How to gradually perfect management organizational structure at Minh Hong Limited Company

As you know, Vietnam has been in transitional period of advancing to socialism. In building the material facilities for the socialism, the economic country has been under many fundamental changes for years.

INTRODUCTION

As you know, Vietnam has been in transitional period of advancing tosocialism In building the material facilities for the socialism, the economiccountry has been under many fundamental changes for years The 8thCommunist Party Congress of Vietnam reaffirmed its goal of advancing tosocialism; carrying out industrialization and modernization In order to have

a reasonable, powerful and effective economic structure, the internal factors(other economic factors, types of enterprises) must prove strong and operatewell If the enterprises want to operate effectively, it will be important to set

up a dynamic and reasonable management apparatus Beside, it requires us

to have a high level of knowledge and understand important role ofmanagement in each enterprise

Nowadays, with the requirements of the new era: while the commodityeconomy is facing fierce competitions, the enterprises management needs to

be strong and dynamic enough to exist and develop Therefore, it isimportant for the enterprises to establish a management organizationalstructure This main task must be done not only by businesses but also bythe entire society

In addition, there are different characteristics in an organization, in everyeconomy and in every type of business So, building a managementorganizational structure, which must to be different to suit the nature and theproduction level of each business, is necessary

From researching and studying documents on management organizationalstructure at Minh Hong Limited Company together with the help from theteachers of the English Department and specially Lecturer Tran Quang Nha,

I have decided to choose my graduation theme as: “How to gradually

perfect management organizational structure at Minh Hong Limited Company”.

Apart from the introduction and conclusion, the Graduation Assignmentconsists of three chapters:

Chapter1: Theoretical background of management organizational structure.Chapter2: Present situation of management organizational structure at MinhHong Co., Ltd

Chapter3: Solutions suggested to perfecting management organizationalstructure at Minh Hong Co., Ltd

Chapter 1:

THEORETICAL BACKGROUND OF MANAGEMENT ORGANIZATIONAL

Organization is a structure (an apparatus or apparatus system) which isintentionally constructed of the role and function (to be legalized) In which,its members carry out their assigned parts with the organic association in

order to achieve common tasks This is an organization definition which isclose to the organizational management concept.

2 What is organizational structure?

An organizational structure is a mainly hierarchical concept of subordination

of entities that collaborate and contribute to serve one common aim

Organizational structure is an organization’s existence form which denotesthe arrangement of parts of the organization and their relationships in thatorder

II Enterprise’s management organizational structure.

According to Peter Drucker’s view on management, a well-known Americanbusiness professor and consultant, he suggested that the work of the managermust be done such as: planning (setting objectives), organizing, integrating(motivating and communicating), measuring, and developing people

* Enterprise’s management organizational structure is a combination of partswhich constitutes the management apparatus and the relationships betweenthose parts

2 Requirements for the Enterprise’s management organizational structure.

The rationality of a company which is expressed in these followingrequirements:

* Optimality: Must be ensured between the stages and level of managementwhich are setting a reasonable, dynamic relationship and serve business’benefits

* Flexibility: Must be ensured for adaptability to any situation occurring inthe system as well as outside the system

* Stability: This requirement seems to conflict with the flexibility, but it isimportant Because, sustainability of organizational structures to ensureeffective management and administration in normal situations Whenarbitrary changes happened many times, it will cause negative consequence

* Reliability: All enterprise’s activities of administrating, coordinating andinspecting require accurate and timely information Managementorganizational structure must ensure reliable information

* Economicalness: Management organizational structure for the lowest costsbut the highest efficiency during construction and use process

3 Meaning of management organizational structure.

Management organizational structure is a form of division of labor in thefields of management, concerning the operation process and administrationsystem Management organizational structure not only reflects theproduction structure, but also positive effects of the development ofproduction

Organizational structure allows us to organize and use reasonably theresources It also allows us to determine the primary relationship among

specific tasks, responsibilities and powers associated with these individualwho are concerning If an organizational structure wants to survive, it must

be consistent with business’s economic, technique characteristics, businessenvironment and be flexible to adapt to changes in Enterprise’s productionand business process A bulky, less flexible structure will make negativeimpacts to the entire enterprise’s business results And, it must be replaced

by the more comprehensive and flexible apparatus

III Types of management organizational structure.

