ACCA (BT) Business and Technology Study Text PDF

Valid from 1 September 2022 to 31 August 2023 ACCA (BT) Exam-focused ACCA Kaplan’s vast classroom experience hel...

Valid from 1 September 2022 to 31 August 2023 ACCA (BT) Exam-focused ACCA Kaplan’s vast classroom experience helps many students pass first time. The books are designed to cover the whole syllabus and they reflect how topics are taught in the classroom, focusing on what will be required of you in the exam. Business and Technology Business and Student-friendly Using accessible language and engaging Technology (BT) formats to help you understand more complex areas, Kaplan simplifies the learning process to make it easier for you to succeed. to 31 August 2023 Valid from 1 September 2022 Written by our expert tutors All Kaplan study materials are written by our subject specialists, experienced tutors who teach the paper so they know what works for students and how best to deliver it. Innovative solutions More than just books, our study materials are supported by a wealth of free online resources, including testing and course assessments. All accessible from our online learning environment MyKaplan. All the resources have been designed to keep you on your study plan and help you pass first time. Kaplan Publishing UK Study Text ISBN 978-1-83996-109-0 Study Text 9 781839 961090  ACCA Applied Knowledge ACCA Diploma in Business and Technology (RQF Level 4) Business and Technology (BT/FBT) Study Text  KAPLAN PUBLISHING’S STATEMENT OF PRINCIPLES LINGUISTIC DIVERSITY, EQUALITY AND INCLUSION We are committed to diversity, equality and inclusion and strive to deliver content that all users can relate to. We are here to make a difference to the success of every learner. Clarity, accessibility and ease of use for our learners are key to our approach. We will use contemporary examples that are rich, engaging and representative of a diverse workplace. We will include a representative mix of race and gender at the various levels of seniority within the businesses in our examples to support all our learners in aspiring to achieve their potential within their chosen careers. Roles played by characters in our examples will demonstrate richness and diversity by the use of different names, backgrounds, ethnicity and gender, with a mix of sexuality, relationships and beliefs where these are relevant to the syllabus. It must always be obvious who is being referred to in each stage of any example so that we do not detract from clarity and ease of use for each of our learners. We will actively seek feedback from our learners on our approach and keep our policy under continuous review. If you would like to provide any feedback on our linguistic approach, please use this form (you will need to enter the link below into your browser). https://docs.google.com/forms/d/1Vc4mltBPrfViy8AhfyKcJMHQKBmLaLPoa_WPqFNf4MI/edit We will seek to devise simple measures that can be used by independent assessors to randomly check our success in the implementation of our Linguistic Equality, Diversity and Inclusion Policy. P.2 KAPLAN PUBLISHING  British library cataloguing-in-publication data A catalogue record for this book is available from the British Library. Published by: Kaplan Publishing UK Unit 2 The Business Centre Molly Millars Lane Wokingham Berkshire RG41 2QZ ISBN 978-1-83996-109-0 © Kaplan Financial Limited, 2022 The text in this material and any others made available by any Kaplan Group company does not amount to advice on a particular matter and should not be taken as such. No reliance should be placed on the content as the basis for any investment or other decision or in connection with any advice given to third parties. Please consult your appropriate professional adviser as necessary. Kaplan Publishing Limited and all other Kaplan group companies expressly disclaim all liability to any person in respect of any losses or other claims, whether direct, indirect, incidental, consequential or otherwise arising in relation to the use of such materials. Printed and bound in Great Britain Acknowledgements We are grateful to the Association of Chartered Certified Accountants and the Chartered Institute of Management Accountants for permission to reproduce past examination questions. The answers have been prepared by Kaplan Publishing. These materials are reviewed by the ACCA examining team. The objective of the review is to ensure that the material properly covers the syllabus and study guide outcomes, used by the examining team in setting the exams, in the appropriate breadth and depth. The review does not ensure that every eventuality, combination or application of examinable topics is addressed by the ACCA Approved Content. Nor does the review comprise a detailed technical check of the content as the Approved Content Provider has its own quality assurance processes in place in this respect. KAPLAN PUBLISHING P.3 P.4 KAPLAN PUBLISHING  Contents Page Chapter 1 The business organisation 1 Chapter 2 Business organisation and structure 17 Chapter 3 Organisational culture in business 57 Chapter 4 Information technology and information systems in business 75 Chapter 5 Stakeholders in business organisations 113 Chapter 6 External analysis – political and legal factors 125 Chapter 7 External analysis – economic factors 149 Chapter 8 External analysis – social, environmental and technological factors 205 Chapter 9 Competitive factors 227 Chapter 10 Professional ethics in accounting and business 247 Chapter 11 Governance and social responsibility in business 275 Chapter 12 Law and regulation governing accounting 301 Chapter 13 Accounting and finance functions within business 317 Chapter 14 Financial systems and procedures 341 Chapter 15 The relationship between accounting and other business functions 377 Chapter 16 Audit and financial control 389 Chapter 17 Fraud, fraudulent behaviour and their prevention in business 423 Chapter 18 Leadership, management and supervision 451 Chapter 19 Recruitment and selection of employees 479 Chapter 20 Individual, group and team behaviour 507 Chapter 21 Motivating individuals and groups 529 Chapter 22 Learning and training at work 549 KAPLAN PUBLISHING P.5  Chapter 23 Review and appraisal of individual performance 571 Chapter 24 Personal effectiveness at work 591 Chapter 25 Communicating in business 615 Index I.1 P.6 KAPLAN PUBLISHING  Introduction KAPLAN PUBLISHING P.7  How to Use the Materials These Kaplan Publishing learning materials have been carefully designed to make your learning experience as easy as possible and to give you the best chances of success in your examinations. The product range contains a number of features to help you in the study process. They include: 1 Detailed study guide and syllabus objectives 2 Description of the examination 3 Study skills and revision guidance 4 Study text 5 Question practice The sections on the study guide, the syllabus objectives, the examination and study skills should all be read before you commence your studies. They are designed to familiarise you with the nature and content of the examination and give you tips on how to best to approach your learning. The Study Text comprises the main learning materials and gives guidance as to the importance of topics and where other related resources can be found. Each chapter includes:  The learning objectives contained in each chapter, which have been carefully mapped to the examining body's own syllabus learning objectives or outcomes. You should use these to check you have a clear understanding of all the topics on which you might be assessed in the examination.  The chapter diagram provides a visual reference for the content in the chapter, giving an overview of the topics and how they link together.  The content for each topic area commences with a brief explanation or definition to put the topic into context before covering the topic in detail. You should follow your studying of the content with a review of the illustration/s. These are worked examples which will help you to understand better how to apply the content for the topic.  Test your understanding sections provide an opportunity to assess your understanding of the key topics by applying what you have learned to short questions. Answers can be found at the back of each chapter.  