Business

Discuss whether organisation by system or product is best for monitoring and raising performance, Organisation of system is where a business is run by functional areas e.g. HR, finance etc, otherwise known as specialism’s, an example of this could be at a supermarket, where staff are separated into different departments like checkouts, produce, café etc. Organisation of product is when a business is organised by ‘profit centres’, where success is monitored by the amount of profit made by each product/store. An example of this would include Coca Cola Ltd, because they own different products such as, Coca Cola, Fanta, and Lilt etc. With a company like Coca Cola Ltd, its better that they’re organised by product, because they each have separate identities and their own responsibilities with goals & aims specific to that product, meaning that they have complete focus on their product’s performance, sales & profits. This would increase quality and production of the product, and motivation amongst staff because they have less pressure worrying about the other products, leading to a happier workforce and increased sales & profits. Another advantage of products being separated is that they can target their audience more effectively, for example, Powerade and Far Coast. Powerade is targeted at people interested in health and fitness and would most likely be sold in gyms & leisure centres, whereas Far Coast would be looking to sell their products to customers with busy lifestyles, and would be most likely be sold in café’s. However, being product organised has its restrictions, their resources are limited because the organisation itself has to split profit between each product, which may not be enough for the product to expand or keep up with demand from customers. In Coca Cola Ltd’s case they would obviously split profit in ratio to the products demands, for example Coca Cola is the most popular product therefore they need bigger factories and more money spent on ingredients than less favourable products such as Odwalla. But if they were to give Odwalla more money, they could invest in a specialised advertising manager, and focus on making the product better known, therefore increasing sales & profit, and making more money for Coca Cola Ltd. Being system organised benefits the business because each department will have managers specifically trained for that field, meaning that each department should be working to the best of their ability, fulfilling the businesses needs and increasing sales & profit. But with departments being separated, into different buildings and offices, employees are forced to communicate through email, fax and phone calls, making it harder to communicate efficiently because messages can easily be distorted or corrupted. Separated departments can have other disadvantages, demotivating staff is one. Some staff may feel restricted to that area, and feel that there is no opportunity for change of job or scenery, leading to a decrease in productivity and performance. But this depends on the type of employee; others may feel comfortable working in a routine and familiar environment. Functional areas make it easier to pinpoint where there is a problem within the business, e.g. sales are decreasing, therefore the responsibility will be passed down to the functional area in charge of that field, in this case that would be ‘Marketing’ and it will be their job to find out where the problem is coming from, why it is there and how they can solve it. Performance is monitored at directors meetings, with the leader of each specialism and owner/s of the business to discuss how the business is doing as a whole, what they can do to improve the business and what each specialism can do to contribute to the succession of the company. I don’t think that either organisation by system or product is better for monitoring and raising performance, I believe it depends on the type of business you are looking to improve. Conglomerate businesses would benefit most organisation by product, these businesses would include Arcadia, run by Phillip Green. And other big companies like Coca Cola Ltd. and Cadbury Ltd. Arcadia owns top high street stores such as Topshop and Dorothy Perkins, and the reason I think organisation by product is better for them is because it would be easier for each store to manage themselves rather than be a whole company trying to organise several stores, with different targets, profits and sales. However if we were to imagine Topshop as its own business, and not part of the high street giant Arcadia then I would recommend organisation by system. This is because they can split the company into specialism’s, like marketing, sales & HR. This would bring the best out of the business, making it as successful and as popular as it could possibly be, contributing huge profits to its owner Arcadia. However, if we were to use a different example, like Morrisons, which is its own company and not owned by a bigger company. Then obviously the profits would be split between the business’s functional areas, and not between its branches (referring to Arcadia and its different stores) So in conclusion to this, I recommend that single businesses should use system organisation, and conglomerate business should use product organisation to monitor and raise performance levels.