virtualandmodular.
Hollow organisations
Holloworganisationssplittheirfunctionsintocore(i.e.strategicallyimportant)andnoncoreactivities.Anythingwhichisclassifiedasnoncoreisoutsourcedtootherorganisations.
Outsourcingreferstothecontractingoutofaspectsoftheorganisationsworktospecialistproviders.Wewilllookatoutsourcinginmoredetailinchapter8.
chapter 2
KAPLAN PUBLISHING 23
Test your understanding 2
freeaccastudymaterial.blogspot.com
freeaccastudymaterial.blogspot.com
freea
ccas
tudym
ateria
l.blog
spot.
com
-
Forexample,anaccountancytrainingorganisationmightoutsourcelessimportantfunctions(suchaspayroll)toathirdpartyorganisationspecialisinginpayrollprocessing.Corefunctions,suchastrainingstudents,wouldbekeptinhouseandundertakenbyemployeesofthecompany.
Virtual organisations
Thisoccurswhereanorganisationoutsourcesmanyofitsfunctionstootherorganisationsandsimplyexistsasanetworkofcontracts,withveryfew,ifany,functionsbeingkeptinhouse.
Forexample,manyinternetretailerscouldbeseenasvirtualcompanies.Theirproductsareboughtinfrommanufacturers,salesaredeliveredtocustomersbythirdpartycouriersandeventheirwebsitesmaybemaintainedandhostedbyexternalITspecialists.
Thereis typicallyonlyasmallcentralstaffwithinavirtualbusiness, whocoordinateallofthesedifferentthirdpartiesandensurethattheircustomersneedsarethereforemet.
Modular organisations
Theseareexamplesofboundarylessmanufacturingcompanies.Ratherthansimplymakingtheirownproduct,theybreakthemanufacturingprocessdownintomodulesorcomponents.Eachcomponentcanthenbemadebythecompanyoroutsourcedtoanexternalsupplier.
Forexample,amobilephonemanufacturermaypayexternalmanufacturerstomakesomekeycomponentsforitshandsetssuchasprocessorsandscreens.Thesearethenassembledbythemanufactureralongwithothercomponentsithasmanufactureditself.
Inextremecases,themanufacturingofallcomponentscanbeoutsourced,meaningthatthecompanysimplyassemblesthemtocreateitsfinalproduct.
2Other basic organisational concepts
Aswellasthedifferenttypesoforganisationstructure,youneedtobeawareoffourotherkeystructuralconcepts.
2.1 Separation of direction and management
Ownershipandmanagementoflargerorganisationsareoftenseparated.Thisisespeciallycommoninlargercompanies,wheretheowners(shareholders)electdirectorstorunthecompanyontheirbehalf.
Inordertoensurethatdirectorsarerunningthebusinessinthebestinterestsoftheowners,manysafeguardsandcontrolsareputinplace.Thesewillbedealtwithinmoredetailinchapter11.
Business organisation and structure
24 KAPLAN PUBLISHING
freeaccastudymaterial.blogspot.com
freeaccastudymaterial.blogspot.com
freea
ccas
tudym
ateria
l.blog
spot.
com
-
Notethatdirectionandmanagementmayalsobeseparatedinlargerorganisations.Directorsmaylackthetimetodealwitheveryissuethatarisesinthedaytodayrunningoftheorganisation.Theywillthereforeappointmanagerstoundertakethesetasksforthem.
Thisleavesthedirectorsfreetofocusoncreatingandmanagingthehighlevelstrategiesfortheorganisation,whilethemanagersfocusonthedaytodayoperationalissues.Forexample,thedirectorsmaydecidethattheorganisationisgoingtolaunchanewproduct,orwillopenachainofnewstores.Themanagerswillbeinchargeofdecisionssuchashiringandfiringjuniorstaffanddealingwithcustomercomplaints.
Inasmallcompanythereisusuallyadivorceofownershipandcontrol.
Isthisstatement:
A TrueB False
2.2 Scalar chain
Thisisthelineofauthoritywhichcanbetracedupordownthechainofcommand,fromthemostseniormemberofstafftothemostjunior.Itthereforerelatestothenumberoflevelsofmanagementwithinanorganisation.
2.3 Span of control
Amanagersspanofcontrolisthenumberofpeopleforwhomheorsheisdirectlyresponsible.
Thefactorsthatinfluencethespanofcontrolinclude:
the nature of the workthemorerepetitiveorsimplethework,thewiderthespanofcontrolcanbe.
the type of personnelthemoreskilledandmotivatedthemanagersandotherstaffmembersare,thewiderthespanofcontrolcanbe.
the location of personnelifpersonnelarealllocatedlocally,ittakesrelativelylittletimeandefforttosupervisethem.Thisallowsthespanofcontroltobecomewider.
chapter 2
KAPLAN PUBLISHING 25
Test your understanding 3
freeaccastudymaterial.blogspot.com
freeaccastudymaterial.blogspot.com
freea
ccas
tudym
ateria
l.blog
spot.
com
-
Considerthefollowingstatements:
Whichofthesestatementsis/arecorrect?
(i) Thescalarchainrelatestothenumberofpeopleoverwhomamanagerhasauthority.
(ii) Abusinesswithhighlyskilled,motivatedmembersofstaffwilltendtohaveawiderspanofcontrolthanabusinesswithdemotivatedemployees.
A (i)onlyB (ii)onlyC BothD Neither
2.4 Tall and flat organisations
Atallorganisationhasmanylevelsofmanagement(alongscalarchain)andanarrowspanofcontrol.
Aflatorganisationhasfewlevelsofmanagement(ashortscalarchain)andawidespanofcontrol.
Business organisation and structure
26 KAPLAN PUBLISHING
Test you understanding 4
freeaccastudymaterial.blogspot.com
freeaccastudymaterial.blogspot.com
freea
ccas
tudym
ateria
l.blog
spot.
com
-
Itisworthnotingthattallorganisationstendtobemorebureaucraticandtakelongertomakedecisions,duetothelargenumberoflevelsofmanagementthatneedtobeinvolved.
Flatorganisationstendtohaveweakercontrolandfewerchancesforemployeestoprogressorbepromotedwithintheorganisation.
Ifamanagerialstructurehasmanylevelsofmanagement,isitlikelytohaveanarroworwidespanofcontrolateachlevelofmanagement?
2.5 Offshoring
Offshoringreferstotheprocessofoutsourcingorrelocatingsomeofanorganisationsfunctionsfromonecountrytoanother,usuallyinanefforttoreducecosts.
Forexample,manycompaniesintheUKhavemovedtheircustomercallcentrestoothercountries,suchasIndiaandthePhilippines.ThesecountrieshavesignificantlylowerwageratesthantheUK,makingthe callcentrescheaperfortheoffshoringcompanytooperate.
chapter 2
KAPLAN PUBLISHING 27
Test your understanding 5
freeaccastudymaterial.blogspot.com
freeaccastudymaterial.blogspot.com
freea
ccas
tudym
ateria
l.blog
spot.
com
-
Whilethecostsavingscanbesignificant,offshoringcancreateadditionalproblemsfortheorganisation,includingproblemswithculturaldifferencesandlanguagebarriers.