Summary diagrams complete each chapter to show the important links between topics and the overall content of the paper. These diagrams should be used to check that you have covered and understood the core topics before moving on. P.8 KAPLAN PUBLISHING  Quality and accuracy are of the utmost importance to us so if you spot an error in any of our products, please send an email to [email protected] with full details, or follow the link to the feedback form in MyKaplan. Our Quality Co-ordinator will work with our technical team to verify the error and take action to ensure it is corrected in future editions. Icon Explanations Definition – Key definitions that you will need to learn from the core content. Key point – Identifies topics that are key to success and are often examined. Tricky topic – When reviewing these areas care should be taken and all illustrations and Test your understanding exercises should be completed to ensure that the topic is understood. Supplementary reading – These sections will help to provide a deeper understanding of core areas. The supplementary reading is NOT optional reading. It is vital to provide you with the breadth of knowledge you will need to address the wide range of topics within your syllabus that could feature in an exam question. Reference to this text is vital when self- studying. Test your understanding – Exercises for you to complete to ensure that you have understood the topics just learned. Illustration – Worked examples help you understand the core content better. Progression – This symbol links the topics in the chapter to other relevant papers in the ACCA syllabus. KAPLAN PUBLISHING P.9  On-line subscribers Our on-line resources are designed to increase the flexibility of your learning materials and provide you with immediate feedback on how your studies are progressing. If you are subscribed to our on-line resources you will find: 1 On-line reference ware: reproduces your Study text on-line, giving you anytime, anywhere access. 2 On-line testing: provides you with additional on-line objective testing so you can practice what you have learned further. 3 On-line performance management: immediate access to your on-line testing results. Review your performance by key topics and chart your achievement through the course relative to your peer group. Syllabus introduction Syllabus background The aim of ACCA Business and Technology/FIA Diploma in Business and Technology, Business and Technology, is to introduce students who may not have a business background to the business, which as an entity is made up of people and systems which interact with the environment and with each other. Objectives of the syllabus  Understand the purpose and types of business and how they interact with the key stakeholders and the external environment.  Understand business organisation structure, functions and the role of corporate governance.  Recognise the functions, systems and new technologies in accountancy and audit in communicating, reporting and assuring financial information, including the effective compliance, internal control and security of financial and other data.  Recognise the principles of authority and leadership and how teams and individuals are recruited, managed, motivated and developed.  Understand the importance of personal effectiveness as the basis for effective team and organisational behaviour.  Recognise that all aspects of business and finance should be conducted in a manner which complies with and is in the spirit of accepted professional ethics and professional values. P.10 KAPLAN PUBLISHING  Core areas of the syllabus  The business organisation, its stakeholders and the external environment.  Business organisational structure, functions and governance.  Accounting and reporting systems, compliance, controls, technology and security.  Leading and managing individuals and teams.  Personal effectiveness and communication.  Professional ethics in accounting and business. ACCA Performance objectives In order to become a member of the ACCA, as a trainee accountant you will need to demonstrate that you have achieved nine performance objectives. Performance objectives are indicators of effective performance and set the minimum standard of work that trainees are expected to achieve and demonstrate in the workplace. They are divided into key areas of knowledge which are closely linked to the exam syllabus. There are five Essential performance objectives and a choice of fifteen Technical performance objectives which are divided into five areas. The performance objectives which link to this exam are: 1 Ethics and professionalism (Essential) 2 Stakeholder relationship management (Essential) 3 Governance, risk and control (Essential) 4 Leadership and management (Essential) The following link provides an in depth insight into all of the performance objectives: https://www.accaglobal.com/content/dam/ACCA_Global/Students/per/PER- Performance-objectives-achieve.pdf KAPLAN PUBLISHING P.11  Progression There are two elements of progression that we can measure: first how quickly students move through individual topics within a subject; and second how quickly they move from one course to the next. We know that there is an optimum for both, but it can vary from subject to subject and from student to student. However, using data and our experience of student performance over many years, we can make some generalisations. A fixed period of study set out at the start of a course with key milestones is important. This can be within a subject, for example ‘I will finish this topic by 30 June’, or for overall achievement, such as ‘I want to be qualified by the end of next year’. Your qualification is cumulative, as earlier papers provide a foundation for your subsequent studies, so do not allow there to be too big a gap between one subject and another. We know that exams encourage techniques that lead to some degree of short term retention, the result being that you will simply forget much of what you have already learned unless it is refreshed (look up Ebbinghaus Forgetting Curve for more details on this). This makes it more difficult as you move from one subject to another: not only will you have to learn the new subject, you will also have to relearn all the underpinning knowledge as well. This is very inefficient and slows down your overall progression which makes it more likely you may not succeed at all. In addition, delaying your studies slows your path to qualification which can have negative impacts on your career, postponing the opportunity to apply for higher level positions and therefore higher pay. You can use the following diagram showing the whole structure of your qualification to help you keep track of your progress. P.12 KAPLAN PUBLISHING  Syllabus objectives We have reproduced the ACCA’s syllabus below, showing where the objectives are explored within this book. Within the chapters, we have broken down the extensive information found in the syllabus into easily digestible and relevant sections, called Content Objectives. These correspond to the objectives at the beginning of each chapter. Syllabus learning objective Chapter reference A THE BUSINESS ORGANISATION, ITS STAKEHOLDERS AND THE EXTERNAL ENVIRONMENT 1 The purpose and types of business organisation 1 (a) Define ‘business organisations’ and explain why they are formed. (b) Describe common features of business organisations. (c) Outline how business organisations differ. (d) List the industrial and commercial sectors in which business organisations operate. (e) Identify the different types of business organisation and their main characteristics (i) Commercial (ii) Not-for-profit (iii) Public sector (iv) Non-governmental organisations (v) Cooperatives. 2 Stakeholders in business organisations 5 (a) Define stakeholders and explain the agency relationship in business and how it may vary in different types of business organisation. (b) Define internal, connected and external stakeholders and explain their impact on the organisation. (c) Identify the main stakeholder groups and the objectives of each group. (d) Explain how the different stakeholder groups interact and how their objectives may conflict with one another. (e) Compare the power and influence of various stakeholder groups and how their needs should be accounted for, such as under the Mendelow framework. KAPLAN PUBLISHING P.13  Syllabus learning objective Chapter reference 3 Political and legal factors affecting business 6 (a) Explain how the political system and government policy affect the organisation. (b) Describe the sources of legal authority, including supra- national bodies, national and regional governments. (c) Explain how the law protects the employee and the implications of employment legislation for the manager and the organisation. (d) Identify the principles of data protection and security. (e) Explain how the law promotes and protects health and safety in the workplace. (f) Recognise the responsibility of the individual and organisation for compliance with laws on data protection, security and health and safety. (g) Outline principles of consumer protection such as sale of goods and simple contract. 