Trigger 3

1.How to develop functions as company grows? 

A company can have two different kinds of functions:

1. Internal functions are part of the company itself, done by company's own employees 

2. External functions are done by an outside source, such as advertising agency (1)

Picture from https://www.kent.ac.uk/careers/workin/business-functions.htm

Internal functions are all part of the Porter's Value Chain, which will be more thoroughly looked at later.

One aspect to consider about the functions of a growing business is whether to use outsourcing to facilitate growth. In other words: whether to hire another company to do the work, or to hire more employees.

A small business is more likely to have to outsource things such as accounting and marketing, compared to big corporations, which tend to have their own departments for many functions, such as legal and research. Whether outsourcing is the best solution for particular company's particular function, can depend on many factors. 

Benefits and risks in outsourcing (2):

Here are some advantages of outsourcing:

1. Lower costs
• Minimizing recruitment and operational costs
2. Swiftness and expertise
• Outsourcing vendor will already have expertise and necessary equipment
3. Concentrating on core competence rather than supporting functions
4. Risk sharing
• An outside specialist will have knowledge of possible risks and a company can also shift some of the responsibilities to outsourcing agent

And here are some of the disadvantages:

1. Risk of exposing confidential data to an outside agent
2. Time and quality
• It can be more challenging to supervise the delivery times and quality of work of an outside vendor
3. Hidden costs
• A problem that can occur especially with a foreign company
4. Lack of focus
• An outside vendor might be more tuned to general needs of customer than the specific company's specific needs

2. What is the value chain?

The value chain is the chain of operations (and the supporting activities) that gets the product to the customer. The concept was introduced by Michael Porter in 1985, in his book Competitive Advantage: Creating and Sustaining Superior Performance.

The basic purpose of a value chain in a company is adding value to the customer on every step of the chain and thus providing a product that makes profit when sold to the customer. Here is a brief summary of each step in the value chain:

Information on the picture is from http://www.netmba.com/strategy/value-chain/

3. How size affects management of company?

In order to better understand the difference in management when company size changes, I will have a look at the standard structures of companies.

"As an organization grows in size, complexity, and product market coverage, different strategies and organization form are used." Barnad, R.

Based on Ryszad Barnad's website (4) there are five stages of company sizes:

Stage IV: Large diversified firms with several autonomous business units which report to head office

• Stage III: Geographically decentralized operations
• Operating units can stand alone, not strictly tied together 

• Stage II: Some degree of decentralization of decision making
• A lot of variations, for example classic functional lines (see Porters value chain) or a vertical coordination
• Different operations not as independent as stage III

• Stage I: Single business enterprise managed by one person
• Close, daily contact with employees
• Nearly all management decisions and functions done by (and dependent on) owner

What I would conclude, is that when a company grows, management will be decentralized further and further.

References:

1. University of Kent's website: https://www.kent.ac.uk/careers/workin/business-functions.htm

2.  https://www.flatworldsolutions.com/articles/advantages-disadvantages-outsourcing.php
3. http://www.netmba.com/strategy/value-chain/

4. Barnat, R., 2014, Stategy implementation, http://www.strategy-implementation.24xls.com/en333