2.6 Shared Services Approach
Thisapproachinvolvesrestructuringtheprovisionofcertainserviceswithintheorganisationsothatinsteadoftheservicebeingfoundinseveraldifferentpartsoftheorganisationitiscentralisedintoonespecificpartoftheorganisation.
Forexample,amediumsizedbusinessmayhaveacoupleofstaffineachdepartment(i.e.sales,production)thatdealwithITforthatpartoftheorganisation.
AsharedservicesapproachwouldbetoformadistinctITdepartmentthatalltheITstaffweretransferredinto.ThisITdepartmentwouldthenofferITservicestotheentireorganisation.
Thisapproachhasseveraladvantages,including:
Notethatasharedservicesapproachismorethansimplycentralisingthefunctionintooneplace.Sharedservicesofteninvolvesrunningtheservice,forexampleIT,likeaseparatebusinesswithintheorganisationandchargingtherestoftheorganisationfortheuseoftheservice.
improvedqualityofserviceprovision improvedconsistencyofservice costsavingsthroughgreaterefficiencyandreducedduplicationofroles
3Centralisation and decentralisation
Anothermethodofanalysingstructuresisbyreferencetothelevelatwhichdecisionsaremade.
Thefactorsthatwillaffecttheamountofdecentralisationare:
Inacentralisedstructure,theupperlevelsofanorganisation'shierarchyretaintheauthoritytomakedecisions.
Inadecentralisedstructuretheauthoritytotakedecisionsispasseddowntounitsandpeopleatlowerlevels.
managementstyle abilityofmanagement/employees geographicspread sizeoftheorganisation/scaleofactivities.
Business organisation and structure
28 KAPLAN PUBLISHING
freeaccastudymaterial.blogspot.com
freeaccastudymaterial.blogspot.com
freea
ccas
tudym
ateria
l.blog
spot.
com
-
Theadvantagesanddisadvantagesofdecentralisationare:
Advantages Disadvantages
Seniormanagementfreetoconcentrateonstrategy.
Betterlocaldecisionsduetolocalexpertise.
Bettermotivationduetoincreasedtrainingandcareerpath.
Quickerresponses/flexibility,duetosmallerchainofcommand.
Lossofcontrolbyseniormanagement.
Dysfunctionaldecisionsduetoalackofgoalcongruence.
Poordecisionsmadebyinexperiencedmanagers.
Trainingcosts. Duplicationofroleswithinthe
organisation. Extracostsinobtaining
information.
WhichofthefollowingisNOTalikelyadditionalcosttoanorganisationcausedbydecentralisation?
A Additionaltrainingcostsareoftenrequiredinadecentralisedorganisation
B Duplicationofroles,leadingtohigherpersonnelcostsC Extracostsofgatheringinformationfromvarioussourcesand
locationsD Lostsalesduetolackoflocalknowledgeandexpertise
Howdoestheabilityoftheemployeesaffectthelevelofdecentralisation?
4Levels of strategy
Withinanorganisation,eachlevelofmanagementwillhavedifferentrolesandresponsibilities.Thisisespeciallythecasewhenitcomestodevelopingastrategy,orplanforthefuture,fortheorganisation.
TheAnthonyTriangleisamodelthatcanbeusedtoillustratethetypesofstrategicplanningthatwillbemadeateachleveloftheorganisationshierarchy.
chapter 2
KAPLAN PUBLISHING 29
Test your understanding 7
Test your understanding 6
freeaccastudymaterial.blogspot.com
freeaccastudymaterial.blogspot.com
freea
ccas
tudym
ateria
l.blog
spot.
com
-
Different levels of planning
Strategic planningisundertakenbyseniormanagers.Itinvolvesmakinglongtermdecisionsfortheentireorganisation.
Tactical planningisundertakenbymiddlemanagement.Ittendstolookatplansforspecificdivisionsordepartmentsandspecifieshowtouseresources.
Operational planningisundertakenbyjuniormanagersandsupervisors.Itisshortterm,detailedandpractical.
Theaboveplanninglevelscouldbeappliedtoasupermarketasfollows:
Notethatinordertobesuccessful,thelevelsofstrategymustsupporteachother.Ifastrategicdecisionismadetoimprovecustomerservice,thismustbesupportedbyappropriatetacticaldecisionsbeingmadeineachstore,suchasallocatingmoreofthestoresbudgettohiringadditionalcustomerservicesemployees.Eventhen,thiswillonlybeasuccessiftheoperationalstrategiesselectthemostappropriatecandidatesforthenewrole.
Strategicplanningwouldinvolvemakingplansforthewholebusiness.Thiscouldinvolvewhichlocationstoopenorclosestoresandwhethertoraisecashfrominvestors.
Tacticalplanningwouldbethecreationofstrategiesforaparticularsupermarket.Forexampledecisionsaboutspecialoffers,localadvertisingandwhichproductsshouldbestocked.
Operationalplanninginvolvepractical,daytodaystrategies,suchasorganisingshiftpatterns,decidingwhentostocktheshelvesandadvertisingforandselectingnewemployees.
Business organisation and structure
30 KAPLAN PUBLISHING
Illustration 2 Strategic, tactical and operational planning
freeaccastudymaterial.blogspot.com
freeaccastudymaterial.blogspot.com
freea
ccas
tudym
ateria
l.blog
spot.
com
-
Hisaretailstoresellingelectronics.Itiscurrentlydecidinghowmanyunitsofitsproductsitwillneedtoordernextmonthinordertomeetcustomerdemand.
Whichlevelofstrategicplanningdoesthisrelateto?
A StrategicB FunctionalC TacticalD Operational
5The roles and functions of the main departments in a business organisation
Inspiteoftheirstructuraldifferences,organisationsusuallyhavemanysimilarities.Oneoftheseisthatmanyorganisationsoperatesimilarbasicdepartmentstoeachother,withthesamerolesandconcerns.
Someofthemostcommondepartmentsarelistedbelow.
Department Role Key concernsResearch and development
Improvingexistingproducts
Developingnewproducts
Purchasing Acquiringthegoodsandservicesnecessaryforthebusiness
Priceandpaymentterms Quality Stocklevels/delivery
schedules
Production Convertingrawmaterialsintofinishedgoods
Quality(ofmaterialsandfinishedgoods)
Costs Wastage/efficiency Stocklevels/production
schedules
chapter 2
KAPLAN PUBLISHING 31
Test your understanding 8
freeaccastudymaterial.blogspot.com
freeaccastudymaterial.blogspot.com
freea
ccas
tudym
ateria
l.blog
spot.
com
-
Direct service provision
Providingservicestoclients(e.g.accountancyfirm)
Quality Timesheets/scheduling
Marketing Identifyingcustomerneeds
Marketresearch Productdesign Pricing Promotion Distribution
Customerneeds Quality Promotionalstrategy Distributionchannelstrategy Pricingstrategy
Administration Administrativesupport
Processingtransactions
Efficiency Informationprocessing
Finance Bookkeeping Financial
reporting Financial
controls Budgeting Theraisingof
capital
Accuracyandcompletenessofrecordkeeping
Monthlymanagementreporting Annualfinancialreporting
Whichofthefollowingisnotpartoftheresponsibilityofaresearchanddevelopmentdepartment?
