PRINCIPLES OF BUSINESS

GRADE 10B

SECTION 1: THE NATURE OF BUSINESS

Topic 1: EARLY ECONOMIES:

The Economic Problem:

Our unlimited needs and wants far exceed the limited resources available to satisfy our needs.
Scarcity: is the fundamental economic problem of having seemingly unlimited human wants in a
world of limited resources. It states that society has insufficient productive resources to fulfil all
human wants and needs.
Scarcity leads to Choice–making a decision between several choices eg. Having to make choices
at the grocery store.
Economy: This is any place or location where economic activity exists i.e consumers and
producers interact. Economies also interact with government and the international sector.
Economic Animals – The individuals or persons who carry out the varying activities to survive
Economic Activity – The tasks done to survive for eg. Hunting, fishing etc.

SUBSISTENCE ECONOMY:
This occurred amongst early humans whose basic needs and wants were food shelter and
clothing. These are called our primary needs. The needs of a village were satisfied from nature
only providing for themselves. This is also called Direct Production.

Division of Labour and Specialisation

Nomadic people settled to different areas such as around rivers they began to specialise in
different tasks.

Definition of Specialisation:
This is the focusing of effort on one particular task or product.

Specialisation can exist in 6 different ways:

 1. By Product – eg. Fish farming, Poultry or Cattle
2. By Process – eg Oil extraction, Refining, By product (Lubricants, Gas)
3. By Firm – eg Microsoft – Software, Tablets, Cell Phones. Or Google
4. By Industry –eg Tourism, Transportation, Agriculture, Extractive.
5. By Region- eg Northern Region of Trinidad for Chive
6. By Nation- eg Trinidad’s Oil, Switzerland’s Chocolates, Germany’s Automobiles.

Advantages and Disadvantages of Specialisation:

Advantages
1. Less time to train a person performing one job.
2. Tools are less expensive because the jobs are less complex.
3. Output or production is increased. (Repetitive)
4. Machines can be used to speed up production.
5. Efficiency is improved (Time related)
6. The skill of the worker is improved through repetition
7. Standardised product (lower cost)

Disadvantages
1. Cannot work for niche or small markets
2. Difficult to motivate workers doing repetitive tasks
3. Industrial action is easier to organise and more effective (Workers cannot be easily
replaced)
4. Machines allow for individual craftsmanship to be lost.
5. Can be disruption in the chain of production if worker is ill or absent.
6. Occupational Immobility- unable to transfer skills learnt to other jobs.

BARTER:
In simpler economies before the advent of money bartering was used.
Definition:
Exchange (goods or services) for other goods or services without using money.

Disadvantages to Bartering:
1. A double coincidence of wants. Can only exchange if each party desires what the other
party has.
2. Rate of exchange could be difficult to be decided upon.
 3. Some goods are not divisible.
4. Goods are bulky and difficult to transport.
5. Store of Value – Some goods are perishable and cannot be stored for a long time.

