Unit

Business organizations

In this unit youll learn how to: Identify the different types of existing business institutions. Relate the usual functions of the organization: management, planning, organization, execution and control. Be aware of the importance of an adequate organizational structure to carry out the provision of quality services. Identify the different stages of the decision-making process. Recognize the different types of existing trademarks. Differentiate between corporate identity and corporate image.

And youll study: The legal, functional and organizational features of every type of organization. The departments in an organization. Organizational charts. Existing methods for decision-making. Trademarks. Corpor ate image. Corporate identity.

Business organizations

1. The company as an organization

How many companies surround us? The bus that we take every day belongs to a transport company; the bakery where we buy bread (Fig. 1.1) is a company too; and the bookstore where we buy academic material or text books is a company as well. They all look different but they have many things in common. From this starting point, we can define what a company is as follows: A company is a for-profit entity the primary purpose of which is to obtain benefits through the sale of goods or services on the market. Lets consider this definition: Entity. This is a community considered as a unit, that is to say, there is a group of people forming the entity that are not treated individually, but collectively as a whole.
Vocabulary
Profit. Gain or advantage taken of something.

For-profit. This means that it has been created in the interest of making money, unlike other types of organizations such as foundations or NGOs (non-profit organizations), which are aimed at obtaining a social benefit. Through the sale of goods or services on the market. Companies may engage in the sale of goods (bread, photocopies...) or services (public transport). When a company is created, the employer or the partners provide capital with which the company purchases a range of goods. In addition, many times premises are bought to develop the activity; it may also have mobile phones, company cars, etc. These are the assets of the company. However, the value of the company rarely coincides with the value of its assets, and this is because the company, in its every-day performance, gains customers and tries to retain their loyalty, creates a good image in the market (corporate image), and also generates expectations for benefits. The value of these intangible assets is very difficult to assess. In addition, they are not included in the list of the company assets that we can check through accountancy. However, when the company is sold, it is not only for the price of its tangible assets, but also for the value of its intangible assets. Those assets that add value to the company exist because there is an organized exploitation of resources. This is the reason why the most relevant issue about the company concept is that all this group of goods, rights and people must be organized; therefore, hereinafter we will refer to it as an organization (Scheme 1.1). In turn, organization is a broad concept that may have different meanings: Regarding the allocation of tasks to employees, the way decisions are made and who takes the corresponding responsibility, we may talk about internal organization

Fig. 1.1. A small shop is a company too. Think about original or very specialised small shops that you have seen lately in your town or neighbourhood. 8

In a broad sense, companies are called organizations.

Business organizations

Spanish assistant
Assets Property + rights + obligations

Intangible value of the company Image + customers

Company = Organization

Work Employer + employees

Hay muchas formas de referirse a una empresa en ingls. El trmino ms general es business, que se refiere al concepto de "negocio" en general. Cuando ese negocio se crea por la asociacin de varias personas, recibe el nombre de company, que es el trmino que usaremos casi siempre en este libro. Adems, tambin podemos referirnos a ella como firm o enterprise. Por otro lado, una corporation es una empresa que tiene personalidad jurdica propia.

Scheme 1.1. Components of the concept of organization.

When it comes to perform their activity, organizations must develop mechanisms for communication, both among its members and with other economic agents they are related to (suppliers, customers...). That is to say, an internal communication and an external communication. Well deal with these two types of communication later. Also internally, the organization is structured on areas or functions, which give rise to departments. Imagine you read an article in the newspaper or hear an interview with a prestigious doctor; usually the function of the person who writes the article or the doctor appears under the name and includes the correspondent department (for example, Jaime lvarez, Director of Human Resources of Petroleros Europeos, S. A. or Alejandro Salgado, Head of Gastrointestinal Surgery at Hospital Salud es Vida). Thus, the organization has an internal structure in which the work is divided among employees and hierarchical relationships are settled with the aim of optimizing the skills and knowledge of each member. In the following sections well learn more about these issues, as well as their legal or juridical form, as organizations can be formed in several types (corporation, limited partnership, etc.), and also about corporate image or corporate identity of the company.

Case study 1. Buying a company

The company Brokers, S. A. wants to buy another company, Aislantes, S. L. which has been running for several years. The total value of the goods of Aislantes, S. L. after deducting debts (that is to say, its assets), amounts to three million euros. However, Brokers, S. A. is willing to pay up to four million euros to obtain not only the assets of Aislantes, S. L. but also its image, technology, customers and profit expectations (already signed contracts). Solution: This gap of one million euros corresponds to the value of the organization Aislantes, S. L. and its usually known as goodwill.
Vocabulary
Goodwill. Intangible value of a company.

Business organizations

2. Types of business organizations

Do you know that...?
Freelance workers (self-employed workers such as many taxi drivers, lawyers, etc.) belong to the category of individual private companies.

Business organizations may be classified according to various criteria. In our case well focus on those features that allow us to distinguish their legal and organizational structure.

2.1. Legal classification

First of all, we must distinguish between public and private companies, depending on who holds the managing power (the State in the first and individuals in the latter).

Watch out!
The owner of the company is not always its manager. In pymes (small and medium-size companies) both roles usually coincide in the same person, but in large companies management is delegated to professionals on a fee.

In turn, private companies are divided into individual companies, when they belong to only one person, and corporate companies, when the owners are several people. In Spain, there are several types of companies with their own legal features:
Sociedad annima (S. A.) Limited liability companies (partners do not respond with their personal assets) Sociedad de responsabilidad limitada (S. R. L. o S. L.) Sociedad cooperativa Sociedad colectiva Sociedad civil Comunidad de bienes Sociedad comanditaria S. A. S. L. Other companies Cooperativas Sociedades laborales Other companies Sociedad colectiva

According to the partners liability

Companies with unlimited liability (partners respond with their personal assets) Limited partnership (general partners respond with their goods, but community partners dont)

Spanish assistant
Hemos dejado los nombres de las diferentes formas jurdicas en espaol porque suelen variar de pas a pas, as no tienen una traduccin exacta. Por ejemplo, seguro que has visto alguna vez las siglas Ltd. despus del nombre de una empresa anglosajona; pues bien, esas siglas significan Limited, que se correspondera con nuestra S. L., aunque con diferencias. Si quieres saber ms, consulta el siguiente enlace: http:// en.wikipedia.org/wiki/Types_of_ companies.