A ImprovingexistingproductsB DevelopingnewproductsC ResearchingnewtechnologiesforapplicationtofutureproductsD Researchingmarketdemandforproducts
Business organisation and structure
32 KAPLAN PUBLISHING
Test your understanding 9
freeaccastudymaterial.blogspot.com
freeaccastudymaterial.blogspot.com
freea
ccas
tudym
ateria
l.blog
spot.
com
rlearLine
-
6Marketing
6.1 What is meant by marketing?
MarketingisdefinedbytheInstituteofMarketingasthemanagementprocessthatidentifies,anticipatesandsuppliescustomerneedsefficientlyandprofitably.
Thekeyemphasisisthusoncustomerneeds:
Identifyingandanticipatingneedsmarketresearch. Supplyingcustomerneedsproductdesignanddevelopment. Efficiencydistribution. Profitabilitypricingdecisionsandpromotion(informingcustomers
aboutyourproductsotheybuyit).
Marketinginvolvesmuchmorethanjustadvertising!
Marketingismainlyconcernedwithwhichofthefollowing?
A IncreasingsalesrevenueB StreamliningproductionC AnticipatingandmeetingcustomerneedsD Maximisingprofit
chapter 2
KAPLAN PUBLISHING 33
Test your understanding 10
Marketing versus product orientation
freeaccastudymaterial.blogspot.com
freeaccastudymaterial.blogspot.com
freea
ccas
tudym
ateria
l.blog
spot.
com
-
6.2 The marketing mix
Themarketingmixisthesetofcontrollablevariablesthatafirmblendstoproducedesiredresultsfromitschosentargetmarket.
Therearefourbasicelements(the4Ps),whichmustbemanagedtosatisfycustomersneedsataprofit.
Product Thisincludesproductfeatures,durability,design,brandname,packaging,range,aftersalesservice,warrantiesandguarantees.
Place Choiceofdistributionchannels,transportation,outletmanagement,stocksandwarehouses.
Promotion (distribution)
Advertising,personalselling,publicity,salespromotiontechniques.
Price Pricelevels,discounts,allowances,paymentterms,creditpolicy.
6.3 Product issues
Therearetwomainproductissuestoconsider:
ProductdefinitionThemainissueregardingproductistodefineexactlywhattheproductshouldbe.Thiscanbedoneonthreelevels:
Business organisation and structure
34 KAPLAN PUBLISHING
The marketing mix additional detail
freeaccastudymaterial.blogspot.com
freeaccastudymaterial.blogspot.com
freea
ccas
tudym
ateria
l.blog
spot.
com
-
ProductpositioningWithallofthesefactorsthequestionofproductpositioningiscriticalhowdoesourproductcomparewiththeofferingsofcompetitors?Isourproductbetter?Ifso,inwhatway?
Anewcarcouldbespecifiedasfollows:
Core/genericproductpersonaltransportation. Actualproductrangeofenginesizes,differentbodyshapes
offered,etc. Augmentedproductmanufacturerswarrantyordealers
discountedservicecontract.
6.4 Pricing issues
Therearefourkeyconsiderations(the4Cs)whendecidingthepriceofaproduct:
Theseissuescanbeblendedtogivearangeofpricingtactics,includingthefollowing:
Costthepricemustbehighenoughtomakeaprofit. Customerswhataretheywillingtopay? Competitionisourpricehigherthancompetitors? Corporate objectivese.g.thepricecouldbesetlowtogainmarket
share.
Costpluspricingthecostperunitiscalculatedandthenamarkupadded.
Penetrationpricingalowpriceissettogainmarketshare. Perceivedqualitypricingahighpriceissettoreflect/createanimage
ofhighquality. Pricediscriminationdifferentpricesaresetforthesameproductin
differentmarkets,e.g.peak/offpeakrailfares. Goingratepricingpricesaresettomatchcompetitors. Priceskimminghighpricesaresetwhenanewproductislaunched.
Laterthepriceisdroppedtoincreasedemandoncethecustomerswhoarewillingtopaymorehavebeenskimmedoff.
chapter 2
KAPLAN PUBLISHING 35
Illustration 3 Marketing
Product further considerations
freeaccastudymaterial.blogspot.com
freeaccastudymaterial.blogspot.com
freea
ccas
tudym
ateria
l.blog
spot.
com
-
6.5 Promotional issues
Promotionisessentiallyaboutmarketcommunication.TheprimaryaimistoencouragecustomerstobuytheproductsbymovingthemalongtheAIDAsequence:
Towardsthisfirmswilluseacombinationofdifferentpromotionaltechniquesaspartoftheirpromotionalmix,including:
6.6 Place (distribution) issues
Thekeydecisionunderplaceisbetween:
Lossleadersoneproductmaybesoldatalosswiththeexpectationthatcustomerswillthengoonandbuyothermoreprofitableproducts.
Captiveproductpricingthisisusedwherecustomersmustbuytwoproducts.Thefirstischeaptoattractcustomersbutthesecondisexpensive,oncetheyarecaptive.
Advertisinge.g.placingadvertsonTV,innewspapers,onbillboards,etc.
Salespromotiontechniquese.g.Buyonegetonefree. Personalsellinge.g.doortodoorsalesmen. Personalrelations(PR)e.g.sponsoringsportsevents.
Selling directherethemanufacturersellsdirectlytotheultimateconsumerwithoutusinganymiddlemen,e.g.accountancyfirmsdealdirectlywiththeirclientswithoutrecoursetobrokersorothermiddlemen.
Selling indirectherethechannelstrategycouldcompriseamixtureofretailer,distributors,wholesalersandshippingagents,e.g.fooddistributionwillofteninvolvedistributorsandretailerstogettheproductfromfarmertoconsumer.
Business organisation and structure
36 KAPLAN PUBLISHING
Variations in marketing mix settings
freeaccastudymaterial.blogspot.com
freeaccastudymaterial.blogspot.com
freea
ccas
tudym
ateria
l.blog
spot.
com
-
Nileisanonlineretailerofgames,DVDsandbooks.Itiscurrentlyplanninganupgradetoitswebsitetomakeiteasierforcustomerstofindtheitemsthattheyarelookingfor.
Whichoneofthe4Psofmarketingdoesthisrelateto?
A PriceB PlaceC PromotionD Product
6.7 The strategic marketing process
Themarketingprocessimpactsthestrategicplanningprocessofanorganisationasfollows:
Strategic analysis of the firm and its business environment
Marketinganalysiswillinclude:
Strategic choice
Marketingdecisionswillinclude:
analysisofbrandstrength,productquality,reputation,etc. analysisofcompetition marketresearchtodeterminemarketattractiveness detailedanalysisofcustomerexpectationsandpower.
decisionsregardingwhichproductstosell segmentingpotentialmarkets(e.g.byage)andthentargetingattractive
segments developingstrategiesforeachofthemarketingmixvariables.
chapter 2
KAPLAN PUBLISHING 37
Test your understanding 11
freeaccastudymaterial.blogspot.com
freeaccastudymaterial.blogspot.com
freea
ccas
tudym
ateria
l.blog
spot.
com
-
Strategy implementation
Implementingmarketingstrategieswillinclude:
settingbudgetsforadvertising,etc. settingtargetsforsalesrevenue,marketshare,brandawareness,etc. monitoringandcontrol.