BUSINESS TERMS AND CONCEPTS

Capital/ Producer goods- Tangible assets or goods that are used to produce other goods eg.
Buildings, Vehicles, Stock, Raw materials
Consumer goods- are goods that are ultimately consumed rather than used in the production of
another good. (Final Product)
Primary goods- are those goods that are utilised in the production of consumer goods eg. Raw
materials, agriculture, fishing, farming.
Consumer - a person who purchases goods and services for personal use and plays a vital role in
the economy.
Free good – A good that is not scare and available without limits eg. Air, Desert sand, water in
the oceans.
Private good- is defined in economics as "an item that yields positive benefits to people that is
excludable, i.e. its owners can exercise private property rights, preventing those who have not
paid for it from using the good or consuming its benefits eg Bread
Public Goods- These goods are non-exclusive i.e no one individual can exclude another
individual from receiving its benefits eg. Roads, Bridges
Merit Goods – These are goods that when used contributes a benefit to the wider society eg.
Education
Demerit Goods – These goods when used or consumed have a negative impact on the wider
society eg. Cigarettes
Labour – The human mental and physical effort in the production process.
Market – A mechanism which allows buyers and sellers to interact in their interest eg. Online
buying, financial market, commodity market.
Opportunity Cost – is the value of the loss incurred as the result of the sacrifice of the second
best option.
Organisation – The provision and coordination of the firms inputs to achieve the goals and
objective of the firm
Producer –A person that satisfies human wants by the organisation of resources to produce
goods and services.
Profit – Total Revenue Exceeds total Cost
Loss – Total Cost of Production exceeds Total Revenue
Service – Intangible actives that are provided to satisfy human wants eg. Banking, Cleaning,
Insurance
Direct Services – a service that is incurred for their own sake eg. Haircut, repairs.
Indirect Services – service that is received along with benefiting from a direct service or good
eg. Delivery of Pizza
Trade or Exchange – the exchange of goods and services for money e.g. international trade.
Distinguishable from barter which is exchange of goods for goods.
Commodity – This is a good that is traded, usually raw materials or primary agricultural
products such as copper or coffee.
Enterprise- This could mean a business. This is used to describe an undertaking of an activity
with some degree of difficulty or risk. This undertaking has specific purpose such as monetary
goals. Enterprise can also mean initiative which is daring to do something new or different,
challenging or risky.
Entrepreneurship- The practice of identifying a new innovation or opportunity, organising the
financing and other resources and taking the risk in the hope of creating wealth. The entrepreneur
is the individual who identifies the opportunity and risks the time and money to start to organise
this new adventure.
Trade- This is the process of buying and selling. Business engage in trade to make a profit.

Topic 2: THE DEVELOPMENT OF MONEY

Definition of Money- A commonly accepted instrument or medium of exchange e.. Coins, bank
notes, paper notes.

History of Money-
● The drawbacks of barter led to the development of money.
● Traditionally cowrie shells, cattle, salt and sugar were used as money.
● Then precious metals were used such as silver and gold but it became burdensome and
heavy.
 ● The goldsmiths kept the gold while issuing receipts to precious metal owners to represent
the value of gold owned.
● The owner would present the receipt when the gold was required.
● The bearer of the receipt would be paid the gold.
● Gold smiths started to issue smaller denominations such $10 and $5
● Now receipts became a representation of money.
● Goldsmiths became bankers and the amount of money exceeded the amount of gold or
silver in reserve due to loans being given out which led to greater economic activity.
● Central banks took over the issuing of money to stabilize the system.

Characteristics of Money:
1. Generally acceptable
2. Relatively Scarce
3. Easily divisible
4. Homogenous in nature
5. Fairly durable
6. Portable

Functions of Money:
1. As a medium of exchange
2. As unit of account - pricing
3. As a store of value – stored for future use eg. savings
4. Means of deferred payment- makes credit possible.

Legal Tender-
Legal tender is a medium of payment recognized by a legal system to be valid for meeting a
financial obligation. Paper currency and coins are common forms of legal tender in many
countries.

Fiat- An official order or decree by someone in power.

Limited legal tender money is accepted as legal tender only up to a certain limit eg coins
because of bulk.
Coins are token money and legal tender up to a small amount.
Banknotes or paper money- faith money and not valued to gold or silver.
Bank Deposits – upon which cheques can be drawn. Cheques are not legal tender the deposit is.
Near Money- Cheques, credit cards, debit cards, electronic transfer, bills of exchange, money
orders, bank drafts.
Medium of exchange- a commonly accepted form of payment for goods and services.
Representative money- Money of no intrinsic value that is used as money to claim value.
Legal Tender- money that has been accepted by law to be a medium of exchange
Cheques - A cheque is an order to the bank to make payments to the payee stated on it.
Credit Cards/Debit Cards
This allows the card holder to make payments by simply presenting the card to the seller.  A
credit card facility is actually a loan given to a customer and thus it is repaid at an interest.  A
debit card is issued against a customer’s account balance and is therefore not a loan.
Money Order
They can be used to make payments locally or overseas, as they are made out in the currency in
which they are to be paid. The payee will cash the money order at his bank.