4 Macroeconomic factors 7 (a) Define macro-economic policy and explain its objectives. (b) Explain the main determinants of the level of business activity in the economy and how variations in the level of business activity affect individuals, households and businesses. (c) Explain the impact of economic issues on the individual, the household and the business: (i) inflation (ii) unemployment (iii) stagnation (iv) international payments disequilibrium. (d) Describe the main types of economic policy that may be implemented by government and supra-national bodies to maximise economic welfare. (e) Recognise the impact of fiscal and monetary policy measures on the individual, the household and businesses. P.14 KAPLAN PUBLISHING  Syllabus learning objective Chapter reference 5 Microeconomic factors 7 (a) Define the concept of demand and supply for goods and services. (b) Explain elasticity of demand and the impact of substitute and complementary goods. (c) Explain the economic behaviour of costs in the short and long-term. (d) Define perfect competition, oligopoly, monopolistic competition and monopoly. 6 Social and demographic factors 8 (a) Explain the medium and long-term effects of social and demographic trends on business outcomes and the economy. (b) Describe the impact of changes in social structure, values, attitudes and tastes on the organisation. (c) Identify and explain the measures that governments may take in response to the medium and long-term impact of demographic change. 7 Technological factors 8 (a) Explain the effects of technological change on the organisation structure and strategy (i) Downsizing (ii) Delayering (iii) Outsourcing. (b) Describe the impact of information technology and information systems development on business processes and the changing role of the accountant in business as a result of technological advances. 8 Environmental factors 8 (a) List ways in which the business can affect or be affected by its physical environment. (b) Describe ways in which businesses can operate more efficiently and effectively to limit damage to the environment. (c) Identify the benefits of economic sustainability to a range of stakeholders. KAPLAN PUBLISHING P.15  Syllabus learning objective Chapter reference 9 Competitive factors 9 (a) Identify a business's strengths, weaknesses, opportunities and threats (SWOT) in a market and the main sources of competitive advantage. (b) Identify the main elements within Porter’s value chain and explain the meaning of a value network. (c) Explain the factors or forces that influence the level of competitiveness in an industry or sector using Porter's five forces model. (d) Describe the activities of an organisation that affect its competitiveness: (i) Purchasing (ii) Production (iii) Marketing (iv) Service B BUSINESS ORGANISATION STRUCTURE, FUNCTIONS AND GOVERNANCE 1 The formal and informal business 3 (a) Explain the informal organisation and its relationship with the formal organisation. (b) Describe the impact of the formal organisation on the business. 2 Business organisation, structure and design 2 (a) Describe Mintzberg’s components of the organisation and explain the different ways in which formal and informal organisations may be structured: (i) Entrepreneurial (ii) Functional (iii) Matrix (iv) Divisional (geographical, by product, or by customer type) (v) Boundaryless (virtual, hollow or modular) (b) Explain basic organisational structure concepts: (i) separation of ownership and management (ii) separation of direction and management (iii) span of control and scalar chain P.16 KAPLAN PUBLISHING  Syllabus learning objective Chapter reference (iv) tall and flat organisations (v) outsourcing and offshoring (vi) shared services approach. (c) Explain the characteristics of the strategic, tactical and operational levels in the organisation in the context of the Anthony hierarchy. (d) Explain centralisation and decentralisation and list their advantages and disadvantages. (e) Describe the roles and functions of the main departments in a business organisation: (i) Research and development (ii) Purchasing (iii) Production (iv) Direct service provision (v) Marketing (vi) Administration (vii) Finance. (f) Explain the role of marketing in an organisation (i) Definition of marketing (ii) Marketing mix (iii) Relationship of the marketing plan to the strategic plan. 3 Organisational culture in business 3 (a) Define organisational culture. (b) Describe the factors that shape the culture of the organisation. (c) Explain the contribution made by writers on culture: (i) Schein – determinants of organisational culture (ii) Handy – four cultural stereotypes (iii) Hofstede – international perspectives on culture 4 Committees in business organisations 11 (a) Explain the purposes of committees. (b) Describe the types of committee used by business organisations. (c) List the advantages and disadvantages of committees. KAPLAN PUBLISHING P.17  Syllabus learning objective Chapter reference (d) Explain the role of the Chair and Secretary of a committee. 5 Governance and social responsibility in business 11 (a) Explain the agency concept in relation to corporate governance. (b) Define corporate governance and social responsibility and explain their importance in contemporary organisations. (c) Explain the responsibility of organisations to maintain appropriate standards of corporate governance and corporate social responsibility. (d) Briefly explain the main recommendations of best practice in effective corporate governance: (i) Executive and non-executive directors (ii) Remuneration committees (iii) Audit committees (iv) Public oversight (e) Explain how organisations take account of their social responsibility objectives through analysis of the needs of internal, connected and external stakeholders. (f) Identify the social and environmental responsibilities of business organisations to internal, connected and external stakeholders. C ACCOUNTING AND REPORTING SYSTEMS, TECHNOLOGY, COMPLIANCE, CONTROLS, TECHNOLOGY AND SECURITY 1 The relationship between accounting and other business 15 functions (a) Explain the relationship between accounting and other key functions within the business such as procurement, production and marketing. (b) Explain financial considerations in production and production planning. (c) Identify the financial issues associated with marketing. (d) Identify the financial costs and benefits of effective service provision. P.18 KAPLAN PUBLISHING  Syllabus learning objective Chapter reference 2 Accounting and finance functions within business 13 (a) Explain the contribution of the accounting function to the formulation, implementation and control of the organisation's policies, procedures and performance. (b) Identify and describe the main financial accounting functions in business: (i) recording financial information (ii) codifying and processing financial information (iii) preparing financial statements (c) Identify and describe the main management accounting and performance management functions in business: (i) Recording and analysing costs and revenues (ii) Providing management accounting information and decision-making (iii) Planning and preparing budgets and exercising budgetary control (d) Identify and describe the main finance and treasury functions: (i) Calculating and mitigating business tax liabilities (ii) Evaluating and obtaining finance (iii) Managing working capital (iv) Treasury and risk management (e) Identify and describe the main audit and assurance 16 roles in business: (i) Internal audit (ii) External audit (f) Explain the main functions of the internal auditor and 16 the external auditor and how they differ. 