According to the requirement of a minimum capital

Societies in which a minimum capital is required Societies in which no minimum capital is required Companies that, apart from obtaining benefits, aim at integration with the environment and social cohesion Companies that only seek profit

Aimed at social economy or not

Classified as commercial companies in the Commercial Code

Activities

Sociedad comanditaria Market companies S. A. S. R. L. Companies whose activities are commercial Non-market companies Other companies

1. Search the web and indicate the minimum required capital to form a corporation (S. A.) and a limited company (S. L.), and the difference between stocks and shares. 2. List the types of existing S. A. and S. L. You can find documentation online.
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Table 1.1. Types of companies in Spain.

Besides the abovementioned features in Table 1.1, the following are also relevant: The minimum capital of the S. A. is higher than the one of the S. L. The identity of the partners is important in the S. L., so partners must give their approval when they transmit their shares; in the case of a S. A. (stock), this is not important. In the S.C., partners bring money or time to implement it; in the C.B., the participants exploit or manage pre-existing property without obligation to bring further capital to form the community.

Business organizations

2.2. Classification according to the organizational structure

Each of the several divisions that we may find in this type of structure is known as department. The organizational structure is the distribution of the parts of an organization. Organizations use this means to achieve the goals they have set.

Types of organizations by organizational structure

According to the way tasks are assigned to employees and to the way they coordinate among themselves
Formal Its structure is clearly defined and very stable. Each element of the company is located and identified and performs its function obeying orders from other individuals that are clearly identified. It arises from spontaneity: its members engage in relations that were not previously defined. The decision-making authority occupies the top position in the corporate hierarchy.

Informal

Centralized According to the role The possibility to delegate tasks to lower positions is minimal. of the decision-making The authority assigns or delegates the decision-making to individuals in lower positions of authority Decentralized the structure. Linear organization Simple Functional organization The principle of hierarchy: each employee receives orders from his immediate superior. It is typical of pymes. Subordinates in lower levels receive orders from several heads of department instead of receiving them from only one head. Heads with authority make their decisions upon the previous advice from specialists (staff). Decisions are made and responsibility is taken as a group, but not individually. The organizational structure resembles a double-entry matrix. For example: one entry would be the function to perform in the company and the other would be the project to be developed in the company. Thus, there are at least two heads: a hierarchical-type head linked to functions and a project head.

Depending on the degree of specialization of job positions

Complex

Mixed or hierarchical functional organization Organization in committees

Matrix organization

Depending on the degree of hierarchy

Highly hierarchical Flat

Theres a large number of hierarchical levels and thus a big gap between staff and managers. Virtual absence of intermediate levels of command between management and staff of the company.

Table 1.2. Types of organizations according to their organizational structure.

Case study 2. Matrix organization

The company Ricos Quesos, S. L. is divided into two geographical areas: north and south. In turn, it develops three different products: cured cheese, semi-cured cheese and soft cheese. Thus, if Ricos Quesos, S. L. was organized independently in each geographical area, we would have duplicate structures and tasks. It could also happen that the different criteria between the both areas resulted in different products depending on the area. However, this could be avoided if employees simultaneously received orders from the area manager and from a product manager in charge of unifying the technical criteria for both areas. How could this approach be reflected in a matrix?

Solution:

General management Head of the north area Head of the south area Employees Employees Employees

Head of cured cheese Head of semi-cured cheease Head of soft cheese

Employees Employees Employees

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Business organizations

3. Functions in the organization: planning, management, organization and control

Vocabulary
These are some concepts related to planning: Forecast. Its something that is expected to occur. It is a hypothesis about what we believe will happen in the future. Budget. Its a forecast, but assessed in monetary terms. Program. A set of tasks, a calendar for carrying out these tasks, a responsible person for them, and resources to perform them.

In the different classifications that we have seen before, we talked about the leadership role of line managers. In turn, we distinguished between the owner (employer) and the manager of the company, who, as we studied, may not always be the same person. The individual or individuals who manage the company have the mission of organizing all the resources with the aim of obtaining benefits for the company or organization through four functions: planning function, organization function, direction function, and control function.

3.1. Planning function

The planning function consists of establishing the goals that the company has to reach. In other words, it is the ideal that will guide the company in its performance. For example, the company Disconta XS, S. L. wants to launch a new product to market with the purpose of covering an unmet need. The employer can plan many variables such as what product or service a company will sell, which activities it will develop or which organizational structure will be implemented. To do this, goals must be initially settled, and, according to them, the best strategies to achieve them will be determined. This is known as strategic planning. In any strategic planning there are several factors that the employer must take into account: Resources: the questions concerning this particular issue are which elements should be used to achieve the goals, if they are available and, if they are not, how to obtain them. For example: according to the example above, and as a result of several market studies, the company Disconta XS will devote an initial budget of 50 000 and a total of 15 workers will handle all the processes to launch this product. Actions: the question here is what is going to be done in order to achieve these goals. Moreover, these actions have to be sequenced in time and, if its necessary, some of them will have to be prioritized over others. For example, the plan made by the company Disconta XS implies the performance of the following phases:

Do you know that...?

There are several tools in planning that can help us make plans in the short, medium or long term. The most important and wellknown are the following two: PERT: it was originated in the U.S. Navy. Basically it involves the graphic representation of a series of tasks that form a project. GANTT: its another graphic technique in which you specify the expected time to spend on each task within a process.
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a) Market research for the product. b) Determination of physical resources and staff needed. c) Manufacture of the product. d) Distribution and sale of the product. People: the point here is how many people are needed to achieve the objectives set and which tasks or functions have to be performed by each staff member. In the event of not having all those people available, the question is if its possible to hire them or not. For example: a) Product design: as the company itself does not have this specialized staff, it has to outsource it. b) Manufacturing: it has been decided that a total number of ten employees will be needed for the performance of the different stages in the manufacture of the product.

