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Why do most small companies use functionally organized departments

Why do most small companies use functionally organized departments?
Organizational Structures
The aim of any business is to maximize profit. In order to do this there must be
division and specialization of labour. This implies that different people come together
in order to create a product that has value to consumers. Hence, the activities of
different people involved in a business must be coordinated. So there is a need for an
organizational structure that brings this coordination about. People in an organization
must know
(1) What their activity is and where it fits into the product as a whole;
(2) What their roles is, what responsibilities they have and to whom they are
The need to delegate
Any organizational structure, which implies the combination of activities, is
impossible without delegation. It is especially necessary in a large organization to
delegate decision-making. The obvious problem is that in opposition to this
imperative to delegate is the equally important need to coordinate all activities.
Delegation does mean that the manager loses a measure of control. It is important
that the overall shape of the organization is maintained. A great deal of management
theory is focused on this issue for example, the concept of a mission statement for
the company so that everyone knows where the company as a whole is heading and
can take responsible decisions accordingly.
Delegation also means empowerment it means that subordinates have a more
enriching work experience.
Business organisations are generally divided into specific departments personnel,
purchasing, production, sales, finance, distribution are examples. None of these
departments can function properly without the other departments.
In large companies there must be departmentalization. This means, activities must be
coordinated by organizing them into departments. A company obviously faces the
problem of how best to organize its departments. The solution must depend on each
company, its market and also culture. Any departmental organization means that
there can be conflict between departments and a loss of communication. It also
means that the company loses the benefit of organizing one way by organizing in
Departments can be orgainised by
(1) function for example, personnel, production, marketing;
(2) product
(3) territory (geographical region)
(4) market segment or customer
(5) time for example, by shift
(6) numbers that is, to produce teams of a specific size
(7) equipment
However, the usual choice facing a company is whether to organize by function, or by
Organisation by function or product?
When a business organisation is divided into specific departments each performing a
specific function personnel, purchasing, production, sales, finance, distribution
this is known as a functional approach.
-it is easy to set up.
-it is well defined in functions.
-Reduces duplication of activities
-Encourages technical expertise
-it has workable perspectives.
-it is easy to coordinate
Discuss the role of electronic media in communication.
The Impact of the Internet/Technology
on the Business Communication.
The following are other examples of current Internet/ technology uses:
1. Technical Papers
Originally, the Internet was only used by the government and universities. Research scientists used the Internet to communicate with other scientists at different labs and to access powerful computer systems at distant computing facilities. Scientists also shared the results of their work in technical papers stored locally on their computer system in ftp sites. Researchers from other facilities used the Internet to access the ftp directory and obtain these technical papers.
2. Share Company Information
Commercial companies are now using the Web for many purposes. One of the first ways that commercial companies used the Web was to share information with their employees. Informs employees about such things as training schedules .There is also some information which is company private and access is restricted to company employees only.
3. Product Information
One of the ways businesses share information is to present their product information on a Web page. The Web provides an easy and efficient way for companies to distribute product information to their current and potential customers.
4. Advertising
Along these lines, companies are beginning to actually advertise online. They also use a banner for advertisements on their Yahoo Web Page. These advertisements are created in the established advertising model where the advertising is positioned between rather than within editorial items. Another type of advertising focuses on entertaining the customers and keeping them at the companies' site for a longer time period.
5. Business & Commerce on the Net
There is an explosion of commercial use. More information about business on the Internet can be found at the NET.
6. Magazines
Magazines are starting to realize that they can attract customers online. Examples of magazines now published online .These magazines are still published in hard copy, but they are now also available online. Many of these publications are available free sometimes because of the time delay (i.e. publications online are past issues) or usually to draw in subscribers for a free initial trial period. Some of these publications may remain free online if advertisers pay for the publications with their advertisement banners.
7. Newspapers
Some newspapers are beginning to publish online.
8. Employment Ads
Companies are also beginning to list their employment ads online to attract talented people who they might not have been able to reach by the more tradition method of advertising in local papers. Interested parties can submit a resume or call to schedule an interview, which saves time for everyone involved. Universities can also help their students find jobs more easily by using job listings on the Internet.
9. Stock Quotes
There are several time delayed (15 minutes) ways to track stock performance, and they are all are free. These are commercial companies which provide stock quotes for free but charge for other services.
10. Country Investment Information
Thinking about investing in a particular country? Information on countries can be found online. For example, check out the graphical information (GDP, inflation, direct foreign investment, etc.) on ANY COUNTRY.
11. Order Pizza
You can order a PIZZA. If you can easily imagine people working late at their offices and ordering out for food online.
12. Software Distribution
A very effective and efficient use of the Web is to order software online. This reduces the packaging and shipping costs. Also documentation can now be provided online.
13. Traffic Information
Ever wonder what the rush hour traffic was like before you head home and get stuck in it? Many different cities are putting traffic information online.
14. Tourism
Plan a trip to countries A/B with information gathered off the Internet. These and other countries are on the Internet. So you can plan your vacation from your computer.
15. Movie Previews
Some cos. provides movie clips from many of their new releases.
16. Chat Rooms on AOL
Chat rooms are a more interactive technology. INTERNET provides areas where people can "log on" and converse with others with similar interests in real time. This is the first popular use of interactivity by the general public. The other uses up until recently have been more static, one-way distribution of information. Interactivity is the future of the Internet.
17. Interactive Computer Games
One of the first areas where interactivity will increase on the Internet are computer games. People will no longer have to take turns playing solitary or crowd around one machine. Instead they will join a computer network game and compete against players located at distant sites.
18. Real Estate
Buying a home online will become possible. While very few people would want to buy a home without seeing it in person, having house listings online will help reduce the time it takes to purchase a home. People can narrow down which houses that they are actually interested in viewing by seeing their description and picture online.
19. Process Mortgages online
After a house is chosen, potential buyers can apply for a mortgage online. No longer will buyers be restricted to local lending institutions, since many lenders will be able to compete online for business.
20. Buying stocks
Stocks will soon be able to be purchased over the Internet without the assistance of a broker.
21. Ordering products.
Ordering products online is an important application. As mentioned above, the Pizza Page showed how easy it could be done. Other companies are setting up Web pages to actually do this.
22. Live Video
Viewing live video clips will become more common in the future.
23. "Chat" Internet Telephone
While AOL users are currently accessing "Chat Rooms" to communicate with other people on the Internet, they are restricted to text-based communication or possibly an icon as their identity online. CUCME from Carneige Mellon provides a means for people to actually see other people online. However, network speed is once again a limiting factor. If a user is not directly connected to the Internet (most connections are via modem), then the image is extremely slow. This application will become more popular with increased network connections.
24. Video Conferencing
On the other hand, businesses will begin using video to communicate with others. Andersen Consulting is setting up training online. There should also be some applications that businesses can choose to help set up video conferencing.
25.Auto manufacturing
Automobile manufacturers want to
reduce production time for a vehicle configured to
a specific customer's preferences to only five days,
using internet/telecommunication to speed up
the process.
26.COMPUTERS manufacturing
COMPUTER manufacturers want to
reduce production time for an unit configured to
a specific customer's preferences to only five days,
using internet/telecommunication to speed up
the process.[ DELL COMPUTERS]