3 Principles of law and regulation governing accounting 12 and auditing (a) Explain basic legal requirements in relation to retaining and submitting proper records and preparing and auditing financial reports. (b) Explain the broad consequences of failing to comply with the legal requirements for maintaining and filing accounting records. KAPLAN PUBLISHING P.19  Syllabus learning objective Chapter reference (c) Explain how the international accountancy profession regulates itself through the establishment of reporting standards and their monitoring. 4 The sources and purpose of internal and external 13 financial information, provided by business (a) Explain the various business purposes for which the following financial information is required: (i) The statement of profit or loss (ii) The statement of financial position (iii) The statement of cash flows (iv) Sustainability and integrated reports (b) Describe the main purposes of the following types of management accounting reports: (i) Cost schedules (ii) Budgets (iii) Variance reports. 5 Financial systems, procedures and related IT 14 applications (a) Identify an organisation's system requirements in relation to the objectives and policies of the organisation. (b) Describe the main financial systems used within an organisation: (i) Purchases and sales invoicing (ii) Payroll (iii) Credit control (iv) Cash and working capital management. (c) Explain why it is important to adhere to policies and procedures for handling clients' money. (d) Identify weaknesses, potential for error and inefficiencies in accounting systems including computerised accounting systems. (e) Recommend improvements to accounting systems to prevent error and fraud and to improve overall efficiency. (f) Explain why appropriate controls are necessary in relation to business and IT systems and procedures. P.20 KAPLAN PUBLISHING  Syllabus learning objective Chapter reference (g) Identify business uses of computers and IT software 4 applications: (i) Spreadsheet applications (ii) Database systems (iii) Accounting packages (h) Describe and compare the relative benefits and limitations of manual and automated financial systems that may be used in an organisation. 6 Internal controls, authorisation, security and compliance 16 within business (a) Explain internal control and internal check. (b) Explain the importance of internal financial controls in an organisation. (c) Describe the responsibilities of management for internal financial control. (d) Describe the features of effective internal financial control procedures in an organisation, including authorisation. (e) Identify and describe the types of information technology and information systems used by the business organisation for internal control. (f) Describe general and application systems controls in business. 7 Fraud and fraudulent behaviour and their prevention in 17 business, including money laundering (a) Explain the circumstances under which fraud is likely to arise. (b) Identify different types of fraud in the organisation. (c) Explain the implications of fraud for the organisation. (d) Explain the role and duties of individual managers in the fraud detection and prevention process. (e) Define the term money laundering. (f) Give examples of recognised offences under typical money laundering regulations. (g) Identify methods for detecting and preventing money laundering. (h) Explain how suspicions of money laundering should be reported to the appropriate authorities. KAPLAN PUBLISHING P.21  Syllabus learning objective Chapter reference 8 The impact of Financial Technology (Fintech) on 4 accounting systems (a) Describe cloud computing as a capability in accountancy and how it creates benefits for the organisation. (b) Explain how automation and artificial intelligence (AI) in accounting systems can affect the role and effectiveness of accountants. (c) Describe how the application of big data and data analytics can improve the effectiveness of accountancy and audit. (d) Outline the key features and applications of Blockchain technology and distributed ledgers in accountancy. (e) Define cyber security and identify the key risks to data that cyber-attacks bring. (f) Identify and describe features for protecting the security of IT systems and software within business. D LEADING AND MANAGING INDIVIDUALS AND TEAMS 1 Leadership, management and supervision 18 (a) Define leadership, management and supervision and explain the distinction between these terms. (b) Explain the nature of management: (i) Scientific/classical theories of management – Fayol, Taylor (ii) The human relations school – Mayo (iii) The functions of a manager – Mintzberg, Drucker. (c) Explain the areas of managerial authority and responsibility. (d) Explain the situational, functional and contingency approaches to leadership with reference to the theories of Adair, Fiedler, Bennis, Kotter and Heifetz. (e) Describe leadership styles and contexts: using the models of Ashridge and Blake and Mouton. P.22 KAPLAN PUBLISHING  Syllabus learning objective Chapter reference 2 Recruitment and selection of employees 19 (a) Explain the importance of effective recruitment and selection to the organisation. (b) Describe the recruitment and selection process and explain the stages in this process. (c) Describe the roles of those involved in the recruitment and selection processes. (d) Describe the methods through which organisations seek to meet their recruitment needs. (e) Explain the advantages and disadvantages of different recruitment and selection methods. (f) Explain the purposes and benefits of diversity and equal opportunities policies within the human resources plan. (g) Explain the practical steps that an organisation may take to ensure the effectiveness of its diversity and equal opportunities policy. 3 Individual and group behaviour in business 20 organisations (a) Describe the main characteristics of individual and group behaviour. (b) Outline the contributions of individuals and teams to organisational success. (c) Identify individual and team approaches to work. 4 Team formation, development and management 20 (a) Explain the differences between a group and a team. (b) Define the purposes of a team. (c) Explain the role of the manager in building the team and developing individuals within the team. (i) Belbin’s team role theories (ii) Tuckman’s theory of team development (d) List the characteristics of effective and ineffective teams. (e) Describe tools and techniques that can be used to build the team and improve team effectiveness. KAPLAN PUBLISHING P.23  Syllabus learning objective Chapter reference 5 Motivating individuals and groups 21 (a) Define motivation and explain its importance to the organisation, teams and individuals. (b) Explain content and process theories of motivation: Maslow, Herzberg, McGregor and Vroom. (c) Explain and identify types of intrinsic and extrinsic rewards. (d) Explain how reward systems can be designed and implemented to motivate teams and individuals. 6 Learning and training at work 22 (a) Explain the importance of learning and development in the workplace. (b) Describe the learning process: Honey and Mumford, Kolb. (c) Describe the role of the human resources department and individual managers in the learning process. (d) Describe the training and development process: identifying needs, setting objectives, programme design, delivery and validation. (e) Explain the terms 'training', 'development' and 'education' and the characteristics of each. (f) List the benefits of effective training and development in the workplace. 7 Review and appraisal of individual performance 23 (a) Explain the importance of performance assessment. (b) Explain how organisations assess the performance of human resources. (c) Define performance appraisal and describe its purposes. (d) Describe the performance appraisal process. (e) Explain the benefits of effective appraisal. (f) Identify the barriers to effective appraisal and how these may be overcome. P.24 KAPLAN PUBLISHING  Syllabus learning objective Chapter reference E PERSONAL EFFECTIVENESS AND COMMUNICATION IN BUSINESS 1 Personal effectiveness techniques 24 (a) Explain the importance of time management. (b) Describe the barriers to effective time management and how they may be overcome. (c) Describe the role of information technology in improving personal effectiveness. 2 Consequences of ineffectiveness at work 24 (a) Identify the main ways in which people and teams can be ineffective at work. (b) Explain how individual or team ineffectiveness can affect organisational performance. 