Business organizations

c) Storage: three workers are considered necessary for this function. d) Distribution and sales: the tasks of distribution and sales will be outsourced (that is, they will be performed by staff outside the company); therefore, theres no staff assigned to this function. Control: the point here is which control measures have to be established to act in the events where deviations from planned objectives or goals occur. For example: the established control system is based on the following standards: a) Product/employee: productivity of each employee cannot fall outside the 5 % over the initial target that has been proposed. b) Costs: the costs for each production process may not vary more than 3 % of planning.
Important
A leadership style is the set of methods and procedures used by management to fulfil their leadership roles. There are many classifications of leadership styles, but they can be grouped into three main types: a) Authoritarian style: also called "autocratic", its based on the allocation of tasks and workers by managers. Each employee knows what to do. This is not positive for the participation of employees in the decisionmaking process. b) Democratic style: also known as "support to workers", it facilitates teamwork and the participation of employees in the decision-making process. c) Advisory style: it is regarded as a combination of the two styles above. The manager consults with his or her employees, and therefore they feel valued in the company. However, the manager is the one that ultimately decides. d) Passive or liberal style: in this case, the directors or managers settle the objectives that the organization has to reach and employees organize with each other how to achieve them. The role of the manager is limited to giving advice or transmitting information on work procedures in the event that the employees ask for it.

3.2. Organizational function

The employer must ensure that every human and material resource meets the assigned function, and also controls what relations are established among them and intervenes if it is necessary. That is to say, the aim of the organizational function is that all the resources that have been settled in the planning phase are adequate and that the relationship between them is optimal to reach the achievement of the targets. Every organization process implies a restructuring in which bodies or departments are created to carry out the corresponding tasks.

3.3. Leadership function

Once the functions of planning and organization have been defined, the company has to start working. The leadership function (or management) is the task of control that the employer has to perform upon his or her staff to motivate and guide it in the achievement of the objectives that have been previously planned. Leading is also to explain or transmit the companys plans to others and give appropriate instructions so that, by means of performing them, the planned goals are finally reached. This is one of the most complex existing functions in business, as the employer should not only guide and motivate, but also understand the problems that his or her employees may face in the process of achieving the objectives, in order to intervene, if its necessary, by facilitating support tools. Schematically, this function could be summarized as follows:

Leadership function

Lead towards the expected target

Motivate

Understand problems

Transmit business plans

Give specific instructions

Scheme 1.2. Functions of the management of the company. 13

Business organizations

In turn, when we talk about management we may find three different levels (Fig. 1.2):
Senior management Middle management Operational management Other employees

Globally: this is management itself, since it refers to the entire company. This is also known as top management. Departmental level: it includes what is known as "company management", as it relates to the technical or intermediate heads of the organization. Its scope is each and everyone of the departments in which the company is structured. Operational level: it refers to every defined group of people or tasks. It is usually known as supervision, and it corresponds to the operational level of the organization.

3.4. Control function

The control function is to verify if everything goes as it was previously planned, if the instructions that have been given are being followed, and if the settled principles are being observed. This verification will highlight potential weaknesses and mistakes so that they can be solved or corrected and prevent them from happening again. Moreover, this function also helps the employer to assess the outcome of the decisions that have been adopted by means of the measurement and correction of the activities that are being performed in the company, and always trying to ensure that the outcome fits the plans that were previously developed. Thus, the employer may detect possible deviations that can be analyzed in order to decide which corrective measures are the best to adopt with the aim of solving potential problems.

Fig. 1.2. Levels of direction.

Vocabulary
Effectiveness. Ability to achieve the desired effect. Efficiency. Ability to achieve the desired effect at the least possible cost.

As we can see, there is a direct relationship between planning and control, as any planning process necessarily requires a control system. Thus, the organization has a monitoring mechanism that allows it to assess the extent of achievement of the objectives that have been proposed and, therefore, to assess the effectiveness of the planning. In any control process, we can define the following stages: a) Establishing several control variables (for example, productivity / employee). b) Specifying how we are going to gather information about the variable that we have set (daily production statistics, etc.). c) Heads of the control department will compare the expected data to those that have been collected on an actual basis and will discuss the deviations that may have occurred. For example, if it is planned that 1 000 units of product A must be obtained every day but daily production statistics show that only 950 units have been obtained, there is a deviation from the figures that were previously planned. d) According to the obtained deviations, the most appropriate remedial actions will be proposed. In our case, the measure could be to increase working time.

Case study 3. Control systems

The company Control, S. L. is dedicated to manufacture and sell computer hardware. It decides to establish a control system in the company in order to evaluate the results of the manufacturing process. The estimated production volume per month is 5 000 units for a total amount of 200 working hours per month. Which control system would be the most suitable for this company? Solution: a) Control variable: a variable regarding production/employee will be set. Moreover, the affordable range of
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variation for this variable will also be set (for example: -5 %). b) Data collection: it will be done through the companys internal accounting. To do this, worksheets with the production of each employee will be obtained every day. c) Control department: the heads of departments will report daily data to the control department. This department will assess and determine the corrective measures to be carried out in the event of deviations.

Business organizations

4. Departments in the company. Organizational charts

4.1. Concept and types of departments
As we mentioned before, the function of organization involves dividing the company into smaller units or structures. These units are known as departments, areas or functional units of the company, and they are specialized in one or more specific tasks in order to achieve the goals or objectives that have been planned. The tasks that are carried out in each department are usually supervised by the head of such department. Generally speaking, departments are usually set according to the functions attributed to them. Thus, there are four main functions that most common departments usually perform (Table 1.3): production, commerce, finance and human resources. Common departments in companies Production department Commercial department
Purchasing department Sales department

Features
It generates products or services through the transformation of resources. It is also known as operation unit. Its responsible for the procurement of goods or services for the company. Its responsible for pricing, customer relations, conditions of sale, etc. It obtains and manages the money that the company needs to develop its activity and controls all economic activities. It plans and implements the decisions relating to recruitment, selection, training and design of compensation policies of the company staff. It may also be responsible for security and hygiene at work. In large companies, it develops performance evaluation programmes to assess the activity of employees.

Finance department

Human resources department

Table 1.3. Most common departments in companies.