Analysisofbrandstrengthwouldcomeunderwhichpartofthestrategicplanningprocess?
A StrategicanalysisB StrategicchoiceC Strategicimplementation
Business organisation and structure
38 KAPLAN PUBLISHING
Test your understanding 12
Strategic marketing further analysis
freeaccastudymaterial.blogspot.com
freeaccastudymaterial.blogspot.com
freea
ccas
tudym
ateria
l.blog
spot.
com
-
Chapter summary
chapter 2
KAPLAN PUBLISHING 39
freeaccastudymaterial.blogspot.com
freeaccastudymaterial.blogspot.com
freea
ccas
tudym
ateria
l.blog
spot.
com
-
7Practice questions
Thefollowingfourstatementsrelatetoeitherthefunctionalordivisionalstructures.
Whichofthestatementsrelatetoafunctionalstructure?
(i) Enablesaccesstoeconomiesofscale(ii) Tendstocauseduplicationofroles(iii) Doesnotusuallycopewellwithdiversification(iv) Specialistsmayfeelisolated
A (i)and(ii)B (i)and(iii)C (ii)and(iii)D (ii)and(iv)
Conflictingdemandsoverallocationofresourcesismostlikelytobeadisadvantageforwhichtypeoforganisationalstructure?
A EntrepreneurialB MatrixC DivisionalD Geographical
Business organisation and structure
40 KAPLAN PUBLISHING
Test your understanding 14
Test your understanding 13
freeaccastudymaterial.blogspot.com
freeaccastudymaterial.blogspot.com
freea
ccas
tudym
ateria
l.blog
spot.
com
-
HLtdisamanufacturingcompany.Theworkundertakenissimple,meaningthateachmanagerlooksafteralargenumberofemployees.Becauseofthis,therearerelativelyfewlevelsofmanagementwithinthecompany.
WhichofthefollowingiscorrectwithregardstothestructureofHLtd?
A Widespanofcontrol,shortscalarchainB Narrowspanofcontrol,shortscalarchainC Widespanofcontrol,longscalarchainD Narrowspanofcontrol,longscalarchain
Whichofthefollowingwouldbeatypicalfeatureofaflatorganisation?
A EasycareerprogressionforemployeesB ClosesupervisionofemployeesbymanagersC FasterdecisionmakingD Highlevelsofbureaucracy
Whichofthefollowingisanadvantageofcentraliseddecisionmaking?
A Allowsseniormanagementtofocusonhighlevelstrategicdecisions
B BettermotivationformorejuniorstaffC ImprovedlocaldecisionsD Avoidanceofdysfunctionaldecisionmaking
chapter 2
KAPLAN PUBLISHING 41
Test your understanding 16
Test your understanding 17
Test your understanding 15
freeaccastudymaterial.blogspot.com
freeaccastudymaterial.blogspot.com
freea
ccas
tudym
ateria
l.blog
spot.
com
-
GLtdisasupermarket.Ithasthreestrategiesinplace:
UsingtheAnthonytrianglemodel,whatwouldeachofthesestrategiesbeclassifiedas?
(1) Tohirefiftynewcheckoutoperatorswithinthenextfiveweekstohelpreducecustomerqueuetimes
(2) Tobeginthesaleofelectronicsinallstoreswithinthenexttwoyears(3) TorelocateoneofitsstoresintownAtoanew,moresuitablesite,
locatedbythestoremanager
Strategy 1 Strategy 2 Strategy 3A Strategic Tactical OperationalB Operational Strategic TacticalC Tactical Operational StrategicD Operational Tactical Strategic
Pearplchascreatedanewtypeofmobilephone.IttookanumberofyearsofresearchanddevelopmentandPearareconcernedthatthecompanysrivalswillquicklycopythephoneandselltheirownversions.Pearhavethereforedecidedtosellthephoneataveryhighinitialpriceperunitinordertoquicklyrecoupthedevelopmentcosts.Oncerivalproductsarelaunched,Pearwilldropthepriceinordertocompetemoreeffectively.
WhattypeofpricingstrategyisPearusing?
A PenetrationpricingB GoingrateC PerceivedqualityD Priceskimming
Business organisation and structure
42 KAPLAN PUBLISHING
Test your understanding 18
Test your understanding 19
freeaccastudymaterial.blogspot.com
freeaccastudymaterial.blogspot.com
freea
ccas
tudym
ateria
l.blog
spot.
com
-
Considerthefollowingstatements.
Whichofthesestatementsis/arecorrect?
(i) PromotioninvolvestheuseoftheAIDAsequence,whichstandsforAdvertise,Interest,DesireandAction.
(ii) Whenlookingatstrategicmarketing,settingbudgetsforadvertswouldoccuratthestrategicimplementationstage.
A (i)onlyB (ii)onlyC BothD Neither
Jplcwishestochangeitscorporatestructure.Ithasdecidedtooutsourceallofitsnoncorefunctionstoexternalthirdparties.
WhichofthefollowingboundarylessstructuresisJplcplanningtoadopt?
A InformalB VirtualC ModularD Hollow
(a) ALtdisconsideringchangingitsorganisationalstructure.However,itisconcernedaboutthepossibledrawbacksofwhicheverstructureisselected.
Thetwoorganisationalstructuresthatarebeingconsideredare:
A FunctionalB Matrix
chapter 2
KAPLAN PUBLISHING 43
Test your understanding 22
Test your understanding 21
Test your understanding 20
freeaccastudymaterial.blogspot.com
freeaccastudymaterial.blogspot.com
freea
ccas
tudym
ateria
l.blog
spot.
com
-
Required:
Classify the following disadvantages as primarily relating to either A (Functional) or B (Matrix):
(0.5 marks each = 2 marks in total)
Thefollowingsentencescontaingapswhichspecifytherelevantaspectofthemarketingfunction.
ALtdfeelsitisimportanttoconsiderthecost,customers,competitionanditsowncorporateobjectiveswhenthinkingabout1.
Required:
ALtdisconcernedthatitisfailingtocommunicatewiththemarket,meaningthatcustomersaresimplynotinterestedinbuyingAsproducts.ThisindicatesaweaknessinAs2.
Required:
(1 mark each, total = 2 marks in total)
(4 marks)
(i) Largenumbersoftimeconsumingmeetings(ii) Dualcommand,leadingtoconflict(iii) Difficultycopingwithdiversification(iv) Overlapofauthoritybetweenmanagers
(b) ALtdisalsoconcernedaboutitsmarketingprocess,whichitbelievesiscurrentlyineffective.Itisawarethattherearefourkeyaspectstothemarketingfunction,whichare:A ProductB PlaceC PromotionD Price
(i) Select the aspect of the marketing function which appropriately fills gap 1 above i.e. select A, B, C or D.
(ii) Select the aspect of the marketing function which appropriately fills gap 2 above i.e. select A, B, C or D.
Business organisation and structure
44 KAPLAN PUBLISHING
freeaccastudymaterial.blogspot.com
freeaccastudymaterial.blogspot.com
freea
ccas
tudym
ateria
l.blog
spot.
com
-
Test your understanding answers
The correct answer is D
TheseparatepartsoftheorganisationoperateasSBUsinadivisionalstructurenotafunctionalstructure.