Along with the development of production that formed many types ofmanagement organizational structure, each one has different characteristics,advantages and disadvantages and it is applied in specific, certainconditions

1 Online structure.

* Basic contents of the online structure are a ladder, which has many stairs

In which, Superior controls (determine, command, directly check) juniorsand juniors must submit superior’s ideas This is a mandatory control-submission relationship

* Advantages and disadvantages:

- This is a simple and clear structure for the united command Thisstructure’s advantages are clear responsibility, and to maintain discipline andinspection Leaders must take full responsibility for the junior’s activities, socan maintain the one-superior-in-charge regime

- It also has some disadvantages When business applies this type ofstructure, Enterprise’s parts will have the distance and lack coordination Itmakes difficulty to motivate staff’s creativity and attract professionals

2 Functional structure.

* The growth will require horizontally expanding In which, each level ofmanagement must perform management function at each state with morecomplicated levels So, managers need to have good knowledge, understandthe situation and make the right decisions Junior not only takes theleadership of a department function, but also takes the leadership of thebusiness owners and other parts

* Advantages and disadvantages:

- With relatively complex operation, the functional structure is moreeffectively than the online structure Director himself doesn’t analyze allissues, monitor every company’s situation But, it belongs to functionaldepartment’s tasks (experts and staff who has specialized knowledge ofeconomic, technical, understanding of current institution related to businessactivities and have experience of situations)

- However, functional structure makes management apparatuscumbersomely, bureaucracy prone director and unclear information Itmakes staff lack a comprehensive vision and coordination in order toaccomplish common goals

3 Incorporate online-function structure.

* Incorporate online-function structure is commonly applied in medium andlarge business This is the combination of two types of relations: control-submission relationship and coordination-collaboration relationship

* Advantages and disadvantages:

- This type of structure has exploited the advantages of the online structureand the functional structure Before, Company’s director makes a decision

on issues (which relate to the company’s mission); he is staffed by the

functional department It helps Director to clearly hold the company’ssituation Because, all of units in the company are guided directly by theboard of directors, the company’s production and business are united.

- But, this structure has revealed many weaknesses There are manyfunctional parts; they usually have to hold many meetings and it makeseverybody to feel tired, stressful, waste of time In addition, it also causesthe internal conflicts company because of the inconsistent opinion It doesn’tmake staff It makes the department unable to promote innovations andtechnical improvements and combine different departments

Diagram 1: Incorporate online-function structure in a product production

4 Divisional structure.

* This is a kind of new structure which was consistent with the development

of modern economy It often applies for large corporate combinations toadapt to threats and opportunities outside The company’s managementapparatus is structured according to product, market and customer

* Advantages: - Allowing the company to have flexible adaptations in thework to meet to the needs of these operating groups outside the central andrealize the changes around the area of operation

- Creating linkages with depth through specialization in the hierarchy ofmanagement systems

- Focusing on the success or failure of the products, services, customer ormarket specific

- Creating distinct business units; in which it allows this division to competewith the others

* Disadvantages:

- Uneven development between branches can cause difficulties in thesharing of common resources

- Solving common problems could be coincidence between branches

- Slow development of product quality and services compared tocompetitors

Production Team

- Although there is priority from the strength and resources of the entirecompany, but it is difficult to deal with the challenge of the whole company.

- Not creating a common basis in training of high level and managementexperienced staff

- Having disperse tendency easily (excessive flexibility, weakening theunified management effectiveness)

- Very expensive because of many managements

- Each stage under the direction of the two centers Unified concentratedoperation’s effect is limited

- Powers and responsibilities of managers may overlap Create easily

problems and gaps in the department’s efforts, inconsistently

6 Mixed type of structures.

In the management practice, people often expect to have source divisionthat to be able to balance each method’s advantages and disadvantages It isnecessary especially with the combination of large companies which trade inmany high-technologies in their territories Management apparatus is dividedinto branches Each branch is organized under different structures forspecific tasks and a separate legal unity, although it is monitored uniformly

at the company

Chapter 2:

PRESENT SITUATION OF MANAGEMENT ORGANIZATIONAL STRUCTURE AT MINH HONG CO., LTD

I Overview of Minh Hong Co., Ltd.

1 Establishment and development process of Minh Hong Co., Ltd.

- The name of the company: Minh Hong Limited Company

- Transaction name in brief: MH CO., LTD

- Address: My Duc – Ha Noi

- Tell: 034.3847153

- Tax code: 0100765718

- Fax: 034.3849153

- Year of establishment: April 10th, 2000

- Business license No: 052922

- Account number at My Duc Bank of Agriculture and Rural Development:445071102812

Minh Hong Co., Ltd was set up on April 10th, 2000 The company has been anenterprise with legal status since the establishment Company may use its ownseal as prescribed by the State and organize business activities in accordancewith regulations of the Socialist Republic of Vietnam With the best effort, thecompany has existed and developed for many years The development process

of Minh Hong Co., Ltd may be divided into 2 periods as follows:

 The developmental process from 2000 to 2003

Minh Hong Company Limited was established in 2000 with legal capital ofVND 1.5 billion The company has met a lot of difficult things in the firstperiod, such as: capital, labors, technology About capital, which were loansfrom My Duc Bank of Agriculture and Rural Development and somewhere?