3 Competence frameworks and personal development 24 (a) Describe the features of a competence framework. (b) Explain how a competence framework underpins professional development needs. (c) Explain how personal and continuous professional development can increase personal effectiveness at work. (d) Explain the purpose and benefits of coaching, mentoring and counselling in promoting employee effectiveness. (e) Describe how a personal development plan should be formulated, implemented, monitored and reviewed by the individual. 4 Sources of conflict and techniques for conflict 24 resolution and referral (a) Identify situations where conflict at work can arise. (b) Describe how conflict can affect personal and organisational performance. (c) Identify ways in which conflict can be managed. KAPLAN PUBLISHING P.25  Syllabus learning objective Chapter reference 5 Communicating in business 25 (a) Define communications and identify methods of communication used in the organisation and how they are used. (b) Explain how the type of information differs and the purposes for which it is applied at different levels of the organisation: strategic, tactical and operational. (c) List the attributes of good quality information. 4 (d) Explain a simple communication model: sender, 25 message, receiver, feedback, noise. (e) Explain formal and informal communication and their importance in the workplace. (g) Identify the consequences of ineffective communication. (g) Describe the attributes of effective communication. (h) Describe the barriers to effective communication and identify practical steps that may be taken to overcome them. (i) Identify the main patterns of communication. F PROFESSIONAL ETHICS IN ACCOUNTING AND BUSINESS 1 Fundamental principles of ethical behaviour 10 (a) Define business ethics and explain the importance of ethics to the organisation and to the individual. (b) Describe and demonstrate the following principles from the IFAC (IESBA) code of ethics, using examples. (i) Integrity (ii) Objectivity (iii) Professional competence (iv) Confidentiality (v) Professional behaviour (c) Describe organisational values which promote ethical behaviour using examples. (i) Openness (ii) Trust (iii) Honesty P.26 KAPLAN PUBLISHING  Syllabus learning objective Chapter reference (iv) Respect (v) Empowerment (vi) Accountability (d) Explain the concept of acting in the public interest. 10 2 The role of regulatory and professional bodies in promoting ethical and professional standards in the 10 accountancy profession (a) Recognise the purpose of international and organisational codes of ethics and codes of conduct, IFAC (IESBA), ACCA etc. (b) Describe how professional bodies and regulators promote ethical awareness and prevent or punish illegal or unethical behaviour. (c) Identify the factors that distinguish a profession from other types of occupation. (d) Explain the role of the accountant in promoting ethical behaviour. (e) Recognise when and to whom illegal, or unethical conduct by anyone within or connected to the organisation should be reported. 3 Corporate codes of ethics 10 (a) Define corporate codes of ethics. (b) Describe the typical contents of a corporate code of ethics. (c) Explain the benefits of a corporate code of ethics to the organisation and its employees. 4 Ethical conflicts and dilemmas 10 (a) Describe situations where ethical conflicts can arise. (b) Identify the main threats to ethical behaviour. (c) Outline situations at work where ethical dilemmas may be faced. (d) List the main safeguards against ethical threats and dilemmas. KAPLAN PUBLISHING P.27  The examination Examination format The syllabus is assessed by computer-based examination (CBE). Questions will assess all parts of the syllabus and will test knowledge and some comprehension or application of this knowledge. The examination will consist of: Number of marks Thirty 2-mark questions 60 Sixteen 1-mark question 16 Six 4-mark questions 24 –––– Total time allowed: 2 hours 100 Examination tips Spend the first few minutes of the examination reviewing the format and content so that you understand what you need to do. Divide the time you spend on questions in proportion to the marks on offer. One suggestion for this exam is to allocate 1.2 minutes to each mark available. Objective test questions: Read the questions carefully and work through any calculations required. If you don't know the answer, eliminate those options you know are incorrect and see if the answer becomes more obvious. Guess your final answer rather than leave it blank if necessary. Computer-based examination (CBE) – Tips Be sure you understand how to use the software before you start the exam. If in doubt, ask the assessment centre staff to explain it to you. Questions are displayed on the screen and answers are entered using keyboard and mouse. At the end of the exam, you are given a certificate showing the result you have achieved. The CBE exam will not only examine multiple choice questions but could include questions that require data entry or a multiple response. Do not attempt a CBE until you have completed all study material relating to it. Do not skip any of the material in the syllabus. Read each question very carefully. Double-check your answer before committing yourself to it. Answer every question – if you do not know an answer, you don't lose anything by guessing. Think carefully before you guess. P.28 KAPLAN PUBLISHING  The CBE question types are as follows:  Multiple choice – where you are required to choose one answer from a list of options provided by clicking on the appropriate ‘radio button’  Multiple response – where you are required to select more than one response from the options provided by clicking on the appropriate tick boxes (typically choose two options from the available list)  Multiple response matching – where you are required to indicate a response to a number of related statements by clicking on the ’radio button’ which corresponds to the appropriate response for each statement  Number entry – where you are required to key in a response to a question shown on the screen. With an objective test question, it may be possible to eliminate first those answers that you know are wrong. Then choose the most appropriate answer(s) as required from those that are left. This could be a single answer (e.g. multiple choice) or more than one response (e.g. multiple response and multiple response – matching). After you have eliminated the ones that you know to be wrong, if you are still unsure, guess. But only do so after you have double-checked that you have only eliminated answers that are definitely wrong. Don't panic if you realise you've answered a question incorrectly. Try to remain calm, continue to apply examination technique and answer all questions required within the time available. KAPLAN PUBLISHING P.29  ACCA Support For additional support with your studies please also refer to the ACCA Global. Study skills and revision guidance This section aims to give guidance on how to study for your exams and to give ideas on how to improve your existing study techniques. Preparing to study Set your objectives Before starting to study decide what you want to achieve – the type of pass you wish to obtain. This will decide the level of commitment and time you need to dedicate to your studies. Devise a study plan Determine which times of the week you will study. Split these times into sessions of at least one hour for study of new material. Any shorter periods could be used for revision or practice. Put the times you plan to study onto a study plan for the weeks from now until the exam and set yourself targets for each period of study – in your sessions make sure you cover the course, course assignments and revision. If you are studying for more than one exam at a time, try to vary your subjects as this can help you to keep interested and see subjects as part of wider knowledge. When working through your course, compare your progress with your plan and, if necessary, re-plan your work (perhaps including extra sessions) or, if you are ahead, do some extra revision/practice questions. P.30 KAPLAN PUBLISHING  Effective studying Active reading You are not expected to learn the text by rote, rather, you must understand what you are reading and be able to use it to pass the exam and develop good practice. A good technique to use is SQ3Rs – Survey, Question, Read, Recall, Review: 1 Survey the chapter – look at the headings and read the introduction, summary and objectives, so as to get an overview of what the chapter deals with. 2 Question – whilst undertaking the survey, ask yourself the questions that you hope the chapter will answer for you. 3 Read through the chapter thoroughly, answering the questions and making sure you can meet the objectives. Attempt the exercises and activities in the text, and work through all the examples. 