4.2. Organizational charts. Concept, features and types

An organizational chart is a diagram that schematically shows the formal structure of the company and its departments, functional areas and its relationship of interdependence. The main features of a classic organizational chart are those appearing in Table 1.4: Features of organizational charts
It outlines the structure of the company, representing the units that form it and indicating the hierarchical relationships among them. It highlights the degree of dependence, as well as its hierarchical relevance. It indicates the specific name of departments and, sometimes, the name of those responsible. It shows a temporal reality: it must represent the hierarchical structure in the company at the time it is made, but not the when the company was created. It must be understandable: the graphical representation must be easily understood by those who read it. It is expressed simply: it must contain only the essential elements to provide the information that is intended to transmit. Table 1.4. Features of a classic organizational chart. 15

Business organizations

As for the existing types of organizational charts, they vary depending on the criterion that has been chosen, as shown in the following table: Sorting criterion Purpose Range Types of organizational charts
Informative Analytical General Partial Structural Functional Staff Vertical

Features
It informs the general public about the company structure, so it tends to be very simple. It contains the whole structure of the company in detail. It covers the full set of the organization concerned. It only shows a part of the structure. It only shows the names of the elements, their hierarchical position and authority relations. It reflects the functions or contents that are assigned to the different departments. It contains information on job positions. It is made from top to bottom in a pyramidal layout. It is made from left to right, and the base of the pyramid would be on the right. The highest authority is placed in the centre and from this point, increasing circles are developed to represent the different levels of authority.

Content

Graphical layout

Horizontal Circular

Table 1.5. Types of organizational charts according to different sorting criteria.

Here you can see two examples of charts: the first belongs to a highly hierarchical company, and the second belongs to a flat company.
Example of a highly hierarchical company General management Financial director Financial technicians Commercial director Head of sales department Head of purchasing department Store operator

Staff director Head of the technical office Payroll responsible

Selection responsible

Scheme 1.3. Chart of a highly hierarchical company. Example of flat organization

Manager

Marketing head

Production head

Financial head

Human resources head

Scheme 1.4. Chart of a flat-organization company.

As you can see in the first chart (Scheme 1.3), there are three department managers: staff, financial and commercial. The general manager (or CEO) is above, and below we can find heads of different areas or technicians, who may also have, in turn, workers in charge of different tasks. In the second chart (Scheme 1.4), only basic information is shown: a manager and four department heads.
Activities

3. How many organizational levels are there in the organizational chart in Scheme 1.3? Specify who reports directly to: a) The commercial director. b) The head of sales. c) The store operator.
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4. Make the following organizational charts: a) Informative chart of a farming company. b) Partial chart of a computing company. c) Functional chart of a hotel company. d) Vertical chart of a wine export company.

Business organizations

5. Decision-making
We are constantly making decisions in our daily life: we decide the clothes that we will be wearing, the road we will take to go somewhere, and many other issues that arise all the time. However, we are scarcely aware of many of those decisions, as we make them as if they were reflex actions; nevertheless, there are other decisions that we consider important enough to think about them thoroughly. The decision-making process is one of the major responsibilities for managers or executives, because, depending on the decisions they make, the company will meet its objectives or not. This is the reason why many economists and human resources specialists believe that business management is definitely an ongoing process of decision-making. Decision-making in the company is a rational process by which one or more individuals choose between two or more alternatives in order to solve a problem.
Fig. 1.3. The decisions we make lead us one way or another. Just think about the decision you made to study Vocational Training and the changes that it has brought to your life.

5.1. Types of decisions

Decisions may be taken as an individual or as a responsible for an organization; all those decisions may vary a lot depending on their level, importance or scope. Therefore, in Table 1.6 you can find the most significant classifications: Sorting criterion Number of individuals Type of decision
Individual Group

Features
It is made by one single individual who is the one responsible for it. It is made by several people, who are responsible for it. It is made by the top hierarchical level. This decision involves planning and organization issues of the company. It has to do with long-term goals. This decision involves planning and organization issues of the company. It is made by the middle positions of the company. It is aimed at the efficient allocation of resources to achieve the goals set at the strategic level. It is made by the executives at the lowest level. It involves the type of decisions that are made in the performance of regular work. It is repetitive; it must be taken regularly. There is a process to facilitate its performance It is new to the company, and then it has to be made when the unforeseen circumstance arises. Theres no settled procedure for it.

Strategic / Level I

Level of the decision maker

Tactical / Level II Operational / Level III

Depending on the method

Scheduled Non-schedulable

Examples
Types of decisions: Strategic/Level I: where to locate production facilities, which the capital resources should be or which products will be produced. Tactical/Level II: budget use and control. Operational/Level III: allocation of tasks to workers. Programmable: payroll. Non-programmable: launching a new product.
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Table 1.6. Types of decisions according to different sorting criteria.

Activities

5. Mr. Roda is the final decision maker of Banco Oscense. Give examples of the decisions that he or the rest of decision-making levels could adopt for the bank according to the types in Table 1.6. 6. Search the web for other possible classifications of decisions (regarding experience, authority, consensus, etc.).

Business organizations

5.2. The process of decision-making

Do you know that...?
When somebody has to make a decision, the choice is influenced by several factors: Resources available. Risk. Time. Pressure. Beliefs. Values.

As we indicated before, decision-making is a process consisting in choosing between two or more alternatives (take the bus or the subway, go to the gym or go shopping, etc.). It is obvious that when we have alternatives that are common and without much importance (as those above), the decision process is almost mechanical. But when we face new problems or those that are relevant somehow, it is necessary to perform the entire process and assess all possible alternatives. The decision-making process consists of four main stages: 1. Analysis of the situation. In this first stage, we must define the goal we want to achieve to solve the problem and what causes it. Therefore, it is essential to find all the necessary information, both present and past. 2. Planning and assessment of alternatives. In a second step, we identify the different options that we can choose and even raise new ones. Thus, the more options we have, the more we are able to find the most suitable. We will make an assessment of the alternatives by eliminating the less advantageous. 3. Decision and execution. At this stage, we will decide which the best option is among the possibilities and we will put it into practice, that is to say, we will execute it. 4. Monitoring and evaluation. Finally, we will assess whether the results correspond to our planning or not, that is to say, if we have achieved the objective or if we have solved the problem that we wanted to solve. Otherwise we will have to go through the process and the selected alternative again.