Thematrixstructuretendstorequiretimeconsumingmeetingsandhassignificantoverlapofauthoritybetweenmanagers.Thistendstoslowthedecisionmakingprocessdown.
The correct answer is B
AsMhasseveralcomplexproducts,astructurethatcreatesaseparatedivisiontolookaftereachoneseemsthemostlogical.Functionalandgeographicalstructureswouldstruggletocopewiththedifferingneedsoftheproducts.Thelevelofworkneededtorunalarge,complexorganisationwouldalsoprobablybebeyondthecapabilitiesofanentrepreneurialstructure.
The correct answer is B False
Theytendtobeownermanaged.
The correct answer is B
Thescalarchainrelatestothenumberoflevelsofmanagementwithintheorganisation.
Narrow
chapter 2
KAPLAN PUBLISHING 45
Test your understanding 5
Test your understanding 2
Test your understanding 1
Test your understanding 3
Test you understanding 4
freeaccastudymaterial.blogspot.com
freeaccastudymaterial.blogspot.com
freea
ccas
tudym
ateria
l.blog
spot.
com
-
The correct answer is D
Adecentralisedbusinessdelegatesdecisionmakingdowntoemployeesatalower,ormorelocal,level.Thisshouldallowforbetterlocaldecisionstobemade,hopefullymaximisingsales.
Notethatanothercostofdecentralisationcouldbepoordecisionsorgoalcongruenceleadingtoincreasedcosts.
Themoreabletheemployees,themoredecisionstheycanbeentrustedwith,andthegreaterthelevelofdecentralisation.
The correct answer is D
Thisstrategyisverydetailedandpractical.Notethatfunctionalstrategyisanothernamefortacticalstrategy.
The correct answer is D
Demandwouldbeassessedbyamarketresearchfunctionwithinthemarketingdepartment.
The correct answer is C
Thekeyfocusofmarketingiscustomerneeds.
Business organisation and structure
46 KAPLAN PUBLISHING
Test your understanding 7
Test your understanding 6
Test your understanding 9
Test your understanding 8
Test your understanding 10
freeaccastudymaterial.blogspot.com
freeaccastudymaterial.blogspot.com
freea
ccas
tudym
ateria
l.blog
spot.
com
-
The correct answer is B
GiventhatthewebsiteisthemainlocationthatNiletransactsbusiness,makingthesiteiteasiertousewillbeimprovingNilesplaceofbusiness.
The correct answer is A
Strategicanalysiswouldincludeanassessmentofthefirmsstrengthsandweaknesses,includingbrandname.
The correct answer is B
Makesureyouremembertherelativeadvantagesanddisadvantagesofeachorganisationalstructure.
The correct answer is B
Themaindifficultywithmatrixorganisationsisconflictsoverthelinesofcontrolwhichcanleadtoconflictingdemandsoverallocationofresources.
The correct answer is A
Therearefewlevelsofmanagement,meaningthescalarchainisshort.Thefactthateachmanagerhasalargenumberofsubordinateswouldindicateawidespanofcontrol.
chapter 2
KAPLAN PUBLISHING 47
Test your understanding 12
Test your understanding 11
Test your understanding 15
Test your understanding 14
Test your understanding 13
freeaccastudymaterial.blogspot.com
freeaccastudymaterial.blogspot.com
freea
ccas
tudym
ateria
l.blog
spot.
com
-
The correct answer is C
Flatorganisationshavewidespansofcontrolandashortscalarchain.Thismeansthattherewillberelativelyfewmanagementpositionsforstafftobepromotedinto.Awidespanofcontrolwillalsomeanthatitisdifficultformanagerstomonitortheactivitiesofallstaff.However,fewermanagerstendstomeanfasterdecisionscanbemade.
The correct answer is D
Centralisationinvolvesdecisionsbeingmadebyseniormanagement,ratherthanbyjuniororregionalstaff.OptionsA,BandCareadvantagesofdecentralisation.Centralisationdoes,however,ensurethatallthedecisionsaremadebythesameteamofmanagers,improvinggoalcongruence.
The correct answer is B
Strategyoneispracticalandshortterm,makingitanoperationalstrategy.Strategy2affectsthewholebusinessandislongterm,indicatingastrategicplan.Strategythreeaffectsaspecificsectionofthebusiness(inthiscase,aparticularstore)andismadebymiddlemanagement(thestoremanager),indicatingatacticalplan.
The correct answer is D
Thisisaclassicexampleofpriceskimming.
The correct answer is B
AIDAstandsforawareness,interestdesireandaction,sostatement(i)iswrong.Statement(ii)iscorrect.
Business organisation and structure
48 KAPLAN PUBLISHING
Test your understanding 19
Test your understanding 20
Test your understanding 17
Test your understanding 16
Test your understanding 18
freeaccastudymaterial.blogspot.com
freeaccastudymaterial.blogspot.com
freea
ccas
tudym
ateria
l.blog
spot.
com
-
The correct answer is D
Rememberthatoutsourcingnoncoreactivitiesreferstoaholloworganisation.Virtualorganisationsoutsourceallfunctions(includingcore),whilemodularorganisationshavesomecomponentsoftheirproductmadebyotherorganisations.
(a) Thecorrectanswersare:(i) B
(ii) B
(iii) A
(iv) B
Rememberthatthematrixstructurehasbothfunctionalanddivisionalmanagementinplace.Whilethiscanbeanadvantagewhendiversifying,itmeanshavingtwosetsofmanagement,whichcanleadtoconflict,disagreementandadditionalexpense.
(b) Thecorrectanswersare:(i) D youareprovidedwiththe4Csinthestatement,whichrelate
topricing.(ii) Cbydefinition,thisreferstopromotion.
chapter 2
KAPLAN PUBLISHING 49
Test your understanding 22
Test your understanding 21
freeaccastudymaterial.blogspot.com
freeaccastudymaterial.blogspot.com
freea
ccas
tudym
ateria
l.blog
spot.
com
-
Business organisation and structure
50 KAPLAN PUBLISHING
freeaccastudymaterial.blogspot.com
freeaccastudymaterial.blogspot.com
freea
ccas
tudym
ateria
l.blog
spot.
com
-
OrganisationalcultureinbusinessChapter learning objectives
Uponcompletionofthischapteryouwillbeableto:
defineorganisationalculture describethefactorsthatshapethecultureoftheorganisation explainthecontributionmadebywritersonculture:
Scheindeterminantsoforganisationalculture Handyfourculturalstereotypes Hofstedeinternationalperspectivesonculture
explaintheinformalorganisationanditsrelationshipwiththeformalorganisation
describetheimpactoftheinformalorganisationonthebusiness.
51
chapter
3
freeaccastudymaterial.blogspot.com
freeaccastudymaterial.blogspot.com
freea
ccas
tudym
ateria
l.blog
spot.
com
-
1Defining organisational culture 1.1 Definition
Therearemanydefinitionsofcorporateculture.Theseinclude:
Thespecificcollectionofvaluesandnormsthataresharedbypeopleandgroupsinanorganisationandthatcontrolthewaytheyinteractwitheachotherandwithstakeholdersoutsidetheorganisation.Hill & Jones
Thewaywedothingsaroundhere.Handy
Ultimately,culturemeansthesumtotalofallthebeliefs,attitudes,normsandcustomsthatprevailwithinanorganisation.