A money order is basically a tool to transfer money or make payments. Think of it as an

alternative to a cheque. However, while cheques and money orders can serve a similar function,
and they also look quite similar, there are some important differences to consider.

Unlike regular cheques, money orders are prepaid. That means they're backed by large agencies
or corporations instead of individuals, making them especially valuable because of the safety and
reliability they provide.

Bank Draft
A bank draft is a cheque which guarantees payment to the receiver from the issuing bank. Bank
drafts can be made out to a payee in foreign currency and thus used for making overseas
payments. Bank drafts are obtained for a fee from a commercial bank.

● Getting a banker’s draft is like asking a bank to write a cheque for you – you give them
your money, and they give you a cheque for that amount to give to the person you’re
paying.

Bill of Exchange
This is used to pay for goods bought overseas on credit.  It is an order in writing from an
exporter (drawer) to an importer (drawee) requiring payments of a certain sum of money at a
fixed future date.  The time period allowed is normally three months.
Electronic Transfer
This is a system used to transfer funds electronically rather than paper-based payment methods.
Funds are transferred over a computer network and makes payments fast, safe and easy.
Examples include credit and debit card transactions, remittances (through companies such as
Western Union) and money transfers.
Tele-Banking
This system allows a bank’s customer to simply use the telephone to get his banking services
done rather than visiting the bank. Services include; checking account balances and transaction
history, opening a new account, transferring funds etc.
Internet Banking
This differs from tele-banking in that the internet is used to access the same services. Customers
can go on-line to view their balances and transaction history and transfer funds etc.
Ecommerce
Electronic commerce more popularly called ecommerce is the buying and selling of goods and
service using the internet. It allows for a full range of trading activities over the internet such as
advertising, placing orders, delivery and making payments.

Topic 3: PRIVATE AND PUBLIC SECTOR:

There are two main sectors of the economy: private and public.

The private sector

The private sector consists of small-, medium- and large-scale businesses. The owners of these
businesses are individuals who have set up on their own (sole traders), those who have formed
partnerships, and shareholders who are the owners of companies.

Individuals set up private businesses principally to earn a profit, and for the pleasure of running a
business and being their own boss. They might also have wider social concerns, such as to
provide essential services like hearing aids or incomes for those in need of a job.

Private sector businesses seek to anticipate customer requirements, and respond to signals
provided by the market in the form of demand and prices.

Tip
You should know that public corporations are government owned and are in the public sector. In
contrast, public companies are in the private sector and are owned by private shareholders.
The public sector

The public sector consists of enterprises owned and run by the government. In many countries,
the government owns and runs key utilities such as rail and bus companies; oil, gas and
electricity
industries; the central bank; and water companies such as National Water Commission in
Jamaica. Government departments directly run by government officials, such as the tax
department, are also part of the public sector.

Motives for operating in Motives for operating in

the public sector the private sector

Provision of goods and services To earn profit

Cater to the entire population Cater to a target market or niche

market

Provide public and merit goods, e.g. Provide consumer goods, etc.
education, national defence, etc.

Limited or no competition Strong competition among firms

Topic 4: ECONOMIC SYSTEMS:

Differentiate among the types of economic systems

Over time, countries have had to develop economic systems so that the key decisions about what
to produce, how to produce, and who will receive goods and services can be determined. As we
shall see below, what is referred to as the 'mixed economy' has become the most common form
of economic system.

