Business Awareness Chapter 2 Flashcards
(36 cards)
What is a functional structure?
An organization divided into separate departments or functions where employees are grouped by specialism and departmental targets are set.
Define divisional structure.
An organizational structure where a larger organization is divided into divisions or semiautonomous blocks, focusing on geographic areas or specific products.
When is a divisional structure particularly useful?
When a company makes different classes of products/services or when activities are geographically dispersed.
What is a matrix structure?
An organizational structure that crosses a functional structure with a product/customer/project structure, suitable for project-based work.
Define governance in an organizational context.
The systems by which an organization regulates and controls itself.
What is the agency problem?
A situation where directors may act in their own best interests rather than as agents of the company and its shareholders.
What is centralization?
The concentration of decision-making authority at the top levels of the organizational hierarchy.
What is decentralization?
The distribution of decision-making authority to lower levels of the organizational hierarchy.
What are strategic risks?
Long-term risks created by the organization’s strategy or strategic objectives, influenced by external factors.
Define operational risks.
Major risks that affect an organization’s ability to execute its strategic plan, related to internal factors.
What are business risks?
Risks specific to the organization due to the industry they operate in, such as product failure and poor investments.
What are non-business risks?
Risks that affect all organizations, such as event risks like fire and floods, or financial risks like economic recession.
What is the role of the finance function?
To support other departments within the organization.
Define stakeholder.
A person or group of persons who have a stake (an interest) in the organization.
How may stakeholders influence organizations?
Through their interests and stakes in the organization.
Fill in the blank: The matrix structure is appropriate when an organization requires _______.
[cross-functional working]
True or False: The agency problem is when directors act in the best interests of shareholders.
False
List the types of risk mentioned.
- Strategic risks
- Operational risks
- Business risks
- Non-business risks
What is a functional structure?
An organization divided into separate departments or functions where employees are grouped by specialism and departmental targets are set.
Define divisional structure.
An organizational structure where a larger organization is divided into divisions or semiautonomous blocks, focusing on geographic areas or specific products.
When is a divisional structure particularly useful?
When a company makes different classes of products/services or when activities are geographically dispersed.
What is a matrix structure?
An organizational structure that crosses a functional structure with a product/customer/project structure, suitable for project-based work.
Define governance in an organizational context.
The systems by which an organization regulates and controls itself.
What is the agency problem?
A situation where directors may act in their own best interests rather than as agents of the company and its shareholders.