Eachorganisationwillhaveitsowndistinctivecultures,andbehaviouracceptableinoneorganisationalculturemaybeinappropriateinanother.Forexample,somecompanieswillexpectstafftoundertakeadditionalworkintheirowntime,whileotherorganisationswillnot.
Alsoculturesdevelopovertimeorcanchangeinstantlyasaresultofasinglemajorevent,e.g.deathofcompanyfounder,threatenedtakeover,etc.
1.2 Components of culture
Therearethreekeyelementstoanyorganisationsculture.
Organisational culture in business
52 KAPLAN PUBLISHING52 KAPLAN PUBLISHING
freeaccastudymaterial.blogspot.com
freeaccastudymaterial.blogspot.com
freea
ccas
tudym
ateria
l.blog
spot.
com
-
Normsguidepeoplesbehaviour,suggestingwhatisorisnotappropriate(thedonething)e.g.informaldresscodes
Symbolsorsymbolicactione.g.ritualssuchasbuyingtheofficeacakeonyourbirthday.
Sharedvaluesandbeliefsunderlietheculturebyidentifyingwhatisimportante.g.abeliefintheimportanceofpeopleasindividuals.
2The factors that shape the culture of the organisation
Thesixmajorinfluencesonthecultureofanorganisationareasfollows:
Size Technology Diversity Age History Ownership
3Writers on culture
Therearethreewritersyouneedtohaveknowledgeof:Schein,HandyandHofstede.
3.1 Schein
Scheinarguesthatthefirstleadersofacompanycreateitsculture.Futureleaderswillonlybeselectediftheysupportthisoriginalculture.Thusthelinkbetweencultureandleadershipisverystronganditcanbeverydifficulttochange.
Scheinfurthercommentedthatitifleadersaretolead,itisessentialthattheyunderstandthecultureoftheorganisation.Inordertotryanddefineculture,Scheindescribedthreelevels:
Artefactsthesearetheaspectsofculturethatcanbeeasilyseen,e.g.thewaythatpeopledress.
Espoused valuesthesearethestrategiesandgoalsofanorganisation,includingcompanyslogansetc.
chapter 3
KAPLAN PUBLISHING 53
Other influences on culture
The main factors that shape culture
freeaccastudymaterial.blogspot.com
freeaccastudymaterial.blogspot.com
freea
ccas
tudym
ateria
l.blog
spot.
com
-
Newemployeesfindthelastlevelofculturethemostdifficulttounderstand,andlackofunderstandingofthebasicvaluesisoneofthemaincontributorstofailurewhentryingtoimplementchange.
Basic assumptions and valuesthesearedifficulttoidentifyastheyareunseen,andexistmainlyattheunconsciouslevel.
WhichofthefollowingwouldNOTbeclassifiedbyScheinasanartefact?
A DresscodesintheorganisationB DesignoftheorganisationspremisesC StatedaimoftheorganisationtoimprovecustomerserviceD Officefacilitiesprovidedbytheorganisation
3.2 Handy
Handypopularisedfourculturaltypes.
Notethatthisisoftenfoundinorganisationswithanentrepreneurialstructure,asoutlinedinthelastchapter.
Thistendstobemosteffectiveinstableenvironments,wheretheworkperformedbyemployeesrarelychanges.
Powerculture(denotedbytheGreekgodZeus)Herethereisone major source of powerandinfluence.Forexample,inasmallownermanagedbusinesstheownermaystrivetomaintainabsolutecontroloversubordinates.Theremaybefewproceduresandrulesofaformalkindasstafftakedirectiondirectlyfromtheowner.
Roleculture(denotedbytheGreekgodApollo)Inthisversionofculture,peopledescribetheirjobbyitsduties,notbyitspurpose,sojobdescriptionsdictatethewaywedothingsaroundhere.Thiswouldbeseeninabureaucraticorganisation,wherethestructuredeterminestheauthorityandresponsibilityofindividualsandthereisastrongemphasisonhierarchyandstatus.
Organisational culture in business
54 KAPLAN PUBLISHING
Test your understanding 1
freeaccastudymaterial.blogspot.com
freeaccastudymaterial.blogspot.com
freea
ccas
tudym
ateria
l.blog
spot.
com
-
Taskculture(denotedbytheGreekgodAthena)Theemphasishereisonachieving the particular task at handandstaffmayneedtobeflexibletoensuredeadlinesaremet.Peoplethereforedescribetheirpositionsintermsoftheresultstheyareachieving.Nothingisallowedtogetinthewayoftaskaccomplishment.Thisisbestseeninprojectteamsthatexistforaspecifictask.
Personculture(denotedbytheGreekgodDionysius)Thisischaracterisedbythefactitexiststosatisfy the requirements of the particular individual(s)involvedintheorganisation.Thepersoncultureistobefoundinasmall,highlyparticipatoryorganisationwhereindividualsundertakeallthedutiesthemselves,forexample,abarristerinchambers.
IdentifythecorrectstatementregardingHandysculturaltypesfromthefollowing:
A Roleculturestendtofocusontheneedsoftheindividualsworkingintheorganisation
B Powerculturestendtobebureaucraticorganisationswithlargenumbersofpowerfulmanagers
C Personculturestendtodevelopinsmall,highlyparticipatoryorganisations
D Roleculturesnormallyrequirestafftobeflexibleinordertoensuredeadlinesaremet
Identifytwodisadvantagesthatataskculturecouldcreateforanorganisation.
3.3 Hofstede
Hofstedelookedfornationaldifferencesbetweenover100,000ofIBMsemployeesindifferentpartsoftheworld,inanattempttofindaspectsofculturethatmightinfluencebusinessbehaviour.
Hefoundfourtraitsorculturaldimensions:
Individualism (vs. collectivism)looksattheextenttowhichpeopleareintegratedintogroups.Someculturesaremorecohesivethanothers.e.g.AngloSaxonculturesaregenerallymoreindividualisticthanthecollectivistculturesofSouthAmerica.
chapter 3
KAPLAN PUBLISHING 55
Test your understanding 3
Test your understanding 2
freeaccastudymaterial.blogspot.com
freeaccastudymaterial.blogspot.com
freea
ccas
tudym
ateria
l.blog
spot.
com
-
Highindividualismindicatesthatstaffexpecttobeassessedontheirownachievementsandperformance.
Lowindividualism(orcollectivism)wouldmeanthatstaffexpecttobeassessedonagroupbasisandprefertheorganisationtosetgroupgoals.
HighUAcultureswillnotliketoactoutsidetheirnormaljobdescriptionsorroles.Theyprefertobedirectedbymanagementandlikeformalrulesandguidelines.
LowUAcultureswillbepreparedtotakemorerisksandgobeyondtheircomfortzones.Theytendtodislikebureaucracyasitstiflesinitiative.
HighPDculturesexpecttoanswertopowerfulmanagersanddonotexpecttohaveanydemocraticinputintodecisionsthataremade.
LowPDculturesexpecttobeinvolvedwiththedecisionmakingprocessandwantlessdirectsupervisionbymanagers.
Employeesinmasculineculturescanbemotivatedbyofferingthemjobtitles,increasedstatusandpayrises,asthisiswhattheculturevalues.
Staffinfemininecultureswillbemotivatedmorebyworklifebalance,qualityoflifeandrelationshipsatwork.