Traditional (subsistence)
In the early days of development in the Caribbean, the islands were populated by indigenous
people who lived a largely subsistence way of life. Trade was carried out primarily through
bartering. People who populated the islands learned to provide for themselvesthrough fishing,
hunting, subsistence agriculture, and collecting fruits and berries. Subsistence therefore relates to
producing enough goods and services to live, but without making a significant surplus to build
for
the future. This economic system is simple, but limited.
Command or planned (socialist)
A command/planned economy is one in which the government creates plans for the production
of goods, jobs and how goods are allocated between citizens of the country. Some Caribbean
countries have embraced central planning more wholeheartedly than others, with Cuba being a
good example of a country in which (until recently) most of the decisions were made by the
state. Guyana is another example of a country in which many industries have been nationalised
to become state-controlled and managed.

In a socialist economy, long-term plans will be made by the government, for example a five-year
plan for production that sets out what the lead industries will be and how resources will be
allocated to these industries. State planning may focus more resources on capital industries (such
as ones that make machinery and equipment) and public utilities (such as electricity and
railways), and fewer resources on consumer goods industries (industries providing goods for
consumers).

Command economies are advantageous because they often lead to low

levels of unemployment and inequality; however, as there is a lack of
competition, there is no incentive for innovation and entrepreneurship.

Free market or capitalist

In contrast, a free market economy is one in which the decisions about how to produce, and what
to produce, are made by private businesses and consumers. This type of economy relies on
demand and supply. Consumers effectively 'vote' for the goods they want by buying them, and
businesses respond by serving these requirements, supplying goods that will reap a good profit
for the capitalists (owners of the businesses). Businesses in capitalist economies are all striving
for profits, which creates real incentives for innovation and entrepreneurship. However, it also
leads to massive inequality and waste.

Mixed (public and private)

A mixed economy combines elements of command (state) planning with the free market. Some
key decisions are made by the government, which might own some industries such as public
broadcasting, water and electricity. However, many decisions will be made by large and
small businesses, who will have considerable freedom to make their own business decisions.

The reality is that all countries in the Caribbean today have mixed economies, but some lean
more towards the free market and some more towards central planning, as illustrated by the chart
below.
Topic 5: BUSINESS FUNCTIONS AND STAKEHOLDERS:
Describe the functional areas of a business
The functional area of a business (business function) describes the work that needs to be carried
out by a particular section of a business. For example, the production department is made up of
specialists and non-specialists who focus on making the goods. Five of the key functional areas
of a business are described below.

Production
The production department is responsible for making goods to meet customer orders, to the
standards expected and in a safe way. In a company that concentrates on making goods on a large
scale, such as office chairs or cement, the production unit will usually be some form of factory or
other industrial unit, for example a cement works.

The department will be overseen by the production manager, who may sometimes be called the
factory manager or production director. He or she will manage the organisation of the production
lines, and will develop a regular (often weekly) plan of production activities. This will map out
the use of machinery and equipment, as well as the allocation of production workers between the
various production activities. Belowthe production manager are other, less senior managers, who
will help to make plans and schedules. Under these will be supervisors, with the responsibility
for supervising the production workers.

Much of modern business involves service activity (as opposed to product activity), therefore
new titles have developed relating to the main work carried out by a business. The term
"operations manager" or "operations director" is used frequently instead of production manager.
For example, in an insurance company, the head of operations may be responsible for creating
the production plans and schedules.

The production/operations department typically employs a lot more people than the other
functions described below (except in specialist organisations, for example those that concentrate
on marketing or research and development).

Marketing
The marketing department is responsible for identifying customer requirements, and developing
plans to satisfy these requirements. The marketing department is led by a marketing
director who, alongside the production director, is likely to be a member of the board of directors
of the company.

Marketing is often split into a number of specialist areas, and it is the responsibility of the senior
marketing managers to make sure these areas work closely together.

Important marketing functions include:

● Market research: carrying out and commissioning research to find out about customers
and their requirements, to understand customer perceptions of a product, and to find out
what the competition is doing.
● Advertising: creating television and radio commercials or other types of advertisements
to bring customers' attention to the product.
● Promotional activity: designing and delivering promotions to generate customer interest,
for example price reductions, free sample offers, etc.

