Organisational Structure (DP IB Business Management: SL): Exam Questions

FitLife Gyms is a chain of mid-sized fitness centres operating across Europe. The company currently uses a tall organisational structure, with multiple layers of management overseeing operations in each gym. Managers at each location report to regional directors, who then report to senior executives at headquarters. This hierarchy ensures consistency in branding and service quality across all branches.

However, some gym managers have complained that decision-making is slow, as every major request must go through multiple layers of approval. For example, when a branch proposed introducing new equipment tailored to local preferences, it took weeks to receive the necessary approvals. Senior management is now considering a flatter organisational structure to address these issues, but there are concerns about whether gym managers would handle increased responsibilities effectively.

FitLife Gyms is a chain of mid-sized fitness centres operating across Europe. The company currently uses a tall organisational structure, with multiple layers of management overseeing operations in each gym. Managers at each location report to regional directors, who then report to senior executives at headquarters. This hierarchy ensures consistency in branding and service quality across all branches.

However, some gym managers have complained that decision-making is slow, as every major request must go through multiple layers of approval. For example, when a branch proposed introducing new equipment tailored to local preferences, it took weeks to receive the necessary approvals. Senior management is now considering a flatter organisational structure to address these issues, but there are concerns about whether gym managers would handle increased responsibilities effectively.

GlobalGrocer is an international supermarket chain that operates in over 50 countries. The company uses a decentralised organisational structure, with regional managers making decisions based on local market conditions. This structure allows GlobalGrocer to adapt its product offerings to suit customer preferences in different regions, such as stocking local produce or offering culturally specific products.

Recently, GlobalGrocer has faced challenges in maintaining consistency across its operations. Some regional managers have implemented policies that conflict with the company’s global brand image. For example, promotional campaigns in certain regions were criticised for not aligning with the company’s sustainability goals. Senior management is now considering shifting to a more centralised structure to ensure greater control and consistency but is concerned this could stifle innovation and responsiveness in local markets.

GlobalGrocer is an international supermarket chain that operates in over 50 countries. The company uses a decentralised organisational structure, with regional managers making decisions based on local market conditions. This structure allows GlobalGrocer to adapt its product offerings to suit customer preferences in different regions, such as stocking local produce or offering culturally specific products.

Recently, GlobalGrocer has faced challenges in maintaining consistency across its operations. Some regional managers have implemented policies that conflict with the company’s global brand image. For example, promotional campaigns in certain regions were criticised for not aligning with the company’s sustainability goals. Senior management is now considering shifting to a more centralised structure to ensure greater control and consistency but is concerned this could stifle innovation and responsiveness in local markets.

BrightSpark Electronics is a global company that manufactures and sells consumer electronics, including smartphones and home appliances. The company recently restructured its operations to use a matrix organisational structure. Employees now report to both functional managers, such as the heads of marketing or finance, and project managers overseeing specific product lines.

While this structure has improved collaboration across departments and allowed BrightSpark to launch innovative products faster, it has also created challenges. Employees sometimes receive conflicting instructions from their two managers, leading to confusion and delays. Additionally, the need for constant communication and coordination has increased workloads, putting pressure on employees and middle management.

BrightSpark is also facing external challenges, including increased competition in the global market and rapid technological advancements. To remain competitive, the company needs to ensure its matrix structure enhances flexibility and efficiency without reducing employee morale.

BrightSpark Electronics is a global company that manufactures and sells consumer electronics, including smartphones and home appliances. The company recently restructured its operations to use a matrix organisational structure. Employees now report to both functional managers, such as the heads of marketing or finance, and project managers overseeing specific product lines.

While this structure has improved collaboration across departments and allowed BrightSpark to launch innovative products faster, it has also created challenges. Employees sometimes receive conflicting instructions from their two managers, leading to confusion and delays. Additionally, the need for constant communication and coordination has increased workloads, putting pressure on employees and middle management.

BrightSpark is also facing external challenges, including increased competition in the global market and rapid technological advancements. To remain competitive, the company needs to ensure its matrix structure enhances flexibility and efficiency without reducing employee morale.

Elite Style is a well-established premium hairdressing salon located in the heart of a busy city centre. Over the last 12 years, the salon has become synonymous with personalised hair care and high-quality styling services aimed at working professionals and high-income clients. Its reputation has been built on attention to detail, luxury experiences and delivering exceptional results that reflect the salon’s premium pricing strategy

In response to shifting customer demands, Elite Style is preparing to introduce a new express styling service targeting busy professionals. The service will focus on quick, high-quality styling, including blow-dries, trims and styling touch-ups, all completed within a 30-minute timeframe. This initiative aims to attract clients looking for convenient solutions during lunch breaks or before meetings. Management has set a tentative price of $40 per appointment to reflect the salon’s premium image while remaining competitive

To justify the new service, Elite Style’s management team has relied heavily on secondary market research. Sources include industry reports on grooming trends, a competitor analysis and government data on local working populations. Data shows that 70% of full-time professionals in the city take 30–45-minute lunch breaks, and demand for quick grooming services has increased. Competitor research reveals that other express salons offer services ranging from 20 to 45 minutes, with customer satisfaction scores ranging between 82% and 91%

However, relying solely on secondary research carries risks. Specialist market reports are expensive, and there is concern that the data may be outdated or too broad for Elite Style’s niche clientele. Management recognises that additional primary market research may be needed to tailor the service to client preferences

Operationally, launching the express service will require adjustments. Elite Style will need to train existing staff, hire part-time stylists and invest in faster equipment to meet the express timeframe without compromising on quality. While the initial setup cost is estimated at $18,000, financial forecasts suggest that the express service could generate a net profit of $22,000 within six months if operational targets are met

The launch also presents opportunities for differentiation. Elite Style could bundle the express service with additional perks, such as complimentary consultations, loyalty schemes or corporate packages. The key challenge will be to ensure the service remains efficient while maintaining the premium standards the salon is known for

Table 1: Competitor analysis

Table 2: Financial forecast for the express styling service (first six months)

Graph 1: Preferred hair styling service duration by urban professionals

The graph below shows customer preferences for express hair styling durations, based on Elite Style’s secondary market research

FitLife Gyms is a chain of mid-sized fitness centres operating across Europe, catering to a diverse clientele. The company currently uses a tall organisational structure, with multiple layers of management overseeing operations in each gym. Managers at each location report to regional directors, who then report to senior executives at headquarters. This structure ensures consistency in branding, service quality and adherence to company policies

Recently, gym managers have raised concerns about the inefficiency of decision-making. For example, one branch’s proposal to introduce locally popular equipment took weeks to gain approval, causing frustration among staff and members. The delays highlight the challenges of a rigid organisational structure where major decisions pass through multiple layers of approval

In response to these concerns, the HR department conducted an assessment of FitLife’s organisational culture. The assessment revealed strengths in team collaboration but highlighted moderate levels of communication effectiveness and employee morale. Adaptability to change and manager autonomy were also identified as areas requiring improvement (see Table 2 for a summary of the assessment findings)

Senior management is now considering transitioning to a flatter organisational structure to improve decision-making and empower gym managers with more authority. However, concerns remain about whether gym managers can handle increased responsibilities effectively, particularly in areas such as financial management and team leadership. Additionally, FitLife’s strong organisational culture, focused on consistency and control, may clash with the flexibility required in a flatter structure

Table 1: FitLife Gyms – Organisational metrics (2023 vs 2024)

Table 2: FitLife Gyms – Organisational culture assessment