Case study 4. Decision-making process

Gestora FiscalSur, S. L. is increasing its customer base and plans to hire more staff, but it has a problem: the lack of space in its current workplace. Which process of decision-making has to be taken in order to solve this problem? Solution: The process that has to be taken for making such a decision has the following stages: 1. Analysis of the situation: the company wants to rent a new place, where there is room for more workers, but in turn this place must be easily accessible to their customers and allow the company to gain new customers. 2. Planning and assessment of alternatives: FiscalSur, S. L. has three alternatives: a) place A: its downtown, but with few parking areas (it will be dismissed for lack of accessibility); b) place B: its very accessible, but its located

on the suburbs; c) place C: this location is slightly smaller than the above, but it is in a big neighbourhood in the city and surrounded by many businesses. 3. Decision and execution: the company will finally take place C, because although it is somewhat smaller, it is easily accessible and is situated in a neighbourhood where there are many potential customers. 4. Monitoring and evaluation: once installed at the new location, FiscalSur, S. L. will check if the main problem is solved, that is to say, if they have enough room for everyone. It also has to make sure that the place is comfortable for its customers, and if, moreover, moving to this new place has implied an increase in its customer base. Otherwise, it may want to rethink its decision and keep looking for more suitable premises.

5.3. Decision-making in a group

In business, individual decisions are very common, although today there is a growing tendency to make decisions collectively or at least to allow a group to express their opinions, although the final decision is made only by one person. The decision-making process in a group has a number of advantages and disadvantages with respect to decisions on an individual basis:
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Business organizations

Advantages: It allows for more and better information gathering and offers different viewpoints. It produces more and better solutions. It increases motivation and commitment. It encourages creativity. Decisions are usually accepted by everyone, even those that are riskier. Disadvantages: It takes a longer time. It dilutes individual responsibility. Theres a risk of conformism: sometimes a right personal opinion is abandoned in order to reach a consensus. There may be members of the group that self-censor, avoid defending their views or criticizing the others for fear of rejection from the group. There is inequality: members of a group are never equal, as they differ in experience, level or role in the organization, verbal skills, etc. Therefore, a member may try to dominate the group. As for the way of making group decisions, there are many techniques (Table 1.7), and the following are the most important:
Its aim is to develop creativity and find an innovative solution. Once the problem has been explained, each participant brings ideas spontaneously, regardless of the order in which they speak, the value or relationship of the ideas. Ideas are written where everybody can see them. To be effective, one cannot judge the ideas of others and self-censorship has to be avoided. Once the group is not able to develop more ideas, these ideas must be valued and the members have to decide the solution; this stage may be done by the same group or by a different one. It consists in dividing the group into subgroups of 6 people, who will discuss a topic for 6 min. After this time there will be a sharing, and together they will draw a final conclusion based on reports of the subgroups. It is very useful when dealing with a problem that can be split by assigning each of the sides of the issue to a subgroup. The decision can be analyzed from six different perspectives, each of which is represented by a hat of one colour: White: it represents the facts objectively, it works with facts. Black: this is the most pessimistic thinking, working with drawbacks and mistakes. Yellow: it symbolizes optimism, and works with advantages, successes and benefits. Red: it represents emotions, feelings, intuitions ... Green: its related to creative, innovative and different ideas. Blue: it organizes and coordinates the various thoughts. It is used by those running the meeting. The idea is to give the different types of thinking among the members of each group and analyze the problem from the perspective of the corresponding hat. It combines individual work and group work. It is divided into these steps: The moderator of the team formulates the problem and asks each group member to write as many answers as possible. The moderator collects the answers and reads them aloud, guaranteeing anonymity. Similar ideas are grouped on a whiteboard. The group discusses ideas to clarify, develop or qualify them. In writing, each member assigns a score to ideas. The moderator collects the scores, also anonymous, and quantifies them. The ideas with the most votes will be adopted as group decisions. It develops a great deal of ideas and, as the process is made in writing, it prevents some of the disadvantages of oral group decision-making, such as interferences caused by hierarchical differences or having more outgoing people covering most of the meeting time. Fig. 1.4. Today companies tend to make their decisions on a group basis because of its many advantages.

Brainstorming

Philips 6/6

Six thinking hats

Nominal group

Table 1.7. Techniques of decision-making in a group. 19

Business organizations

6. Corporate identity and corporate image

6.1. Corporate identity
In the beginning of this unit we talked about the need for controlled communication processes in the company. In order to understand this importance, first of all we must understand why the company needs to communicate. And not only to communicate, but also why this communication has to be performed in a controlled way. In advanced societies, people are subjected to thousands of daily advertising stimuli. We go down the street and there are advertisements everywhere; we turn the TV on, and advertisements are there too; and the same goes for magazines. All these companies that launch their messages want us to buy or use their products or services and to recommend them to the people we know, but there are too many of them. This oversupply is the reason why companies have to make a major effort to stand out from their competitors, and the only way of standing out is making their consumers perceive them as a unique product, trademark or professional. Thus, we can define corporate identity as the enduring traits that define the personality of the company. That is to say, it is what the company decides is going to differentiate it from its competitors for a long period of time. We could say its its DNA.

A. Properties of corporate identity

Important
Corporate identity has to be based on actual qualities or intentions of the company, and not only in what is believed to please the public. If the company uses attributes that do not belong to it, the public will clearly notice the inconsistency.

When it comes to implement corporate identity, a company must fulfil four properties: Stability: it has to be maintained over time so that the public may have the possibility of being aware of it. Consistency: it must be based on actual attributes, but not in qualities that the company does not have. Evolution: it has to evolve as time goes by to adapt to changes in society. Uniqueness: the definition of the company must be exclusive, that is to say, products, technology or services can be copied, but not the identity. This is the most important property.

B. Dimensions of corporate identity

Corporate identity has two dimensions: Objective identity: it is formed by actual elements: legal form, corporate structure, history, the goods it produces... Subjective identity: it is formed by the attributes associated with it, but they dont need to be tangible. For example, the company may be friendly, modern, classic, green... Making an analogy with people, we could say that an objective identity might be formed by traits such as age, hair colour, skin colour, nationality, etc., while subjective identity might be formed by other traits, such as being sympathetic, altruistic, friendly and so on. It is essential that all members of the organization know and share the corporate identity of their company, as this identity is present in each and every action that the company performs: its in the way phone calls are answered, and also in its advertisements. Everything must be in accordance with corporate identity.
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C. Communication of corporate identity

Watch out!