Finance
The finance department provides financial information for a company.
It will be responsible for:
● Overseeing the raising of finance for the company, and servicing debts, for example by
making sure that interest is paid on loans.
● Keeping and presenting management accounts. These are created to help managers make
decisions such as whether to make a product or to buy it from another company and then
sell it. Management accounts help production managers to identify where savings can be
made to production processes.
● Keeping and presenting financial records. These set out the past financial performance of
a company, for example the sales made and costs incurred in the last 12 months, and how
much profit has been made.
The finance department will be staffed by financial and management accountants, and by
accounts clerks. Their work is highly structured, and they work to strict deadlines.

Human resources
The human resources (HR) function of a business is concerned with managing and motivating
people in an organisation. It is sometimes referred to as the personnel department. HR seeks to
look after people from the point when they are recruited until
they leave (and sometimes into their retirement). HR organises training and development,
including induction training when you first join an organisation. It also liaises with the trade
unions that represent workers in an organisation.

HR is responsible for creating job advertisements and job descriptions, setting out what a job role
contains. It will then help the relevant employees to organise selecting candidates for interview,
managing the interview, choosing suitable role holders, training them, managing their welfare at
work,paying them, taking away deductions for income taxes, managing aspects of sickness and
allowances for time taken off work, and finally
organising the termination of an employee's work, for example through retirement.

Research and development

Research and development (R&D) is concerned with carrying out research into new products and
processes, and developing prototypes into finished products that work effectively in the market.
Some organisations focus their work entirely on R&D, while for others this is just one aspect of
the organisation's work. For example, in a pharmaceutical or chemical company, R&D will be
carried out to create new products and to establish new formulae for existing products. R&D
specialists will need to have good technical training and understanding associated with their
company, for example scientific research knowledge or IT knowledge. The objective of R&D is
to keep a business abreast with - and at the leading edge of - new developments in the industry.

SECTION 1: THE NATURE OF BUSINESS

Topic 6: Ethical and Legal Issues in Business

Business owners are required to obey all legislation concerning the operations of a business.
These include, paying taxes, business registration, obtaining licenses when required etc. Business
owners should also operate their business based on integrity. This involves:

● Environmental awareness – reducing pollution and harmful effluents in the rivers and
seas. Avoiding tied selling (marrying of goods).
● Ensuring that the business is a bonafide firm or establishment and not using it as a front
for money laundering and other illicit activities.
● Ensuring that capital is legally obtained and not tainted with illegal operations as the
source of funding.
● In the operations of a business, payment of national insurance contributions and taxes.
SECTION 1: THE NATURE OF BUSINESS
Topic 6A: Ethical and Legal Issues in Business

The ethical and legal principles that must be adopted in the establishment and operation of
a business. These includes:

● The adoption of an organization code of ethics.

● Policies on environmental issues.
● Handling of personal information.

The negative effects of unethical and illegal practices on the business includes the
following:

● Misleading advertisements – unfair and fraudulent practice on the population;

● Withholding of tax – cheating the government of revenue;
● Unethical disposal of waste – pollution; and,
● Money laundering – distortions in the national economy.
 ● Untrue sale price – For example, writing the word sale on items for which the price
remains the same.

Consequences of Unethical and Illegal Practices

● Illegal business practices will result in legal consequence for business. This may include
large fines the loss of the business.  Legislation also protects consumers, competitors and
society from unethical practices of a business.
SECTION 1: THE NATURE OF BUSINESS
Topic 7: Careers in Business
SECTION 2: THE INTERNAL ORGANIZATIONAL ENVIRONMENT
Topic 8: Management (The Functions of Management)
Topic 8B: Management (The Functions of Management)
Topic 9C: Management (The Functions of Management)
Topic 8D: Management (The Functions of Management)

Identify the stakeholders involved in business activities

A stakeholder is a person or group who has an interest in business activities. For example, the
diagram below details the stakeholders involved in the business Grace Foods.