4 Recall – at the end of each section and at the end of the chapter, try to recall the main ideas of the section/chapter without referring to the text. This is best done after a short break of a couple of minutes after the reading stage. 5 Review – check that your recall notes are correct. You may also find it helpful to re-read the chapter to try to see the topic(s) it deals with as a whole. Note-taking Taking notes is a useful way of learning, but do not simply copy out the text. The notes must:  be in your own words  be concise  cover the key points  be well organised.  be modified as you study further chapters in this text or in related ones. Trying to summarise a chapter without referring to the text can be a useful way of determining which areas you know and which you don't. Three ways of taking notes: Summarise the key points of a chapter. Make linear notes – a list of headings, divided up with subheadings listing the key points. If you use linear notes, you can use different colours to highlight key points and keep topic areas together. Use plenty of space to make your notes easy to use. KAPLAN PUBLISHING P.31  Try a diagrammatic form – the most common of which is a mind-map. To make a mind-map, put the main heading in the centre of the paper and put a circle around it. Then draw short lines radiating from this to the main sub- headings, which again have circles around them. Then continue the process from the sub-headings to sub-sub-headings, advantages, disadvantages, etc. Highlighting and underlining You may find it useful to underline or highlight key points in your study text – but do be selective. You may also wish to make notes in the margins. Revision The best approach to revision is to revise the course as you work through it. Also try to leave four to six weeks before the exam for final revision. Make sure you cover the whole syllabus and pay special attention to those areas where your knowledge is weak. Here are some recommendations: Read through the text and your notes again and condense your notes into key phrases. It may help to put key revision points onto index cards to look at when you have a few minutes to spare. Review any assignments you have completed and look at where you lost marks – put more work into those areas where you were weak. Practise exam standard questions under timed conditions. If you are short of time, list the points that you would cover in your answer and then read the model answer, but do try to complete at least a few questions under exam conditions. Also practise producing answer plans and comparing them to the model answer. If you are stuck on a topic find somebody (a tutor) to explain it to you. Read good newspapers and professional journals, especially ACCA's Student Accountant – this can give you an advantage in the exam. Ensure you know the structure of the exam – how many questions and of what type you will be expected to answer. During your revision attempt all the different styles of questions you may be asked. Further reading You can find further reading and technical articles under the student section of ACCA's website. Technical update This text has been updated to reflect Examinable Documents September 2022 to June 2023 issued by ACCA. P.32 KAPLAN PUBLISHING Chapter 1 The business organisation Chapter learning objectives Upon completion of this chapter you will be able to:  define ‘business organisations’ and explain why they are formed  describe common features of business organisations  outline how business organisations differ  list the industrial and commercial sectors in which business organisations operate  identify the different types of business organisation and their main characteristics: commercial, not-for-profit, public sector, non-governmental organisations, cooperatives. KAPLAN PUBLISHING 1 The business organisation Types of organisation are also explored in the Corporate and Business Law examination, the Financial Reporting examination and the Strategic Business Leader examination. 1 Business organisations and the reason they are formed 1.1 What is a business organisation? Defining an organisation is difficult as there are many types of organisations which are set up to meet a variety of needs, such as clubs, schools companies, charities and hospitals. What they all have in common is summarised in the definition produced by Buchanan and Huczynski. ‘Organisations are social arrangements for the controlled performance of collective goals.’ Note the three key aspects of this definition:  collective goals  social arrangements  controlled performance. What is an organisation? Consider the three aspects of Buchanan and Huczynski’s definition in more detail: (a) ‘Collective goals’ – organisations are defined by their goals. The main goal of a school is to educate pupils. It will therefore be organised differently to a company that aims to make profits. (b) ‘Social arrangements’ – someone working alone cannot be classed as an organisation. Organisations are structured to allow people to work together towards a common goal. Usually, the larger the organisation, the more formal its structures. (c) ‘Controlled performance’ – an organisation will have systems and procedures in place to ensure that group goals are achieved. For a company this could involve setting sales targets, or periodically assessing the performance of staff members. 2 KAPLAN PUBLISHING  Chapter 1 It is worth noting that a major similarity between most organisations is that they are mainly concerned with taking inputs and transforming them into outputs. For a manufacturing company, this could involve taking raw materials and transforming them into a finished product that can be sold onto its customers. An accountancy training firm will also take inputs (students and syllabuses) and transform them into outputs (qualified accountants). Illustration 1 – Football team A football team can be described as an organisation because:  It has a number of players who have come together to play a game.  The team has an objective (to score more goals than its opponent).  To do their job properly, the members have to maintain an internal system of control to get the team to work together. In training they work out tactics so that in play they can rely on the ball being passed to those who can score goals.  Each member of the team is part of the organisational structure and is skilled in a different task: the goalkeeper has more experience in stopping goals being scored than those in the forward line of the team.  In addition, there must be team spirit, so that everyone works together. Players are encouraged to do their best, both on and off the field. Test your understanding 1 Which of the following would be considered to be an organisation according to the definition produced by Buchanan and Huczynski? (i) A sole trader (ii) A tennis club (iii) A hospital A (i), (ii) and (iii) B (i) and (ii) only C (ii) and (iii) only D (i) and (iii) only KAPLAN PUBLISHING 3 The business organisation 1.2 Why do we need organisations? Organisations enable people to:  Share skills and knowledge – this can enable people to perform tasks that they would be unable to achieve on their own. Knowledge can also be shared between all the people within the organisation.  Specialise – individual workers can concentrate on a limited type of activity. This allows them to build up a greater level of skill and knowledge than they would have if they attempted to be good at everything.  Pool resources – whether money or time. This results in synergy where organisations can achieve more than the individuals could on their own. Test your understanding 2 Daniel is organising a social event. Which of the following would be benefits of him forming a committee to manage the planning process and the event itself? (i) It would help to overcome his limitations, by bringing on board other people with different skills to him. (ii) It would save time through the joint efforts of everyone on the committee. (iii) It would help to satisfy Daniel’s social needs. (iv) All members of the committee would have to be skilled in all aspects of managing the social event. A (i), (ii) and (iii) only B (i), (iii) and (iv) only C All of the above D None of the above 2 Different types of organisation As we have discussed, different organisations have different goals. We can therefore classify them into several different categories. 