building warehouse and distribution capabilities to become a
one-stop-shopping, same-day-delivery capability
for all types of consumer products. These new
models change the lives of consumers and of those
in business delivering and consuming such products
and services. [ WEBVAN]
The implications specifically for the purchasing
organisation are profound and the opportunities
are tremendous.
Key challenges facing purchasing managers and
executives today include the following:
* reducing the overhead and costs associated with
* reducing the cycle time for purchasing;
* pushing procurement to the desktops and
enabling self-service;
* improving procurement practice by significantly
reducing inefficient buying, redundant processes,
non-strategic sourcing and maverick buying;
* assisting suppliers to become more responsive in
order to meet our customers' demands; and
* collaborating more effectively with suppliers.
These and other such issues can be addressed by
leveraging Internet technologies, which inherently
enable collaboration and automate processes across
value chains. Early successes enjoyed by several leading
companies, coupled with technologies that have
proven themselves and matured, have firmly
established Web-based procurement automation as one
of the key initiatives within most companies'
e-business strategy. Web-based procurement
automation, commonly referred to as 'e-procurement',
addresses the end-to-end process of the corporate
procurement loop. This includes product selection,
requisition, pricing, approval cycle, purchase order
generation, submission of orders to the suppliers,
product shipment, receiving and payment.
There are several key advantages to deploying
e-procurement. e-Procurement solutions make a
powerful business case since they provide significant
and tangible return on investment (ROI) in a
relatively short time. The ROIs can be measured by
traditional metrics unlike business-to-business (B2B)
or business-to-consumer sell-side e-commerce
solutions where the traditional ROI metrics are
difficult to establish and measure. The ability of
e-procurement solutions to automate and streamline
the procurement processes, thus reducing the
overhead, cycle-time and paperwork, is now well
known. Fundamental to achieving this process
efficiency is to push the purchasing and approval
activities to the users' desktops and automate the
business rules and the procurement workflow to
chain. Another advantage of e-procurement comes
from it being centralised - this provides a Web-based
platform for managers and stakeholders to collect,
monitor, analyse, track and control enterprise-wide
purchasing information, which helps to minimise
maverick buying and maximise purchasing dollars by
reducing duplication. This information can be
integrated into a Web-based enterprise portal that
allows stakeholders within the company to access key
performance indicators across their respective
enterprise functions, including procurement.