Any organization, by the fact of its mere existence, is sending information about itself to the environment. This information is issued in two ways: Voluntarily: this is the information that the company issues in a controlled and intentional way. For example, if a line manager of the organization offers a lecture on the history of the organization at a conference. Involuntarily: this is the information that the company issues without control. Those data are inferred from comments, actions or opinions that are produced in private or unintentionally. For example, if the president of the organization meets his or her old college buddies and talks about the way sales are going in that semester. When we receive information from different companies, we understand it in the same way, regardless of whether this was voluntary and, therefore, controlled by the company, or involuntary or uncontrolled. That is to say, all the information we receive through several channels makes us create an image of the company. Therefore, if the company wants us to have the image it is trying to create, communication must be: Constant: the company cannot communicate with its public only when its convenient; it has to keep a constant communication. Consistent: all communication actions undertaken by the company have to be faithful to their identity. That is to say, what the company is, what the company does and what the company says it does must be in the same line. If there are inconsistencies, unconsciously or even consciously, the consumer will trigger a warning signal that will cause distrust of all information and actions of the company, and even more when they are voluntary or controlled.

We may use the term public as a collective noun when we mean the set of individuals forming the society in which the organization is immersed. The term general public is also used for this meaning. We also use the term public when we refer to all groups of individuals that form a whole with common features. For example, for the Regional Government of Madrid, the public is formed by all the inhabitants of the Region of Madrid. But the public of an organization is identified with a group: workers of the organization, users of the services it provides, suppliers of the organization, etc.

6.2. Corporate image

To put it simply, we may say that corporate image is what the public think of our organization. Its not just what an individual or group thinks, but what emerges from the collective.

A. Building corporate image

The public builds corporate image from the information it receives from: The company itself: this type of information may have been issued both voluntarily and involuntarily. The competitors: the messages of competitors about themselves influence the image of other companies for comparison. The environment: this includes any information related to the company or sector that reaches the public through media, friends, acquaintances...

B. Measuring corporate image

After creating the corporate image of the company, it is necessary to measure its impact on the market. This measurement is possible through market research techniques, such as opinion polls.
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Business organizations

The two elements that can be studied to carry out the measurement of corporate image are: The reputation of the company, that is to say, the valuation that the public has about the company. Positioning, that is to say, the place that the company has in consumers mind compared to its competitors. To sum up, we can say that corporate identity is formed by traits that belong to the organization, while corporate image is formed by the mental perception or idea that the public has about the organization (Fig. 1.5). In any case, the goal of any organization is to make sure that its identity and its image are the same, as this is the way to ensure that the public has the mental picture of the organization that is best for it.
Case study 5. Building corporate image

The sneaker company Zapatines, S. L. designs and produces shoes for young people aged between 12 and 18. Its corporate identity is formed by the following objective features: young company, founded in 2008, working team of an average age of 32. And the following subjective features: it supports young people, its different, rebel, urban, and fighter. Solution: To create a corporate image in the public so that it identifies that image with the abovementioned values of youth, rebellion, and so on, Zapatines, S. L. decides to adopt the following measures: Remove formal barriers within the company, creating an informal and equal working environment. Use the media that young people use in order to advertise the company. For example, social networks. Use a young language in all its communications. Hiring well-known graffiti artists to do some designs of their shoes. Sponsor skate and graffiti championships and music contests. Support new clothing designers by creating scholarships.

Activities

7. The company Reposteras Lpez, S. L. owns several brands in the food sector. After more than 40 years on the market, it has decided to replace its traditional logo, consisting of the initials RL in plain blue uppercase letters, for a new one in which the initials are not plain, but formed by the symbols of the different brands of the company. In doing so, Reposteras Lpez seeks to convey vitality, while maintaining the strength and solidity that the previous logo transmitted. By including the symbols of all the brands of the company, the public can also fully perceive what is behind Reposteras Lpez, what it does and how it does it. In orther to complement the logo change, the company has hiredan advertising campaign. Which corporate identity properties are evident with this information? Which elements of objective and subjective identity is the company intending to communicate? How does Reposteras Lpez want its identity communication to be? What is the requirement for a corporate image to match a corporate identity?
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6.3. The trademark

The term trademark refers to any sign used to distinguish our products, services and industrial or commercial establishments in the market. The main feature of a trademark is that it has to be unique, that is to say, there can be no other identical or similar trademark in the market. The trademark must be unique for two reasons: Because this uniqueness helps consumers to differentiate products, companies or services from each other. Because it helps the company to be in the market, as it supports visually its distinctive qualities, that is to say, its identity. There are three basic types of trademarks: Nominative: these are formed by a name or letters. They can use a unique font or not. In the example of the right margin, that would be BBVA logo (Fig. 1.5). Figurative: they are symbols, signs or images, such as Movistar logo (Fig. 1.6). Mixed: formed by letters and symbols combined, such as El Corte Ingls logo (Fig. 1.7). These three types are the most commones, but there are other things that may also be a part of the brand, such as a melody (as the one in Nocilla advertisement) or a colour that has been exclusively used for this trademark (as the red colour in the case of Coca-cola). Today, even exclusive flavours are created so that they can be associated with trademarks. In any case, the fundamental types of trademarks are always formed by three elements: The symbol: the figure or icon that represents our organization. For example, the flag of El Corte Ingles. The logo: the name of our organization written in a certain way or in a particular font. For example: the letters of El Corte Ingls. The corporate colours: colours that identify us as an organization. For example, colours green, white and black are the defining feature of El Corte Ingls.
Fig. 1.7. Logo of El Corte Ingls. Example of mixed trademark: it combines a particular font with the symbol of the flag. Fig. 1.6. Movistar logo. Example of figurative trademark: a specially designed M as a trademark. Fig. 1.5. BBVA logo. Example nominative trademark: formed by letters.

