Organisational Structure Assignment

Added on - 22 Feb 2021

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1. How the formal approach (using structure, systems, processes) differs from the informalapproach (relationships, networks, unwritten rules) and analyse it.?Introduction:There are key differences between formal and informal organisations:Formal organisations are focused towards achieving specific goals. Informal organisationsare more focused towards human psychological needs. The organisational structure ofAdidas refers to the way management levels are established, and the way decisions aremade and implemented to achieve the desired goals pf the organisation. As a businessowner or company leader, understanding the differences between a formal and informalorganisational structure can help you make the best decision for your business.The main differences between an informal and formal organization are levels of structureand hierarchies that determine how members interact. Formal organisations are morestructured and rely on authority based upon chains of command. Informal organisations donot require hierarchies of authority or structured internal processes. They are not formed inorder to reach specific goals like a formal organization.Formal Organisational Structure Elements:In a formal organisational structure, the management explains everything to theiremployees and answer all the questions their employees have and clear their doubts andmake sure that their employees have now understood about the task or the work assignedto them.Formal structure organisations usually have a hierarchical pyramid structure with acompany’s CEO and senior managers at the top; mid-level managers in the middle; low-level managers at the bottom. Staff employees are expected to implement decisions andprocesses made at the levels above them, and they are not usually ask for their opinions orideas about how the company should operate.Informal Organisational Structure Elements:In an informal organisational structure, the business doesn’t operate under the commandsor guidelines given by the management. Under this structure, the business operates by asystem developed by the employees who have proven effective. This structure relies onrelationships forged between staff members, cooperation between teams andcommunication that focuses on achieving shared goals.Informal structures are unique for every company, because they are based on thepersonalities of the employees and collaborative techniques developed over time.
3.Explain the factors which we need to consider before taking a decision about tomake (In house) or Buy inventory from external supplier.Solution:The decision as to whether to make vs. buy a product is based on a variety of factors,including the cost of either option, whether the product is available from other vendors, theexpertise and resources your business has when it comes to manufacturing, and whetheryou have enough cash to make a purchase.Some of the factors are listed below which we should keep in mind before we take adecision of make or buy :Benefits of the "Make" Strategy:Often, the decision to make your products comes naturally, based on the product Adidas isselling. If, for instance, Adidas has manufactured an item that doesn’t exist anywhere else,so at that point Adidas will have no choice but to make it. This is one of the biggest benefitsof the make strategy – you can create a product that can’t be bought anywhere else.Adidas even doesn’t have to worry about scheduling or suppliers falling through on theirend of the deal. Adidas is more in control of everything, the management will know early onif Adidas won’t be able to fulfil the current orders on time. The business will also have anongoing understanding of whether it’ll be able to sustain current production and when it’llmay need to scale resources to keep up.Benefits of the "Buy" Strategy:One of the biggest advantages of the buy strategy is being able to find a manufacturer thathas expertise in a particular type of product. This manufacturer may even have beencreating these products for years, allowing for all of the bugs to be worked out in the earlydays. Adidas will also benefit from the facility and employees the manufacturer already hasin place, which will give Adidas the advantage of having those resources without having topay ongoing costs for them.Crunching the Numbers:Before the management of Adidas finalise the make-or-buy decision, the accountdepartment needs to do a little number crunching. It isn’t enough to look at the cost tomanufacture versus the cost to buy. The accountant needs to see, long-term, just how mucheither option will cost.One of the best ways to do this is through a break-even analysis. This is done using a simpleformula: Break-Even Point (Units) = Fixed Costs ÷ (Revenue per Unit – Variable Cost perUnit). That will give the accountants the break-even point.Using this formula, the accountant would do a make-or-buy analysis and add up all fixedcosts to manufacture the item. Those are the costs that will not change, such as the fixedwages you pay. The business also determine the revenue for each item produced and thevariable cost per unit, which are the expenses that can change, such as the cost of parts.This tells the management how many units they’ll need to manufacture to break even onthose costs.
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