CHAPTER 1

Organization: A business organization is an individual or group of people who collaborate to

achieve certain collective & commercial goals. Some business organizations are formed to earn
income for owners. Other business organizations, called nonprofits, are formed for public
purposes.

System: A set of detailed methods, procedures and routines created to carry out a
specific activity, perform a duty, or solve a problem.

An organization’s context involves its “operating environment.” The context must be

determined both within the organization and external to the organization.

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An organization’s external context includes its outside stakeholders, its local operating
environment, as well as any external factors that influence the selection of its objectives
(goals and targets) or its ability to meet its goals. An organization’s internal context
includes its interested parties, its approach to governance, its contractual relationships
with its customers, and its capabilities and culture.

Types of Organizations:

1. Commercial –Are profit seeking organizations

2. Not-for-profit Organization- charitable institutions, hospitals etc.
3. Public sector- state owned at national or local level-provides goods and services
to general public.
4. Non-governmental-are similar to Not-for-profit and serve people in need.

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 5. Co-operatives-Owned by people who work in the organization and is set up with
the intention of making profits.
Organization structures:

Entrepreneurial- Simple set up involving boss and workers, since it is very small.
Besides these set-ups could be family owned and due to its small size it cannot be
further split up.

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Functional: As the entrepreneurial business grows and expands, it can develop
functional structure, meaning can have separate departments based on the functions
performed such as: Sales, Accounts, Administration, Production, R&D etc.

Divisional: As the business grows further and expands, it can be made divisional,
meaning split up based on geographical location or products made. Example: the
company can have branches in UK and US and one could be making cosmetics and the
other accessories.
A divisional structure is a manner of designing an organization so that it is split up into semi-
autonomous units called divisions. While the divisions have control over their day-to-day operations,
they still are answerable to a central authority that provides the overall strategy for the organization
and coordinates its implementation among the divisions. Large corporations, especially large
multinational corporations, utilize a divisional structure. For example, General Motors was one of the
first companies to implement the divisional structure. This type of structure is also referred to as
a multidivisional structure, or M-form, organization.

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Matrix: A matrix organizational structure is a company structure in which the reporting
relationships are set up as a grid, or matrix, rather than in the traditional hierarchy. In
other words, employees have dual reporting relationships - generally to both a
functional manager and a product manager.

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Mintzberg’s Structure: According to Mintzberg organizations are formed of five main
parts:

Operating core

Involves staff who perform the basic work related

directly to the production of products and
services

Strategic apex

Is a part that makes sure that the organization

serves its mission in an effective way? It also
requires that it serves the needs of those people
who control the organization.

Middle-line managers

Connect Operating core with strategic apex forming a bridge between them and these
managers have delegated formal authority over these 2.

Techno structure

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Are the analysts who serve the organization by influencing the work of others. They may
design it, plan it, change it, or train the people who do it, but they do not do it
themselves

Support staff

Composed of specialized units that exist to provide support to the organization outside
the operating work flow.

Levels in Organizations:

Tall/Narrow and Wide/Flat Organizations:

Tall (narrow) structure: Has many levels with small spans of management
-power is centralized on the top levels and there is more employee control
Advantages:
 Greater control
 Better performance

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Flat (wide) structure: Has small number of levels and broad span of management at each level.
Manager must be able to delegate well
Advantages: Great job satisfaction
 More delegation
 Increased communication between levels of management.

Centralization and decentralization:

Centralization of authority means the power of planning and decision making
are exclusively in the hands of top management while in the case
of Decentralization, the powers for the same has been disseminated by the top
management to the middle or low-level management.

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Formal and Informal Organization:
Formal Structure

 Formal structure is primarily concerned with the relationship between authority and
subordinate.

 A typical organization chart illustrates the formal structure at work in a company or part
of a company.

 The hierarchical organization begins at the top with the most senior leader and then
cascades down to the subordinate managers and then subordinate employees below those
managers.

 There are job titles, financial obligations and clear lines of authority for each box on the
organization chart.

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Informal Structure

 Informal structures typically develop around social or project groups.

 Because informal structures are based on mutual trust, there is often a more immediate
response from individuals.

 This saves people time and effort, thus making it easier to work with in informal
structures.

 People also rely on informal structure if the formal structure has stopped being effective,
which often happens as the company grows or changes but doesn’t reevaluate its
hierarchy or work groups.

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Main departments in the Business Organization and their roles:

Marketing Mix: Mechanics /tactics of marketing comprise of 4 components known as 4P’s:

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The 4 P’s are used when referring to a business’s point of view, instead of the customer’s point
of view.
 The first P, product, is a good or service that satisfies the wants of a company’s target
market. When determining what the product will be, it must answer questions such as, what
problem this product will solve, is there a consumer need for this product, and/or what will
be the components of this product? This includes all items used in production to create the
final product or service. However, marketers must also consider who will purchase the
product and what the customer wants.
 The second P, price, is the amount of money customers must pay to obtain the product.
 The third P, place, includes company activities that make a product available to target
consumers. This includes distribution channels, logistics, transportation, and locations
offered. A company could have many stores offering its products across the United States,
but there are still locations with consumers who will not be able to access that company’s
products. This is most likely a loss to the company.
 The last P, promotion, is defined as the activities that communicate the merits of the
product and persuade target customers to buy it.

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