At the beginning, they only had 25 employees and they had to recruit andtrain all new employees Now, number of employee is continuouslyenhancing - 35 persons in 2002 and 50 persons in 2003 Although facing

many difficulties, the company has turnover of VND 500 million in 2000,VND 670 million in 2001 and doubling in 2003 - VND 1.3 billion.

 The developmental process from 2003 to present

The company has invested another line of machines and modernequipments Therefore, it makes their labor productivity triple and improvesproduct quality Stable activities of this line helped the company get profitand open a new orientation about production and business activities in thefuture

The company actively found out partners for joint venture and linking.Their products were appreciated and trusted After 10 years of development,Minh Hong Co., Ltd always achieves all objectives at a rapid growth Themarket of company also continuous expand, before 2003 the companyfocused on 2 primary markets: Hoa Binh and Ha Tay But they are nowproviding goods for more than 10 the northern and the central provinces

2 Functions and tasks of the company.

According to established business decisions, Minh Hong Limited Company

is operated by functions and tasks as follows:

* Functions:

- Production domestic animal feed

- Procession of domestic animal feed supplement

- Distribution goods for wholesale agencies, retailer, large or small farm…

* Tasks: MHC is a company specialized in manufacturing of domesticanimal feeds The company’s task is production completion anddevelopment for meeting the current raising needs Company has promotedinvestment, expanded production, renewed equipment and applied newtechnology in order to improve productivity, product quality They have

been expanding gradually production scale, developing product and marketdistribution channels and advertising the company’s brand, which make thecompany to have a strong brand in the Red river delta region The companycontinuously improves quality to protect the reputation with the slogan:

“only gold quality” and carry out product development strategies to meet thediverse raising needs

They also ensure safety for workers, protect environment and observe thelaw, fully implement the rights of employees, and participate the publicactivities in the business process

3 Features of the company’s product and the market share.

* The company’s product:

MHC is a company specialized in manufacturing of domestic animal feeds.They provide feed to pigs, chickens and ducks at each different stage ofdevelopment Having feeds for piglet from 5 kg to grow-up, domesticatedbird and water bird Looking at the data in Table 1, we see that Company’sproduct structure is diverse and rich The product is manufactured as acondensed powder or tablets which are suitable for characteristics of eachspecies and each stage of their development There are two types ofpackaging – bag of 5 kilogram each and 25 kilogram each Company’sproducts gained credibility in the market with good quality and reasonableprice Therefore, more and more clients come to the company

Table 1: Name some of the company’s products.

Product Name Type Using subjects Type of bag

MH1810 Condensed Porker from 5 kg to grow-up 25kg

(Resource of sales department)

* The market share:

Although, the company’s market is narrow and mainly in the North and theCentral provinces, the turnover keeps rising because the company has gainedmore customers Major clients of the company are wholesale agencies,retailer, small, medium and large farms Company’s guideline shows thatgood productions isn’t enough to survival and develop, need to know thesales organization Company has established a potential sales network which

is a bridge between production and consumption

By way advertising, Company has signed many contracts In 2007, onlysigned 89 contracts but more than 120 contracts was signed in 2008, 2009with overall worth about VND 4 billions But in it, there are a lot of smallcontracts Specifically, the projects which provide feed for the mountainousdistricts of Hoa Binh province, the remote districts of Thanh Hoa province

or some small farms in Ha Tay province

Diagram 2: Network of the Company’s product consumption

(Resource of sales department)

In current years, domestic animal feed industry has developed with fiercecompetitions More and more domestic animal feed has been imported fromChina Although, company has improved many product designs and productqualities, the company’s product consumption has reduced Finally, theymust improve product quality, cut the good’s price in order to increase thecompetitiveness of companies in the market

4 Results of the company’s business production activities from 2007 to 2009.

Basis norms of the company’s business activities at table 2 are consideredencouraging They reflect a strong, stable and advanced growth Thecompany’s position has been strengthened The turnover was worth VND3.306 million in 2007 to VND 3.518 million in 2008, VND 212 millionincrease - equal to 6.41% This is a good signal for the company Withincreasing turnover, the company also must enhance more total capital But,

we can see that turnover’s annual growth rate is greater than total capital’s

Agency

Retailer

Consumer Manufacturer

annual growth rate In 2008 as compared to 2007, total capital increase is

5.68% which is lower than turnover by 6.41% And it continuously

increases when we compare the data in 2008 with that in 2009 Total capital

only raises by 6.61% but turnover raises by 13.18% It seems that the

company has invested in the right direction and managed resources

efficiently

Table 2: Results of the company’s business production activities from 2007

to2009

2009/2008ComparisonAbsolute

Total capital

Dongmillion

Profit

Dongmillion

Average Income

Dongmillion

(Resource of sales department)