2.1 Commercial versus not-for-profit Commercial organisations Commercial (or profit-seeking) organisations see their main objective as maximising the wealth of their owners. 4 KAPLAN PUBLISHING  Chapter 1 There are three common forms that a commercial business can take:  Sole traders – the business is owned and run by one person. In this type of business structure, the owner is not legally separate from the business itself. If a sole trader’s business is sued by a customer, the customer is actually suing the owner themselves.  Partnerships – the organisation is owned and run by two or more individuals. Traditionally, partnerships (like sole traders) do not have a separate legal identity from their owners. However in recent years many countries have created alternative partnership structures (such as Limited Liability Partnerships (LLPs) in the UK) which mean that the business exists as a separate legal entity and the owners’ liability is limited to the amount they have invested into the partnership.  Limited liability companies – a company has a separate legal identity to its owners (who are known as shareholders). The owner’s liability is limited to the amount they have invested into the company. In the UK, there are two types of limited company: Private limited companies (with ‘Ltd’ after their name) – these tend to be smaller businesses, often owned by a few shareholders. Shares cannot be offered to the general public. Public limited companies (with ‘plc’ after their name) – these can be much larger businesses. Shares can be offered to the general public, meaning that there can be millions of different shareholders. This makes it easier for the company to raise finance, enabling further growth. Not for profit organisations Not-for-profit organisations (NFPs or NPOs) do not see profitability as their main objective. Instead, they seek to satisfy the particular needs of their members or the sectors of society that they have been set up to benefit. Illustration 2 – NFP examples NFPs include the following:  government departments and agencies (such as HM Revenue and Customs)  schools  hospitals  charities (such as the Red Cross, Oxfam and Doctors Without Borders)  clubs. KAPLAN PUBLISHING 5 The business organisation The objectives of different NFPs will vary significantly:  Hospitals exist to treat patients.  Councils may see their mission as caring for their communities.  Government organisations usually exist to implement government policy.  A charity may have ‘provision of relief to victims of disasters’ as its main objective. 2.2 Public versus private sector organisations Public sector organisations The public sector is the part of the economy that is concerned with providing basic government services and is controlled by government organisations. Illustration 3 – Public sector organisations The organisations that make up the public sector vary from country to country, but generally include:  police  military  public transport  primary education  healthcare for the poor Private sector organisations The private sector consists of organisations that are run by private individuals and groups rather than the government. Illustration 4 – Private sector The private sector will therefore normally include:  businesses  charities and  clubs. Within these will be both profit-seeking and not-for-profit organisations. 6 KAPLAN PUBLISHING  Chapter 1 Test your understanding 3 Many schools run fund-raising events such as fêtes, where the intention is to make a profit. This makes them ‘profit-seeking’. Is this statement: A True B False Non-governmental organisations (NGOs) A non-governmental organisation is one which does not have profit as its primary goal and is not directly linked to the national government. NGOs often promote political, social or environmental change within the countries they operate. Illustration 5 – NGOs NGOs include:  the Red Cross  Doctors Without Borders  Greenpeace  Amnesty International. 2.3 Co-operatives Co-operatives are organisations that are owned and democratically controlled by their members – the people who buy their goods or services. Each member usually gets a single vote on key decisions – unlike companies where shareholders get one vote for each share that they own. They are organised solely to meet the needs of the member-owners, who usually share any profits. Illustration 6 – Co-operatives In the UK, the largest example of a co-operative is the Co-operative Group, which has over 5.5 million members and operates in diverse markets, such as banking, travel and groceries. KAPLAN PUBLISHING 7 The business organisation Test your understanding 4 Which of the following are usually seen as the primary objectives of companies? (i) To maximise the wealth of shareholders (ii) To protect the environment (iii) To make a profit A (i), (ii) and (iii) B (i) and (ii) only C (ii) and (iii) only D (i) and (iii) only Test your understanding 5 Which of the following organisations is most likely to be classified as part of the public sector? A A charity B A social club C A school D A public limited company 3 Sectors in which organisations operate A further difference between organisations is the market in which they operate. There are a large number of different sectors, which include:  Agriculture – production, processing and packaging of foodstuffs.  Mining – extraction and processing of minerals.  Finance – this includes banks and other companies that profit through investments and the lending of money to others.  Retailers – sale of goods produced by manufacturers to consumers.  Service – production of intangible goods and services.  Transportation – movement of goods between locations. This is not an exhaustive list, but it should give you some idea of the wide range of activities that support organisations. 8 KAPLAN PUBLISHING  Chapter 1 4 Summary In summary, there are a number of key differences between the various types of organisations. These include (but are not limited to):  Ownership – private sector organisations are likely to be owned by individual owners or shareholders (depending on the type of organisation). Public sector organisations will be controlled by the government, while co- operatives will be owned by their members.  Objectives – as mentioned, each organisation has very different goals. This can range from the provision of social services (for charities and public sector organisations) to the maximisation of owner wealth (for profit- seeking organisations).  Activities – the activities of an organisation will be designed to support its objectives. This means that organisational activities are as varied as the organisations themselves!  Sources of funding – public sector organisations will tend to raise money from the central government. Private sector organisations, such as companies and co-operatives, will most likely have to raise funds from their owners. Charities are usually funded by donations.  Size – organisations vary in size from large, multinational companies to small businesses owned and run by a small number of people.  