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Describe two reasons why a business enterprise might change its organisational structure over time - Leaving Cert Business - Question (B) - 2004
Question (B)
Describe two reasons why a business enterprise might change its organisational structure over time. Use illustrations to support your answer.
Worked Solution & Example Answer:Describe two reasons why a business enterprise might change its organisational structure over time - Leaving Cert Business - Question (B) - 2004
Step 1
Size
Answer
One significant reason a business enterprise might change its organisational structure is due to size. As a business grows, it often needs to adapt its structure to handle increased complexity. Larger businesses may face challenges in communication and efficiency, resulting in the need for a more defined hierarchy or specialized departments. For example, a small business may operate with a flat structure where one person handles multiple roles. However, as the business expands, it might shift to a more hierarchical structure to better manage various functions, such as marketing, finance, and operations, thus facilitating specialized roles that improve efficiency.
Step 2
Limited Liability
Answer
Another reason for changing the organisational structure is the need for limited liability. Many businesses start as sole proprietorships or partnerships, where owners have unlimited liability, meaning their personal assets could be at risk if the business fails. Transitioning to a corporate structure often protects personal assets. For instance, a business may begin as a partnership and later evolve into a limited company to safeguard owners against liabilities. This change not only secures personal assets but can also encourage investment, as potential investors often prefer the limited liability that a corporation offers.