Business

Advantages and Disadvantages of an Entrepreneurial Business Structure

A business structure is related to the way in which the business is organized with respect to who makes decisions and instructs what part of the business. Often drawn as a diagram, it shows the relationship between decision makers and different departments within the business.

The corporate business structure

In the corporate business structure, any decision that needs to be made is made centrally, either by one person or at the parent company, the results of which are then communicated to the workers. This is the most ‘rigid’ of organizational structures, as workers have little or no input in the decision-making process, instead just having to follow orders as they are issued.

The corporate business structure is most commonly found in sole traders with few employees, or in organizations that have to make decisions quickly, such as publications, where there is often very little time available to discuss things in meetings when there is a deadline that needs to be met. be put. In this case, someone has to make a decision quickly without having to argue or justify it.

For a sole trader, they are often the sole owner of the business, and that is what they say. Since it is your property, no one has the authority to block or delay your decision. While many may seek advice from the people they employ, they will often already have an idea in mind of what they would like to do, so they will likely make the decision right away.

Advantages of corporate business structure

The main advantage of the corporate business structure is the ability to make decisions quickly. Without long meetings and discussions, or proposals sitting waiting for approval, decisions can be made almost instantly and changes can be implemented. This allows companies to quickly adapt to any changes in market conditions. It is also a style of leadership used by governments in emergencies, and virtually every country has laws in place that allow legislation to bypass parliament or equivalent bodies and be enacted when speed and response time are of the highest priority.

Another advantage is that it is one of the least expensive commercial structures available and, in most cases, it will be the most economical option. This is because there are no layers of Paid Middle Management or Holiness (eg Company Cars).

Third, everyone knows who is in charge and to whom they are accountable, eliminating the potential for confusion if different department heads ask workers for different things (for example, the production department head asks workers to improve The quality of the product for spending more time to each one, at the same time that the head of the Finance Department requests greater production to generate more income).

Disadvantages of Entrepreneurial Business Structure

Despite its advantages, there are a number of disadvantages to the corporate business structure.

Due to its autocratic nature, with workers being told what to do with no input on the decision, there is always a real danger that they will lose morale and motivation if they disagree with the decision. The degree of their discouragement will depend on a number of factors, such as the degree of disagreement they have, as well as the number of explanations (if any) they receive as to why that particular decision was made.

Decision makers may not know as much about the problem, market conditions, etc. as they think they do. While they make quick decisions, they are not necessarily the best decisions, and it may be better for the company to have a specialist manager who is an expert in a particular area.

It may also not be an adequate organizational structure if the business grows, since those responsible for decision making simply have too many decisions to make. As stated earlier, decisions can be made quickly in an enterprise business structure. But if there are so many decisions to make that cause delays while different employees wait for answers, it may actually be faster to appoint a manager and delegate responsibility for making certain decisions to him or her.

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