Other critical success factors
include streamlining and alignment of the purchasing
processes, standardising the procurement process,
people and solution across the enterprise silos,
The buy side is an area where the Internet has proven
itself to provide considerable benefits to businesses.
Companies are fundamentally shifting the ways in
which they conduct business across their value
chains. Constant pressures, such as price, customer
demands, growth and earnings per share, are forcing
companies to eliminate inefficiencies and overheads
in their value chain to make them more responsive,
intelligent and cost-effective.
the financial services industry,
brokerage has been completely reshaped. The market was divided in two main
segments, full-service brokerage, and discount brokerage, and their rates
The product search cost has reduced significantly.
The impact of information technology on the value system of an industry is also
triggering a process where some of the traditional intermediaries are becoming
obsolete, and new virtual-intermediaries are being incorporated. The repercussion for
firms and consumers of this changing environment will depend on the industry and
the characteristics of the value system.
Similarly, airlines, have banded together to create a unique
travel site where these companies will be able to offer fares, ticketing , E-TICKETSand other
services. One of the most important aims of this new initiative is to cut the COST.
New possibilities on value creation and value appropriation do not only lead to a
redefinition of the price equilibrium due to lower transaction costs, search costs, and
customization opportunities, increased transparency and its impact on industry rivalry.
More and more, the Internet is fundamentally affecting the market structure, as the
offering of a firm may fundamentally change, thus affecting competitive dynamics.
Entering e-channels with the appropriate strategy can create an enormous competitive
advantage for traditional and companies, although the net effect for a
particular firm depends on how its competitive positioning is impacted as Internet
comes to the stage. Hence, while sometimes the Internet has allowed firms to
simultaneously increase the willingness to pay of customers, and, because of the
significant jump in volume, reduce the cost of providing these products and services,
value appropriation might be impossible, as rivalry and transparentization of markets
may make it impossible to establish a pricing scheme that allows companies to
capture the created value. In this sense, we have highlighted the importance of taking
into account that on the value creation side, both supply and demand are affected, be
it through the reduction of transaction costs, in form of motivation or coordination
costs, or the triggering of new organizational forms and work processes on the supply
side, or through the reduction of search costs and new customization opportunities.
On the other hand, value appropriation and pricing strategies depend on rivalry and
new entry possibilities, increases in market transparency, and new products and price
among others.
mechanisms. The changes that the Internet provokes on the value creation and value
appropriation sides will define how overall competitive dynamics are going to change
the industry structure
Internet business models
The Internet offers numerous opportunities for the small entrepreneur. A number of these are:
  The Web as a shop window for goods and services, either
  to inform prospective clients/customers of product lines, or
  to enable products to be purchased online.
  The sale of high quality content delivered through the web.
  Offering high quality content free of charge, and
  accepting banner ads, and/or
  acting as an affiliate for relevant businesses.
  Operating a portal, or one stop gateway to sources of valuable content, and
  accepting banner ads, and/or
  acting as an affiliate for relevant businesses, and/or
  charging a commission on sales resulting from traffic delivered via the portal.
  Operating an online community, and
  accepting banner ads, and/or
  acting as an affiliate for relevant businesses, and/or
  offering a facility for members to sell content (for a commission), and/or
  allowing selected corporate partners, for a fee, to provide valuable content alongside links to their products.
  Offering Web-related services, e.g. visual design, navigational design, information structure design, programming, multimedia production, server hosting/administration, consultancy.
Offering other services, e.g. secretarial, translation, accountancy, graphic design, publishing.
To name but a few.
In all cases a high level of visibility is essential to generate sufficient levels of traffic. The Web is vast, there are few unique sites. The most successful of a group of similar sites are those which feature higher in search engine rankings, and are most frequently linked to by other quality sites. A whole industry has grown around optimising Web sites for high search engine placement.

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Leo Lingham


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18 years working managerial experience in business planning,
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24 years in management consulting covering business planning,strategic planning, marketing planning, product planning,
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