Uncertainty avoidance (UA) indexdealswithasociety'stoleranceforuncertaintyandambiguitye.g.FranceandJapanusebureaucracytoreduceuncertaintybecausetheydislikeit.
Power distance (PD) index theextenttowhichthelesspowerfulmembersoforganisationsandinstitutionsacceptandexpectthatpowerisdistributedunequallye.g.inSouthAmericansocieties,differencesinpowerweretoleratedmorethaninNorthEuropeancultures.
Masculinity (vs. femininity)amasculinecultureisonewherethedistinctionbetweentherolesandvaluesofthegendersislargeandthemalesfocusonwork,powerandsuccess(e.g.inJapaneseculture)whereasinfeminineculturessuchasFinland,thedifferencesbetweenthegenderrolesismuchsmaller.
Organisational culture in business
56 KAPLAN PUBLISHING
freeaccastudymaterial.blogspot.com
freeaccastudymaterial.blogspot.com
freea
ccas
tudym
ateria
l.blog
spot.
com
-
LookingattheHofstedetraits,choosetheclassificationthatmostcloselyfitsGreatBritain.
Individualisticorcollective?
Largepowerdistanceorsmall?
Masculineorfeminineroles?
JanehasrecentlymovedtocountryAtoheadupanewlycreatedresearchteam.
Shequicklydiscoversthatherstaffseemunwillingtomakemajordecisionsforthemselvesandexpecthertomonitortheirworkclosely.
WhichofthefollowingfeaturesofHofstedesculturaldimensionsareJanesstaffdemonstrating?
A HighindividualismB LowpowerdistanceindexC HighuncertaintyavoidanceD Femininity
4The informal organisation and its relationship with the formal organisation
Inthelastchapter,welookedattheconceptoftheformalstructuresofanorganisation.Thesehavebeendesignedbymanagementtotryandensurethattheorganisationmeetsitsgoals.
Nowweneedtolookattheinformalorganisation.
Theinformalorganisationisthenetworkofrelationshipsthatexistwithinanorganisation.
Thisnetworkevolvesovertimeandtendstoarisethroughcommoninterestsandfriendshipsbetweenmembersofstaff.Theserelationshipsareoftenacrossdivisions.
chapter 3
KAPLAN PUBLISHING 57
Test your understanding 5
Test your understanding 4
freeaccastudymaterial.blogspot.com
freeaccastudymaterial.blogspot.com
freea
ccas
tudym
ateria
l.blog
spot.
com
-
Aninformalorganisationwillbepresenttosomedegreewithinallformalorganisations.
Thinkoftheinformalorganisationasbeinganaspectoftheorganisationsculture.
Theadvantagesanddisadvantagesofinformalorganisationare:
Advantages Disadvantages
bettermotivation
bettercommunication
provisionofsocialcontrol
inefficientorganisations oppositiontochangecanbe
intensified thegrapevineeffect,wherepotentially
inaccurateinformationorrumoursspreadthroughtheinformalorganisation
conformity
Whichofthefollowingstatementsis/arecorrect?
(i) Informalrelationshipsareshownonorganisationalcharts.(ii) Informalrelationshipswithinanorganisationcanbeacross
divisions.A (i)onlyB (ii)onlyC BothD Neither
Organisational culture in business
58 KAPLAN PUBLISHING
Test your understanding 6
Advantages and disadvantages of the informal organisation
freeaccastudymaterial.blogspot.com
freeaccastudymaterial.blogspot.com
freea
ccas
tudym
ateria
l.blog
spot.
com
-
Theinformalorganisationcaneitherenhanceorholdbackthebusiness.
Managersneedtobeawareoftheinformalstructureandensurethatthey:
adapttheformalstructuretocomplementtheinformalone maintainalooserformalstructuresothattheinformalstructurecan
thrive. attheveryleasttakeaccountoftheinformalstructureindecision
making.
chapter 3
KAPLAN PUBLISHING 59
Informal groups
freeaccastudymaterial.blogspot.com
freeaccastudymaterial.blogspot.com
freea
ccas
tudym
ateria
l.blog
spot.
com
-
Chapter summary
Organisational culture in business
60 KAPLAN PUBLISHING
freeaccastudymaterial.blogspot.com
freeaccastudymaterial.blogspot.com
freea
ccas
tudym
ateria
l.blog
spot.
com
-
5Practice questions
AccordingtoSchein,thereisastronglinkbetweencultureand_________.
Whichwordorwordsbestfilltheblank?
A ManagementstyleB LeadershipC DiversityD Thesizeoftheorganisation
Hcompanyisanalysingitscorporateculture.Ithasfoundthatmanyofitsstaffbelievethatthemainpurposeofthecompanyistosimplyearnasmuchprofitaspossibleandthereforetheyarefailingtoprovidehighqualityservicetocustomers.
AccordingtoSchein,whatlevelofculturehasHcompanyidentified?
A EspousedvaluesB ArtefactsC BasicassumptionsandvaluesD Power
chapter 3
KAPLAN PUBLISHING 61
Test your understanding 7
Test your understanding 8
freeaccastudymaterial.blogspot.com
freeaccastudymaterial.blogspot.com
freea
ccas
tudym
ateria
l.blog
spot.
com
-
CountryVhasastandingarmyoftenthousandsoldiers.Eachsoldierhasaseriesofcloselydefineddutiesandtasksthattheyareexpectedtofulfilonaregularbasis.Theaccomplishmentofthesetasksismonitoredbyahighlybureaucraticadministrationfunction.Noncompliancewiththerulesispunishedandsoldiersarenotexpectedtogobeyondthedutiestheyhavebeenset.
AccordingtoCharlesHandy,whattypeofculturedoescountryVsarmydemonstrate?
A RoleB TaskC PowerD Person
StaffincountryGdisliketheirmanagersinterferingintheirwork.AccordingtoHofstede,thismeansthatthecultureis:
A MasculineB HighuncertaintyavoidanceC LowpowerdistanceD Collective
Informationmaybepassedinformallybetweenindividualswithinanorganisation,sometimesleadingtothespreadofinaccuraterumour.Thisisknownasthe_______________.
Whichwordorwordsbestfillthegap?
A InformalorganisationB FormalorganisationC CorporatecultureD Grapevineeffect
Organisational culture in business
62 KAPLAN PUBLISHING
Test your understanding 10
Test your understanding 11
Test your understanding 9
freeaccastudymaterial.blogspot.com
freeaccastudymaterial.blogspot.com
freea
ccas
tudym
ateria
l.blog
spot.
com
-
Company Risamanufacturingcompanywheremostworkersarepartofthesameunion.Employeesprefertonegotiatepayandconditionsasagroup,ratherthanitbeingnegotiatedonaonetoonebasiswithmanagement.
Company Soperatesalargecallcentre.Staffmembershavestatedtheirpreferencetohavedetailedscriptsprovidedbymanagement.Thesescriptscanhelptheemployeestodealwithanyunexpectedqueriesorobjectionsthatmayarisewhentalkingtocustomers.
Company Thasrelativelyfewmanagers,asmoststaffmembersarefelttobeselfmotivatedandtrustworthy.Whendecisionsaremadebymanagers,employeesexpecttohaveachancetostatetheiropinionsandhavethesetakenintoaccountbytheirmanagers.
