Page 8 - CIMA OCS Workbook May 2019 - Day 1 Tasks

SUGGESTED SOLUTIONS

Currently these responsibilities are being carried out by managers operating under you, our
Finance Director, but it is worth considering having entirely separate functions to improve
efficiency and relieve unnecessary burden. As you say, the structure of your role has not changed
in years, despite the business developing.

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 VitaMine were to go down this route, the most obvious divisions would be based
on the four main product ranges: vitamins, minerals, herbal supplements and targeted care
products. Another option would be divisions based on product format i.e. capsules & tablets,
liquids, serums & sprays and creams & gels.

Advantages

The divisional structure provides clear areas of responsibility for local managers which will
improve local decision making and provide a good training environment for management. It also
allows the senior management to focus on strategic issues and not get bogged down in
operational matters. This should in turn promote growth within the business.

Disadvantages

As each division has its own functional areas then there will be considerable duplication of effort,
for example duplicated finance tasks, which leads to sub-optimisation. There may also be
problems getting autonomous managers to make goal congruent decisions that could lead to a
loss of senior management control. This may also lead to functional specialists feeling isolated
and less important.

Applying concept to VitaMine

This may be a structure worth considering if VitaMine were to diversify into different market
areas where the clientele would be different and the business environment would throw up
different challenges and opportunities. It would be relatively easy to ‘bolt on’ another division.

However this would require an increase in functional staff particularly in HR, IT and also finance in
order to operate effectively.

Recommendation

Continuing with a functional approach would be suitable for VitaMine if the company were to
introduce more functions, such as dedicated IT department and HR department, as opposed to
the current situation of our IT and HR manager reporting into you (our FD). This would address
the current issues with regards to spans of control that are perhaps too wide within the business,
and particularly within the finance department. This will of course have implications for human
resources as more staff may need to be hired, not to mention staff with previous experience in
managing these types of divisions.

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