Basic Organizational Structures

Although there is an almost infinite variety of structural forms, certain basic types predominate in modern complex organizations. There are three basic organizational structures. The conglomerate structure is a variant of divisional structure and is thus not depicted as a fourth structure. Generally speaking, each structure tends to support some corporate strategies over others.

• Simple Structure has no functional or product categories and is appropriate for a small, entrepreneur-dominated company with one or two product lines that operates in a reasonably small, easily identifiable market niche. Employees tend to be generalists and jacks of all trades.
• Functional structure is appropriate for a medium-sized firm with several related product lines in one industry. Employees tend to be specialists in the business functions important to that industry, such as manufacturing, marketing, finance, and human resources.
• Divisional structure is appropriate for a large corporation with many product lines in several related industries. Employees tend to be functional specialists organized.
• Strategic business units (SBU)are a recent modification to the divisional structure. Strategic business units are divisions or groups of divisions composed of independent product-market segments that are given primary responsibility and authority for the management of their own functional areas. An SBU may be of any size or level, but it must have 1) a unique mission, 2) identifiable competitors, 3)an external market focus, and 4) control of its business functions. The idea is to decentralize on the basis of strategic elements rather than on the basis of size, product characteristics, or span of control and to create horizontal linkages among units previously kept separate.
• Conglomerate structure is appropriate for a large corporation with many product lines in several unrelated industries. A variant of the divisional structure, the conglomerate structure (sometimes called a holding company) is typically an assemblage of legally independent firms (subsidiaries) operating under one corporate umbrella but controlled through the subsidiaries’ boards of directors. The unrelated nature of the subsidiaries prevents any attempt at gaining synergy among them.

If the current basic structure of corporation does not easily support a strategy under consideration, top management must decide if the proposed strategy is feasible or if the structure should be changed to a more advanced structure.

My Consultancy–Asif J. Mir – Management Consultant–transforms organizations where people have the freedom to be creative, a place that brings out the best in everybody–an open, fair place where people have a sense that what they do matters. For details please visit www.asifjmir.com, and my Lectures.

 

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Objectives of Advertising

There are at least three different viewpoints taken in attempts to evaluate the contribution of advertising to the economic health of the firm. The generalist viewpoint is primarily concerned with sales, profits, returns on investment, and so forth. At the other extreme, the specialist viewpoint is represented by advertising experts who are primarily concerned with measuring the effects of specific ads or campaigns. A middle view, one that might  be classified as more of a marketing management approach, understands and appreciates the other two viewpoints but, in addition sees advertising as a competitive weapon. Emphasis in this approach is given to the strategic aspects of the advertising function.

Building on objectives for advertising can be assigned that focus on creating awareness, aiding comprehension, developing conviction, and encouraging ordering. Within each category, more specific objectives can be developed that take into account time and degree of success desired. Obviously compared to the large number of people advertising makes aware of the product or service, the number actually motivated to purchase is usually quite small.

In the long run and often in the short run, advertising is justified on the basis of the revenue it produces. Revenue in this case may refer either to sales or profits. Economic theory assumes that firms are profit maximizers, and the advertising outlays should be increased in every market and medium up to the point where the additional cost of gaining more business equals the incremental profits. Since most business firms do not have the data required to use the marginal analysis approach, they usually employ less sophisticated decision-making models. There is also evidence to show that many managers advertise to maximize sales on the assumption that higher sales mean more profits (which may or may not be true).

The point to be made here is that the ultimate objective of the business advertiser is to make sales and profits. To achieve this objective, the actions taken by customers must encompass purchase and continued repurchases of the advertised product. Toward this end, an approach to advertising is  is needed that provides for intelligent decision making. This approach must recognize the need for measuring the results of advertising, and these measurements must be as valid and reliable as possible. Marketing managers must also be aware that advertising not only complements other forms of communication but is subject to the law of diminishing returns. This means that for any advertised product, it can be assumed a point is eventually reached at which additional advertising produces little or no additional sales.

My Consultancy–Asif J. Mir – Management Consultant–transforms organizations where people have the freedom to be creative, a place that brings out the best in everybody–an open, fair place where people have a sense that what they do matters. For details please visit www.asifjmir.com, Lectures, Line of Sight

Self-employed Businessmen:Getting Help from Experts

Many self-employed businessmen believe they do not earn enough money to need financial advice, but anybody with an after-taxes income of more than $20,000 can use financial advice. This goes double for someone in business for himself. Many kinds of advisors are available, such as stockbrokers, lawyers, accountants, credit counselors, bankers, and insurance agents. One of the newer services is that provided by a financial planning consultant, a generalist who can help you with overall financial planning.

Before hiring the services of anyone of these people, though, think about who has the expert’s loyalty. Many insurance agents, for example, earn commissions from insurance companies and as a result charge you nothing. This does,’t mean you don’t get good—free-financial advice, it just means the agent will be trying to sell you insurance along with the advice. His loyalty goes to his employer. On the otherhand, you pay a financial planning adviser or an accountant, and his loyalty is strictly to you. Both kinds of advisers can be very helpful, provided you understand the situation.

Before getting involved with any financial expert, check his references. The best reference, of course, comes from a satisfied friend. You can also casually ask the person the first time you meet him about his background and training. Ultimately, though, before you trust anyone with your money, you should like him. Personal chemistry accounts for a lot in choosing anyone with whom you will have financial dealings.

The one adviser a self-employed businessman is most likely to have is an accountant or an accountiong service. It is strongly suggested that you have an accountant do your taxes. In fact, if you feel you cannot handle the records systems, you can hire an accounting service to set up a record system for you, but it is expensive. A one-time setup will cost something between $200 to $500. Alternately, the accountant who handles your taxes may be willing to help you set up a records system for a small free. When you are negotiating with him, remind him that any system you work out is only to his benefit since he goes over the records at the end of the year, anyway.

My Consultancy–Asif J. Mir – Management Consultant–transforms organizations where people have the freedom to be creative, a place that brings out the best in everybody–an open, fair place where people have a sense that what they do matters. For details please contact www.asifjmir.com, Line of Sight