Grace Foods produces a range of Caribbean cuisine and foods that are sold in the Caribbean, the
United States, the United Kingdom and elsewhere. The company was created in 1922 with the
intentionof supplying Jamaica with food supplies, initially selling foods like salted fish, flour and
rice. Today, it sells far more, and everyone in the Caribbean is familiar with Grace Foods. The
different types of stakeholders involved in a business are detailed further below.

Owners
The owners of the company are the shareholders. Today, there are many shareholders in Grace
Foods. These shareholders are mostly financial companies seeking a good investment, as well as
people who benefit from Grace Foods' pension fund, descendants of the Kennedy family,
employees and others. (Grace Foods was originally set up by John Grace and Fred Kennedy.
Descendants of the Kennedy family are still shareholders in the company.) All of these
shareholders want Grace Foods to do well and to make a healthy profit. The stake that a
shareholder has in the company is called shares, and the share of the profit they receive each year
comes in the form of dividends.
Employees
Employees are contracted to work for an organisation in return for a wage or salary. The stake
that employees have in a company is their job and the wages that come with it. For example,
employees at Grace Foods want to feel proud to work for such an important organisation, and the
better the company does, the better the chance of receiving a wage increase. Employees who are
also shareholders will take regular dividends.

Consumers
Consumers benefit from good-quality products sold by companies at what they consider to be
affordable prices. Consumers want a steady supply of the goods they like, such as Grace baked
beans and Grace aloe vera drink. They want these products to have good nutritional qualities,
and to be healthy and safe to consume. They want these products to be available at their
neighbourhood stores regardless of whether they live in Jamaica, London or New York.

Suppliers
Grace Foods' suppliers include large- and small-scale farmers as wellas manufacturers of
non-food products and a host of other suppliers such as those supplying packaging materials.
These suppliers also want Grace Foods to do well because, for many of them, the company will
be a major customer taking regular supplies of a range of Caribbean food ingredients. Suppliers
will often have supplied products and materials on credit, and so have a vested interest because
they will expect to be paid at a future date.
Communities
Grace Foods supports local communities. Employees are encouraged to engage in community
schemes, particularly in educational, environmental and cultural programmes. The communities
in which Grace Foods operates therefore have a strong interest in the success of the company and
in partnership relationships with Grace Foods. Grace Foods offers scholarships to students at
colleges and universities. In addition, the company pays careful attention to the needs of local
communities, making food donations to the poor and those in need.
The environment
The environment is a key stakeholder in business. There are many ways that companies can
degrade the environment through pollution and wasteful use of resources. At its manufacturing
locations, Grace Foods has well-established processes that reduce waste and save energy. The
company is committed to meeting standards set by the International Organization for
Standardization, and has in place a number of environmental management systems. These
include careful management of the use of water in production processing, and careful
management of food waste so that as much as possible can be recycled, for example as animal
feed.
Future generations
Future generations are key stakeholders in any process of decision making. Decisions made
today by companies like Grace Foods will often have long-term effects, such as the provision of
healthy foods that enable people to stay healthier for longer. If current resources are used to build
hospitals, schools and factories, then these will benefit people who may not yet be bom. The
government also plays a key role in providing business solutions that benefit future generations
through long-term investment planning. However, just as future generations will benefit from
wise business activity today, they will also lose out due to poor decision-making. Poor
decision-making about materials used in products and packaging creates waste, pollution and
other harmful effects for society.

Government
The government is a key stakeholder in business activity, as it wants to see a prosperous
economy that benefits citizens. The government will also benefit from larger tax revenues when
businesses like Grace Foods are doing well. The government is also a key player in business
activity, for example in the running of utilities such as water and gas provision.