Liability – the owners of sole traders or partnerships are liable for any losses their businesses make. Owners of companies enjoy limited liability. In spite of these differences, the different types of organisations often face similar issues to each other. For instance, most will have employees that need to be motivated. Many organisations will need to design strategies for the future, or will need to consider what systems should be put in place to ensure the accurate recording of transactions. It is these common issues that we are going to examine in more detail in the coming chapters. KAPLAN PUBLISHING 9 The business organisation 5 Chapter summary 10 KAPLAN PUBLISHING  Chapter 1 6 Practice questions Test your understanding 6 Which of the following is NOT a benefit that organisations have over individuals? A They allow the sharing skills and knowledge B They enable people to perform tasks they would be unable to achieve on their own C They enable synergy to be achieved D They speed up the time taken to make decisions Test your understanding 7 GreenWatch is an independent environmental charity set up to lobby the government for improved environmental regulation on business. What type of organisation is GreenWatch most likely to be classed as? A Public sector B Co-operative C Non-governmental D Commercial Test your understanding 8 Which of the following statements is correct? A Partnerships are owned and run by one or more people B Private limited companies can sell shares to the public C Shareholders in companies typically have limited liability D The owners of sole traders typically have limited liability KAPLAN PUBLISHING 11 The business organisation Test your understanding 9 Which of the following statements are correct? (i) Companies tend to raise money from central government. (ii) Most sole traders and partnerships have the aim of maximising owner wealth. (iii) Public sector organisations are controlled by the central government. (iv) Charities form part of the public sector. A (i) and (ii) only B (iii) and (iv) only C (ii) and (iii) only D (ii) and (iv) only Test your understanding 10 Here are four statements relating to the features of different types of organisation: A This type of organisation can sell its shares to the public. B This type of organisation is owned and run by two or more people who are legally indistinguishable from the organisation itself. C This type of organisation is controlled by the government. D This type of organisation is owned and democratically controlled by its members. Required: (a) Identify the description above which is associated with each of the following types of organisation, by selecting A, B, C, D or none. (i) Private limited company (ii) Partnership (iii) Public limited company (iv) Co-operative (v) Public sector organisation (0.5 marks each, total = 3 marks) 12 KAPLAN PUBLISHING  Chapter 1 (b) Below are four types of organisation: A Charities B Schools C Limited companies D Police forces Required: Write down which two of the above are most likely to be classified as part of the private sector by selecting TWO of the letters from (A, B, C, D). (0.5 marks each, total = 1 mark) (Total: 4 marks) KAPLAN PUBLISHING 13 The business organisation Test your understanding answers Test your understanding 1 The correct answer is C There would be no collective goals for a sole trader, so this does not satisfy the definition given. Test your understanding 2 The correct answer is A Statement (iv) would not be true, as organisations (which this committee could be classified as) allow for specialisation. Not all of the members would have to be skilled at performing all of the necessary tasks. Test your understanding 3 The correct answer is B – False Schools run fund-raising activities to help pay for extra books, e.g. to improve the quality of education given to pupils. The primary objective is educational, not profit. The money made at the fête is thus a means not an end. Test your understanding 4 The correct answer is D While protecting the environment is to be encouraged and is reinforced within statute to some degree, it is not a primary objective of the company. Companies exist primarily to maximise the return to their owners. Test your understanding 5 The correct answer is C Public sector organisations will be controlled by the central government. This is unlikely to be a charity, a company or a social club – which are typical examples of the private sector. Note that a privately owned and operated school could be part of the private sector, but schools are still the most likely from the list to be public. 14 KAPLAN PUBLISHING  Chapter 1 Test your understanding 6 The correct answer is D Forming an organisation means that people work collectively. Typically this will mean that decision-making will become slower, as more people (with potentially differing ideas) are involved in the decision-making process. Test your understanding 7 The correct answer is C As a charity, GreenWatch is not commercial as it does not have a profit-making objective. It is not obviously controlled by the central government, meaning that it is not in the public sector. It also clearly does not meet the definition of a co-operative, which is an organisation that is controlled by the people who buy its goods. Test your understanding 8 The correct answer is C Sole traders do not enjoy limited liability as, legally, they are not separate from their owners. Only public limited companies can issue shares to the public and partnerships cannot be owned by one person! Test your understanding 9 The correct answer is C Companies usually raise money from sources other than the central government and charities are part of the private sector, rather than the public sector. KAPLAN PUBLISHING 15 The business organisation Test your understanding 10 (a) The correct answers are: (i) None (ii) B (iii) A (iv) D (v) C (b) The private sector refers to organisations that are run by private individuals and groups rather than the government. Therefore, the correct answers are A and C. 16 KAPLAN PUBLISHING Chapter 2 Business organisation and structure Chapter learning objectives Upon completion of this chapter you will be able to:  describe the different ways in which formal organisations may be structured: entrepreneurial, matrix, functional, divisional (by geographical area, by product or by customer type), boundaryless (virtual, hollow or modular)  explain basic organisational structure concepts: separation of ownership and management, separation of direction and management, span of control and scalar chain, tall and flat organisations, outsourcing and offshoring, shared services approach  explain the characteristics of the strategic, tactical and operational levels in the organisation in the context of the Anthony hierarchy  explain centralisation and decentralisation and list their advantages and disadvantages  describe the roles and functions of the main departments in a business organisation: research and development, purchasing, production, direct service provision, marketing, administration and finance  explain the role of marketing in an organisation: – the definition of marketing – the marketing mix – the relationship of the marketing plan to the strategic plan. KAPLAN PUBLISHING 17 Business organisation and structure Organisational structure, organisational strategy, Mintzberg’s building blocks and the marketing mix are also discussed in the Strategic Business Leader examination. The Anthony Triangle is discussed further in the Performance Management examination. 1 Organisational structure Organisational structure is concerned with the way in which work is divided up and allocated. It outlines the roles and responsibilities of individuals and groups within the organisation. There are several possible ways in which an organisation can be structured. For this exam you need to be familiar with each of them, as well as being able to weigh up their advantages and disadvantages. The structure of most organisations will change over time as the company grows. A typical pattern of structural change would be as follows: 1.1 Entrepreneurial structure This structure is built around the owner manager and is typical of small businesses in the early stages of their development. It is also often found where the entrepreneur has specialist knowledge of the product or service that the organisation offers. 18 KAPLAN PUBLISHING  Chapter 2 Advantages Disadvantages  Fast decision making.  Lack of career structure.  More responsive to market.  Dependent on the capabilities of the manager/owner.  Goal congruence.  Cannot cope with  Good control. diversification/growth.  Close bond to workforce. Advantages and disadvantages of entrepreneurial structures Advantages  There is only one person making decisions – this should lead to decisions being made quickly.  As soon as an element of the market alters, the entrepreneur should recognise it and act quickly.  A lack of a chain of command and the small size of the organisation should mean that the entrepreneur has control over the workforce and all decisions within the organisation, leading to better goal congruence. Disadvantages  This type of structure is usually suited to small companies where due to the size there is no career path for the employees.  If the organisation grows, one person will not be able to cope with the increased volume of decisions etc. 1.2 Functional/departmental structure Functional organisations group together employees that undertake similar tasks into departments. This type of structure is often found in organisations that have outgrown the entrepreneurial structure. It is most appropriate for small organisations which have relatively few products