Page 7 - CIMA OCS Workbook February 2019 - Day 2 Suggested Solutions

SUGGESTED SOLUTIONS

CHAPTER NINE

EXERCISE ONE (ORGANISATIONAL STRUCTURE)

BRIEFING NOTES

Trigg Adventure currently has a functional structure, broken down into tasks such as production,
sales and finance.

Current position - Functional Structure

Functional organisations group together employees that undertake similar tasks into departments.
This type of structure is often found in organisations that have outgrown the entrepreneurial
structure, which is typical of small businesses in the early stages of their development. It is most
appropriate for small organisations which have relatively few products or locations and which exist in a
relatively stable environment.

Advantages

The functional structure allows for economies of scale to be built in to the business reducing costs by
standardising procedures. It can allow specialisation on business functions, allowing specialist
managers to focus on their core area of expertise and as a result of this specialisation it allows for
career progression for lower levels of employees.

Disadvantages

This structure can lead to functional heads empire building especially where resources are in short
supply and subject to functional competition. This can lead to conflict between functions and as a
result of this can result in slow decision making where decisions must be cross functional, for example
the choice of our materials involving both our production and finance department or new product
development decisions involving both our production and sale department. It also does not cope well
with diversification in the business as this moves management out of their comfort zone.

Applying concept to Trigg Adventure

A functional approach may be the most appropriate structure to Trigg Adventure for service areas of
the business such as finance, sales and production but it if we were to continue with this this structure
there is also scope to have further functions such as an IT function, a marketing function and an HR
function. Currently these responsibilities are being absorbed by the sales and finance team but it is
worth considering having separate functions to improve efficiency.

Divisional Structure

This structure occurs where an organisation is split into separate divisions, each one autonomously
overseeing a product or geographic area. Each division is likely to have a functional structure, with all
the departments it needs in order to operate in its particular market segment. Divisions are likely to
be run as profit centres, with their own revenues, expenditure and capital investments.

If Trigg Adventure were to go down this route, the most obvious divisions would be a domestic
division and a commercial division as they operate in two distinct markets.

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