Topic 10: Organizational Structures & Charts

Organisational Structure- refers to the way a business is structured to achieve maximum
efficiency. An organizational structure defines how activities such as task allocation,
coordination and supervision are directed towards the achievement of organizational aims
Formal Structure - Formal organization is a fixed set of rules of intra-organization procedures
and structures. As such, it is usually set out in writing eg. Org Chart.
Informal Structure – the unofficial relationships that exist in the firm.
Lines of Communication- this represents the standards and procedures associated with the
movement of information

Organizational Charts
An organizational chart is a diagram of the organization of an enterprise. Its pyramid shape
illustrates the hierarchy system that exists in the organization. The most senior position in the
organization is placed by itself at the apex. The pyramid gets wider towards the bottom depicting
the greater number of workers at its base.

Those who have the power to issue commands have authority in an organization. In the
organization chart above the sales manager has the authority in the Sales department.  All
persons with the same level of authority are placed at the same level on the chart. For example
the sales manager and the accounts manager have the same level of authority in their various
departments.
Responsibility is the capacity to accept duties and to carry out their tasks. For example, both sales
supervisors are responsible to the sales manager.
The chart shows the following:
-each person’s position
-the number of levels of managers
-to whom each employee is responsible (reports) to
-the span of or (area) of control for senior staff members.
Types of Organizational Charts
1. Line
2. Staff
3. Functional
4. Committee

We are looking at the first two Organizational chart – Line Organization and Functional
Organizational
SUMMARY
Line or Direct
The line organizational chart depicts a straight line of command. Authority is said to flow
downwards only in the line organization. The line organizational structure is found in schools or
in the military.
Advantages
1. Simplicity- simple to understand and implement.
2. Responsibility is fixed- Every employee is clear about whom he is answerable to and
who is accountable for him.
3. Unified Control – Good control and direction.
4. Quick decisions made.
5. Flexibility- changes to circumstances
Disadvantages
1. Overloading of the executive as several duties are managed independently.
2. Lack of Specialisation – because different jobs are supervised.
SUMMARY
Functional Organizational Chart
The Functional organization chart is a diagram of an organization that is arranged by its
functions. For example, there is a manager in charge of marketing, and another in charge of
production.  This type of organization has an advantage over the Line as experts are appointed to
run each department. All managers report to the General Manager.

The Functional organizational chart combines the straight line of command of the line
organization with horizontal dotted diagonal lines representing functional authority. The dotted
diagonal lines in the figure above show the authority that the Human Resource Manager has over
other departments. The Human Resource Manager is allowed authority in these department over
human resource matters only e.g. to hire and fire workers. He therefore cannot give directives on
production or marketing matters.
Advantages
1. Specialisation – allows for specialisation by function thereby developing their skills.
2. Efficiency and Productivity improved.
Disadvantages
1. Lack of Teamwork- difficulty working with other units.
2. Difficult Management Control- Difficult to manage a growing organisation.
Topic 9B: Organizational Structures & Charts

SUMMARY
Line and Staff Organizational Chart
The Line and Staff organizational chart combines the line and functional organization with the
addition of staff personnel. Staff workers assist and advise line workers. Staff workers include
consultants, advisors, company lawyers, executive secretary, auxiliary workers etc.  Staff officers
do not have authority, that is, the power to delegate tasks to subordinates in the organization.
Their main role is to advise and assist line officers. This is why there are no vertical lines
connecting staff officers to any other member of staff on the chart. They are therefore, placed at
the side directly below the line officer whom they assist or advise.
Advantages
1. Decision efficiency- able to use staff specialist skills without interference of a
hierarchy.
2. Expert Advice
3. Productivity increases because line managers can have more free time to focus on
other duties.
Disadvantages
1. Authority- confusion between the line and staff positions for authority.
2. Decision Making- line position relies heavily on a staff position for decision making.
3. Conflict between staff and line positions.
4. It is more costly to hire staff specialist.

Committee Organizational Chart

Committees are advisory bodies. They are usually appointed to advise organizations.   Examples
of committees include; parent teachers associations and student councils which are committees
within a school organization. Committees usually delegate certain duties to sub-committees. For
example, an executive committee may appoint a finance committee to advise it on financial
matters. Note that an element of the line organization exists in the committee organization as all
sub-committees are responsible to the executive committee.
Advantages
1. Improved problem solving because of differing ideas.
2. Authority is shared
3. Different interest groups are represented.
4. Assist in coordination amongst various divisions.
Disadvantages
1. High cost and long time to make decision.
2. Conflict among members.
3. Dominant members may control decision making.
4. No one particular person can be held responsible.