6.4. Corporate Visual Identity (CVI)

Spanish assistant
La palabra espaola "marca" puede decirse de dos formas en ingls: trademark y brand, como habrs visto en este pgina. Aunque la mayora de las veces se aceptan Today, as a result of the increasing number of existing trademarks, companies have realized como sinnimos, no est de ms that their identity cant only be based on design, and must go further and make a real difque sepas que no lo son: mienference. tras que trademark Fecha Proyecto Identidad Visual Movistar Cliente Telefnica 03/11/09 es un trmino general que hace referencia a la Thus, just as we have noted the importance of consistency in corporate identity, in the case Archivo Digital Logo_movistar_proteccion_pos_cmyk.ai Nombre del Archivo Logotipo de Movistar positivo con rea de proteccin marca registrada en s misma, el of visual identity this need becomes even more evident because, as a general rule, the first Referencias cromticas: Formato trmino brand se suele emplear contact that an individual has with the organization is through the trademark. para referirse a elementos (visuaPapel Therefore, if we want our trademark to be recognized in the future, or if we want that the les, sonoros o de otro tipo) que Observaciones: sirven para diferenciarse de la actor of an advertisement is clearly identified, we must not change the graphics application competencia. Por eso se dice que of the trademark. algo est branded cuando muestra For example, if we go down the street, the first thing we usually see before entering a store is alguno de estos elementos, por its sign. Moreover, if the store contacts us by postal mail to confirm an order that we have just ejemplo, un bolgrafo con el logo made, we need to identify the trademark, and this is the reason why it must be recognizable del BBVA.

The term corporate visual identity refers to the development and application of the trademark in all areas of the company.

Cyan

Magenta

Amarillo

Negro

C100 M31 Y8 K44

both in the sign and printed on paper.

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1
Web

Business organizations

http://www.um.es/cpu/imagen/ In the section "Servicio de Comunicacin y Proyeccin Universitario" of the University of Murcia, you can access its Corporate Visual Identity Manual.

Summing up to achieve an appropriate visual identity, it is necessary to develop a set of rules to guide the implementation of the brand in various media; in other words, when the brand is used in commercial letters, envelopes, websites, corporate gifts, etc., it must keep the identity and perfectly suit these media. These rules of application are usually explained in the corporate identity manual. The aim of the corporate identity manual is that everyone in the organization in charge of working with some element of visual identity knows how to apply the trademark. This is the way to achieve unification and standardization of communication elements. As for the elements that form corporate visual identity, they are the following: Logo: it is the written part of the identifier of the trademark. For example, the letters forming the words El Corte Ingles. Symbol: its a graphical representation of the trademark. For example, the symbol of sports trademark Nike. Corporate colours: the choice of the colours that form the symbol, the logo or both. Colours have an standard reference for each one so that they can be faithfully reproduced. For example, a Pantone reference. Fonts: the font used in the logo, as well as the one to be used in all company communications, has to be identified. For example, CEPSA has chosen the font family Gill Sans as its corporate font. Figure-background relationship: that is, how to apply the logo depending on the background colour. For example, the brand CEPSA determines that if its logo can not be used with red background and white lettering, the background has to be black.

Fig. 1.8. Logo of El Corte Ingls in black and white.

Monochrome version: how to apply the logo or symbol using only one colour. The logo in Fig. 1.8 is a good example. Applications: all possible applications of the logo and/or symbol in different materials and media. For example, cards, letterheads, envelopes, banners, uniforms, company cars, and so on.

Do you know that...?

Pantone is a U.S. company that invented a system, the Pantone Matching System, which identifies colours by a certain code. Thus, the colours that appear in logos and symbols will remain the same regardless of where they are printed.

Activities

8. Using the Internet, search websites of companies, educational institutions, government agencies, NGOs, etc., and find a complete manual of corporate visual identity of the organization: a) Indicate which of the elements that we have seen in this unit are included in that manual and which are not. b) Once you have identified them, indicate which of the absent elements in the manual should appear. 9. Find three brands on the Internet that match the concept of nominative, figurative and mixed trademark. 10. Do you think that the choice of corporate colour influences the success of a brand? What colours would you choose to represent a brand of wines from the south of Spain? Why? 11. The font may be used to give a formal or informal character to the brand. Use a word processor to search for two fonts, one formal and one informal, to convey the brand image of the company Centro de formacin Calculus, S. L.

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Sum mar y
Classification of companies according to their organizational structure Formal or informal Centralized or decentralized Simple (linear or functional) or complex Hierarchical or flat Planning Production Sales Functions of the organization Organization Departments Management Financial Commercial Purchasing

Control

Human resources

Schematic diagram showing the formal structure of the company and its departments, functional areas and their relationship of interdependence. Organizational chart Sorting criteria Content Graphical Layout Situation analysis Planning and assessment of alternatives Process with four stages Decision and execution Decision-making Monitoring and evaluation Purpose Range

Techniques of decision-making in group:brainstorming,Phillips 6/6, Six thinking hats, nominal group. Objective identity: formed by real elements: legal form, structure, history, goods produced... Subjective identity, formed by the attributes associated with it, but those doesnt have to be tangible: friendly, modern, classic, green Corporate visual identity: development and application of the mark in all areas of the company. Trademark Sign used to distinguish our products, services, industrial or commercial establishments in the market and so on.

Corporate identity (DNA of the company)

Corporate identity Corporate image (public perception)

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Business organizations

Test review
1. The business organization is NOT: a) Assigning tasks to employees. b) Paying applicable taxes. c) Distributing responsibilities among members of the company. d) Line managers making decisions. 2. Which of the following types of company divides its share capital and limits the liability of the partners? a) Sociedad limitada. b) Sociedad colectiva. c) Sociedad annima. d) Sociedad cooperativa. 3. The function responsible for raising the targets or goals to be achieved by the company is: a) Organization function. b) Control function. c) Planning function. d) Management function. 4. Which of the following are managing functions of the employer? a) Identification of objectives, planning and control. b) Identification of objectives, organization, planning and control. c) Identification of objectives, resource allocation, management and control. d) None of the above. 5. Regarding the decision-making process, which of these statements is correct? a) When we face a common problem, the full process has to be performed. b) The situation analysis involves identifying the different options that we can choose. c) The more options we have, the lower the chances of finding the best. d) It is necessary to assess whether the results correspond to those planned or not. 6. In the technique "six thinking hats" each colour reflects a different thinking style. Indicate the wrong option: a) The black hat represents the most pessimistic thinking: it works with drawbacks and mistakes. b) The yellow hat symbolizes optimism: it works with advantages. c) The blue hat represents the facts objectively: it works with facts. d) The green hat is associated with creativity, innovative and different ideas. 7. The properties of corporate identity are: a) Uniqueness, objectivity, consistency and evolution. b) Stability, objectivity, evolution and uniqueness. c) Stability, consistency, evolution, uniqueness. d) Consistency, kindness, uniqueness and evolution. 8. The construction of the corporate image results in: a) The creation of the companys trademark. b) The communication of voluntary and involuntary information. c) Two measurable elements: positioning and reputation. d) The subjective elements of the companys corporate identity. 9. The elements of a trademark are: a) Figurative, nominative and mixed elements. b) Fonts, the figure-background relationship and applications. c) Design, colour and creativity. d) The symbol, logo and corporate colours. 10. A decision that is made on matters arising repetitively and with an established procedure is known as: a) Scheduled decision. b) Intended decision. c) Routine decision. d) Non-schedulable decision. 11. A decision that is made by a superior and that refers to the organizational structure of the company is: a) Strategic or Level I. b) Tactical or Level II. c) Operational or Level III. d) None of the above. 12. The organization whose decisions are taken by the leaders but with professional advice is: a) A matrix organization. b) A hierarchical functional organization. c) A clover organization. d) None of the above.

