CH.7 ORGANIZING THE BUSINESS ENTERPRISE
INTRO Introducing the Irving Empire
o Irving family of New Brunswick = legendary success story in Canadian business.
1. = 3 largest fortune and is valued at ~$6 billion
2. Founded in 1882 by JD Irving since then has been passed on down generation to
3. Tensions arise at some point b/w 3 owners/brothers b/c they felt limited in the power they
This was resolved by restructuring the company and let the 2 main parts go their
o Dividing Trusts: To divide up the company, dozens of family members
who have an interest will have to agree on what the restructuring will
o Shifting fortunes of the 2 main businesses (energy & forestry)
4. By 2009 oil prices had dropped dramatically and so had the Canadian dollar, so the
fortunes of the 2 main parts of the Irving empire were converging once again
WHAT IS THE ORGANIZATIONAL STRUCTURE?
o All businesses have common structural and operating components, each of which has a specific
o Organizational structure: the specification of the jobs to e done w/in a businesss and how those
jobs relate to one another
o DETERMINANTS OF ORGANIZATIONAL STRUCTURE
1. Many elements work together to determine an organizations structure:
Imp ones: organizations purpose, mission, and strategy. Size, technology, and
changes in envtal circumstances
o THE CHAIN OF COMMAND
1. Organization chart: illustrates the companys structure and show employees where they
fit into the firms operations
2. Chain of command: the reporting relationships w/in the company
Ex. Plant manager report directly to the vice-president of production who in turn
reports to the president
BUILDING BLOCKS OF ORGANIZATIONAL STRUCTURE
o 1ststep in developing the structure of any business is twofold: (basic building blocks of all
1. Specialization: determining who will do what
Job specialization: the process of identifying the specific jobs that need to be
done and designating the ppl who will perform there
Specialization and Growth
o In a very small org. the owner may perform every jobbut as it grows
so does the need to specialize jobs sot others can perform there ex.
o Job specialization is a natural part of orgl growth.
It has certain advantages individual jobs can be performed >
efficiently, jobs=easier to learn, and easier to replace ppl who
leave the organization. If its carried to far and jobs become too narrowly defined, ppl
get bored, derive less satisfaction from their jobs, and often
lose sight of how their contributions fit into the overall org.
2. Departmentalization: the process of grouping jobs into logical units. determining how
ppl performing certain tasks can best be grouped together. Control and coordination are
narrowed and made easier, and top managers can see > easily how various units are
Profit centre: a separate company unit responsible for its own costs and profits
Functional departmentalization: departmentalization according to fxns or
activities such firms have production, marketing and sales, human resource,
accounting, and finance depts.
Customer departmentalization: departmentalization according to they types of
customers likely to buy a given product. In gral, its > efficient and customers get
service in part b/c salespeople tend to specialize and gain expertise in their
Product departmentalization: dividing an org. according to the specific
product or service being created.
o Ex. 3M corp : operates diff. Divisions for Post-it brand tape flags,
Scotch-Brite scrub sponges, and the Sarns 9000 perfusion system for
Geographical departmentalization: departmentalization according to the area
of the country or world supplied
PRODUCT VS. GEOGRAPHICAL DEPARTMENTALIZATION: RIGHT