Matrix structure:
This is a combination structure that joins functional areas with structures for projects and teams.
The functional areas flow vertically down the chain of command. Simultaneously, a worker can
be horizontally attached to a project team. Matrix structures offer flexibility for organisation
employees to utilize skills and competencies. It is based on the individual having expertise in
functional areas and be able to transfer these skills to projects. Difficulties can occur in areas of
control of tasks, role ambiguity and role conflict.

Advantages
 1. Efficient Information Exchange
2. Increased Motivation – shared decision making encourages employees

Disadvantages
1. Internal Complexity- this may cause miscommunication and confusion because of dual
authority.
2. Expensive to Maintain and Internal Conflict

Chain of Command- The definition of a chain of command is an official hierarchy of authority

that dictates who is in charge of whom and of whom permission must be asked. An example of
chain of command is when an employee reports to a manager who reports to a senior manager
who reports to the vice president who reports to the CEO.
Types of Org Charts:
1. Vertical
2. Circular
3. Horizontal

Departmentalization- is an aspect of organizational design that includes the subdivision of a

business into units based on their function or other criteria.
Types of Departmentalization:
1. By Function
2. By Process or Equipment
3. By Geographic Territory
4. By Product
5. By Customer and Client
Topic 11: Organizational Hierarchies
Topic 12: Leadership (The Characteristics of a Good Leader)

Leadership style refers to a leader's pattern of behaviour, and the ways in which leaders take
decisions, manage change and deal with their staff. There are three main styles: autocratic,
democratic and laissez-faire.
● Autocratic means making decisions by oneself. Autocratic leaders make decisions on
their own, and then tell staff what to do and how to do it. This tightly controlled approach
is sometimes called 'tell and do. The autocratic manager will often provide clear
instructions, but staff may be demotivated because there is little opportunity to share their
own ideas. Autocratic leaders are usually inflexible and often operate by using threats,
instilling fear and intimidating employees.
● Democratic means making decisions after considering everyone's ideas. In persuasive
democratic management, a leader will make decisions and persuade the followers that
these are the right decisions. In consultative democratic management, the followers will
have a lot of input into the discussion (i.e. they are "consulted"), even if the leader makes
the final decisions. Democratic leaders are often referred to as participatory leaders. They
often impact employees by giving job satisfaction, empowerment and a sense of
teamwork.
● Laissez-faire is a French phrase which means "let (them) do (it)", and it is used to
describe a loose management style. Managers create guidelines and objectives, but then
leave staff to carry out the tasks themselves. This can be successful if the employees are
motivated and are good decision-makers. However, it can lead to chaos if staff need
strong direction from the manager and are unable, for various reasons, to make decisions
themselves.
● Two further styles of leadership are charismatic and transformational. A charismatic
leadership style is where the leader has a strong personality or charisma, and can
influence others to follow. Transformational leadership is where employees are inspired
to embrace changes in the organisation regardless of the consequences.
The table below summarises the main styles of leadership.
Topic 14: Strategies used by Employees and Employers
Strategies used by employers
● Lock outs
● Scab labour
● Public relations
● Threats of redundancies
● Change of contract
● Closure
● Dismissing

Strategies used by employees

● Strike action
● Work to rule
● Go slow
● Overtime ban
● Sick out
● Sit in
● Picketing

Topic 14B: Strategies used to resolve disputes

SUMMARY
Topic 15: The Role of Trade Unions
Topic 17: Motivating Employees
Specific Objectives:
Topic 19: Communication (Internal & External)
SUMMARY
Topic 20: Starting a Business
Topic 20B: Starting a Business (Reasons & essential steps)
Topic 21: The Significance of Collateral