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Ch ec k your lear ning

Distinguish types of existing business institutions 1. Media usually refer to a special kind of company known as pyme. Find out what a pyme is and define the different types of existing pymes. Tip: the website www.creatuempresa.org/apoyoinfo.htm may be helpful to solve this activity. 2. Search the Internet and find out what the laws governing corporations and limited liability companies are and indicate the minimum capital required to constitute them. 3. There are other types of companies that participate in the social economy principles. Enter the website of Confederacin Empresarial Espaola de la Economa Social (CEPES), www.cepes.es, and indicate which they are. Also indicate all the basic features of social economy companies. Relate the common functions of the organization: management, planning, organization, execution and control 4. List the factors that influence strategic planning and that every employer should consider. 5. Which is the difference between the functions of management and organization? Give an example of a task that belongs to each of these types of functions. 6. The company TEXTILNOR, S. L. raised the following issues in a management meeting: a) The operations department proposes a change in staff shifts to produce at lower costs. b) It is proposed to choose between two possible product lines to launch next year: decorative items or toiletries. c) The heads of different departments explain the degree of achievement of the objectives and the deviations that have occurred on the plans while establishing measures to correct these deviations. d) The manager emphasizes the need to motivate staff and to explain clearly its functions. Which function of the organization relates to each case above? Be aware of the importance of an adequate organizational structure to perform the provision of quality services 7. Make the chart of a company including (from the highest to the lowest priority) the following organizational levels: President of the company. General manager. Departments of: Production. Staff. Logistics. Administration. This one has a technical staff of investments. Employees (hierarchically dependent and independent from the different departments). 8. Following the classification of the charts, match the following types with the group they belong to:

General chart Depending on the purpose Organizational chart Circular chart Analytical chart Horizontal chart Partial Chart Staff chart Depending on the layout Depending on the content

Depending on the range

9. Describe the features that concur in the following organizational chart:

Employees Middle positions

Department heads

Manager

10. Think about the reasons you had to study this Vocational Training Course. In relation with your thoughts, design your own decision-making process for this specific case. 11. Make a classification of the types of existing decisions according to the level criterion.

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Business organizations

Ch ec k your lear ning

12. Match each type of decision with its meaning: 1. Decisions made during the development of regular work. a) Scheduled b) Operational c) Individual d) Strategic 2. They are adopted by the superior level of the organization.They settle long-term goals. 3. Decision made by a single person with final responsibility. 4. Decisions to be taken periodically. 13. Describe a scheduled decision you usually make every day. Why do you think that it is scheduled? Was it a nonschedulable decision in the past? 14. List the advantages and disadvantages of decision-making in groups. 15. Indicate if the following statements are true or false: a) Decision-making in the company is an irrational process by which one or more individuals are choosing between two or more alternatives. b) According to the level of the decision maker, there are scheduled and non-schedulable decisions. c) Strategic decisions are those related to the objectives of the company on a long-term basis. d) Encouraging creativity is an advantage of decisionmaking in groups. e) The technique Phillips 6/6 combines individual work with team work. f) The technique "six thinking hats" allows analyzing a decision from six different points of view. Recognize different types of existing trademarks 16. List three examples of famous companies of each of these types of trademarks: nominative, figurative and mixed. Differentiating between corporate identity and image 17. Indicate whether the following statements correspond to elements of subjective corporate identity, objective corporate identity or corporate image of the company: a) The company Tadami decided to adopt the legal form of corporation to facilitate the entry of new members. b) It was founded forty years ago. c) It manufactures wooden furniture of high quality. d) It has always advocated the use of wood from sustainable exploitation and its products are covered by a pan-European forest certification.
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e) Its customers value their involvement with the preservation of the environment. f) Tadami, S. A. commits to cutting-edge designs that offer innovative solutions. g) Its designs have obtained several awards for innovation from magazine conducting consumer surveys. h) It produces furniture collections for living-rooms, bedrooms, offices and dining areas, and therefore customers find solutions for the entire house in its catalogue. They value this issue because they can keep the same style throughout the house. 18. Read the following statements and indicate whether they are true or false: a) Corporate identity may change constantly to adapt to what the public demands. b) Companies should always communicate with their public, and not just when its convenient for them. c) The identity of a company can be copied, as well as the services it provides. d) Corporate identity is known by the line managers of a company, and the rest of the company members dont need to know about it. e) The information received by the public of a company through friends or relatives do not affect its corporate image. f) Consistency is one of the issues that the corporate identity needs to have so that the public may create the image that the company is interested in. 19. We have created the corporate visual identity of the bakery Tupn. Which potential applications should we consider in the manual of corporate visual identity? 20. Indicate if the following statements are cases of voluntary or involuntary communication of corporate identity: a) The president of the NGO Salvacin Sur offers a lecture on the history, goals and values of the organization. b) The marketing manager of Zapatines, S. L. calls for an internal meeting to inform partners about the new advertising campaign. c) The accountant of the bakery Tupn tells the accountant of the fruit store Freshverd that sales are going down. d) The purchasing manager of Zapatines, S. L. meets two friends and tells them that the new advertising campaign that her company is about to launch seems "for dummies" to her.