Company Uhasrecentlybeeninvolvedinpaynegotiationswithmembersofitsworkforce.Itsmanagershavediscoveredthatmostemployeessimplywishtobepaidmoreorbegivennewjobtitles.Theyseemuninterestedinadditionalholidaysortheofferofflexibleworkingarrangements.
ThefollowingaredimensionsusedbyHofstedetoclassifydifferenttypesoforganisationalculture:
Required:
(1 mark each, total = 4 marks)
1 High 2 LowA Powerdistance A1 A2B Uncertaintyavoidance B1 B2C Individualism C1 C2D Masculinity D1 D2
(i) ForCompanyR,selectwhichcombinationofdimensionsapplyfromthegridabove(i.e.A1).
(ii) ForcompanyS,selectwhichcombinationofdimensionsapplyfromthegridabove(i.e.A1).
(iii) ForCompanyT,selectwhichcombinationofdimensionsapplyfromthegridabove(i.e.A1)
(iv) ForCompanyU,selectwhichcombinationofdimensionsapplyfromthegridabove(i.e.A1)
chapter 3
KAPLAN PUBLISHING 63
Test your understanding 12
freeaccastudymaterial.blogspot.com
freeaccastudymaterial.blogspot.com
freea
ccas
tudym
ateria
l.blog
spot.
com
-
Test your understanding answers
The correct answer is C
Thiswouldbeclassifiedasoneoftheorganisationsespousedvalues.
The correct answer is C
Aisadefinitionofthepersonculture,nottheroleculture.
Bisincorrectasapowerculturetendstoonlyhaveonemajorsourceofpower.Bureaucracytendstobefoundinaroleculture.
Disalsoincorrectasthisdescribesataskculture.
Ataskcultureisonewherenothingisallowedtogetinthewayofcompletingthetask.
Disadvantagescouldbe:
highlevelsofstress qualitycompromisedinanefforttogetthejobfinishedontime peoplefeelingthattheirindividualneedsaresurpassedbythe
needsofthetask,e.g.feelingpressurisedtoworklate.
Althoughthepointscanbedebated,andthecultureischanging,GreatBritainisprobably:
Individualistic
Smallpowerdistance
Masculineroles
Organisational culture in business
64 KAPLAN PUBLISHING
Test your understanding 2
Test your understanding 3
Test your understanding 4
Test your understanding 1
freeaccastudymaterial.blogspot.com
freeaccastudymaterial.blogspot.com
freea
ccas
tudym
ateria
l.blog
spot.
com
-
The correct answer is C
Theworkersaredemonstratingadislikeofuncertainty.Notethatiftheyhadlowpowerdistance,theywouldnotwantJanetosupervisetheirworkclosely.
Thereisinsufficientinformationavailabletoconcludeonthemasculinityorindividualismoftheculture.
The correct answer is B
The correct answer is B
Whiletheothersarefactorsthatmayaffectculture,Scheinbelievedinastronglinkbetweenleadershipandculture.
The correct answer is C
Basicassumptionsandvaluesareoftendifficulttoidentifyandexistmainlyatanunconsciouslevel.Inthiscase,itrelatestowhatstaffbelievetheirfunctionisandwhattheythinktheorganisationexpectsofthem.Thiscanbequitedifferenttotheorganisationsstatedgoals(espousedvalues).
The correct answer is A
Roleculturesvaluetheperformanceofanindividualsdutiesnomore,noless.Armedforcesareacommonrealworldexampleofthis.
chapter 3
KAPLAN PUBLISHING 65
Test your understanding 9
Test your understanding 6
Test your understanding 8
Test your understanding 5
Test your understanding 7
freeaccastudymaterial.blogspot.com
freeaccastudymaterial.blogspot.com
freea
ccas
tudym
ateria
l.blog
spot.
com
-
The correct answer is C
Bydefinition.
The correct answer is D
Thegrapevineeffectrelatestoinformalcommunicationbetweenindividualswithintheorganisation.Don'tgetconfusedbetweenthisandinformalorganisationitself,whichdescribestherelationshipsbetweenindividualsintheorganisation.Inreality,thegrapevineoftenfollowsthesameroutesastheinformalorganisation.
Thecorrectanswersare:
(i) C2workersprefertonegotiateandbejudgedcollectively,ratherthanasindividuals.
(ii) B1employeesclearlydislikedealingwiththeunexpected,indicatinghighUA.
(iii) A2employeesexpecttohaveasayinmanagementactivities,indicatingalowpowerdistance.
(iv) D1employeesaremotivatedbymoneyandstatus,ratherthanworklifebalance.Thisindicatesamasculineculture.
Organisational culture in business
66 KAPLAN PUBLISHING
Test your understanding 11
Test your understanding 10
Test your understanding 12
freeaccastudymaterial.blogspot.com
freeaccastudymaterial.blogspot.com
freea
ccas
tudym
ateria
l.blog
spot.
com
-
InformationtechnologyandinformationsystemsinbusinessChapter learning objectives
Uponcompletionofthischapteryouwillbeableto:
identifyanorganisationssystemrequirementsinrelationtotheobjectivesandpoliciesoftheorganisation
identifybusinessusesofcomputersandITsoftwareapplications:spreadsheets,databasesandaccountingpackages
describeandcomparetherelativebenefitsandlimitationsofmanualandautomatedfinancialsystemsthatmaybeusedinanorganisation
explainhowthetypeofinformationdiffersandthepurposesforwhichitisappliedatdifferentlevelsoftheorganisation:strategic,tacticalandoperational
listtheattributesofgoodqualityinformation.
67
chapter
4
freeaccastudymaterial.blogspot.com
freeaccastudymaterial.blogspot.com
freea
ccas
tudym
ateria
l.blog
spot.
com
-
1Data and information
Informationanddataaretwodifferentthings.
Dataconsistsofnumbers,letters,symbols,rawfacts,eventsandtransactions,whichhavebeenrecordedbutnotyetprocessedintoaformthatissuitableformakingdecisions.
Informationisdatathathasbeenprocessedinsuchawaythatithasmeaningtothepersonthatreceivesit,whomaythenuseittoimprovethequalityoftheirdecisionmaking.
Informationisvitaltoanorganisationandisrequiredbothinternallyandexternally.Managementrequiresinformation:
Thisinformationwillbeusedbyvariousthirdparties,including:
toproviderecords,bothcurrentandhistorical toanalysewhatishappeninginthebusiness toprovidethebasisfordecisionmakingintheshortandlongterm tomonitortheperformanceofthebusinessbycomparingactualresults
withplansandforecasts.
theshareholdersorownerswhowillwanttoknowhowtheirinvestmentisperforming
customersandsupplierswhowillwanttoknowhowstablethebusinessisandthereforewhetheritwillbeareliabletradingpartner
employeeswhowillhaveaninterestintheperformanceoftheorganisationandhowitimpactsonthejobsecurityandpay
governmentagenciessuchastaxauthorities.
Information technology and information systems in business
68 KAPLAN PUBLISHING68 KAPLAN PUBLISHING
Types of data
freeaccastudymaterial.blogspot.com
freeaccastudymaterial.blogspot.com
freea
ccas
tudym
ateria
l.blog