In 2007, the company’s profit is VND 315 million, VND 340 million in

2008 In 2009, growth rate increased by about 23.5% as compared with that

in 2008 The company’s annual profits are invested When the investment is efficient, the company’s profit is not only in these numbers Number of the company’s employees is continuously growing year by year.Total workforce of the company - in 2008 as compared to 2007- increases by

re-7 people - equal to 15.2% 2009 as compared to 2008, the company addedmore 17 people equal to 32.1% In 2008 and 2009, the company hasrecruited more workers to positions at the offices and workshop Thenumber of the employees is increasing; each employee’s average income isalso rising An employee’s average income is VND 0.9 million in 2007,VND 1 million in 2008 and VND 1.2 million in 2009 Every year, theworker’s salary always rises timely in order to help them to meet with theincrease of consumer price

II Real situation of management organizational structure at Minh Hong Co., Ltd.

1 Management organizational structure at Minh Hong Co., Ltd.

1.1 Overview of Company’s management apparatus.

Looking at the organizational chart of the company’s management, thecompany’s organizational structure was organized according to the online-function style Director is the highest person at the company and he isassisted by two vice directors and the functional departments Theproduction part is workshop Every part undertakes the different tasks andfunctions at the company

a Management people.

The company’s leadership includes 3 positions as follows:

- Director: Director, who has the right to make decisions, is the highest

executive in the company, the company’s legal representative and takes

responsibility before the law for the company’s entire production business

activities He establishes business co-operation and production plans,

development strategy, annual business plans He builds and organizes

appropriate management apparatus to deal with the needs of the company’s

Sales Dept.

Technology

Department

Finance Department

Accounting-Administrative Department

Workshops

- Vice director of business: Helping director to operate the company’s field

of business, such as: consumer products, search market, business strategicplanning…and responsible to report the Director the task performance which

he is assigned

- Vice director of technique: managing and operating a number of areas oftechnique, science, technology and environment, labor protection, industrialhygiene, quality assurance Helping the director carry out plans and directlysupervises business activities at workshop

- Functions and Tasks: Giving advices to Director, managing technicalfield, recommending the director technical solutions, regularly repair andassess product quality Researching and creating new techniques and theoptimal production process to enhance the production efficiency They areresponsible to guide workers about improvement and apply science toproduction

- The use of staff: There are 2 employees who are graduates fromspecialized technique course; suitable for its function Number ofemployees is reasonable, but no one has university degree

- Department’s relationship: Coordinating with accounting department toset up prices, norms for consumable materials and liquidate material inexcess They must report to Technical Director and Director about theproblems to be solved timely This is a good management method to savefuel, reduce production cost It helps to reduce cost to enhance company’scompetition.

* Planning Department

- Organizational structure: including 3 persons There is a senior clerk, astaff who is in charge of statistic and production temperate, a staff who willsupply materials, entry raw materials into the warehouse to serve productionprocess and also export raw materials for workshops

- Functions and Tasks: They work on designs, material reserve, costestimates, the main and auxiliary material, purchase supplies, openmanagement and monitoring book General reports on production progressand implementation monthly, quarterly, six months, even years plan

- The use of staff: There are only 3 persons who have college degree Whenthe workload is too much, staff must work very hard and overtime

* Finance and Accounting Department

- Organizational structure: including 3 persons who are arranged as follows:

a senior clerk, a staff who gets the blame for price, wage payment, socialinsurance, payment materials and a staff who will pay Bank debts, holdcashier

- Functions and Tasks: They are in charge of the cash flow flexibility,timely, accurate They are responsible for all things which are related to thebank: bank credit, periodic reports preparation, working with tax authorities,statistic, social insurance, and bank debt and the employee’s salary

- The use of staff: On the whole, the sort of staff position relatively fit to thedepartment’s function and task One staff has a university degree, and twostaff who are graduates from a college.

- Department’s relationship: On the basis of labor norms of the technicaldepartment, planning department, sales department, financial department todetermine product prices, cost of raw materials, employee’s salary Theyanalyze profits and loss, and then they frequently report to the director Itmakes the company to allocate production cost more reasonably

* Administrative Department

- Organizational structure: There are 2 persons, a senior clerk and a staff

- Functions and Tasks: giving an advice to the Director on the company’sadministrative organization, making proposals for arranging, organizingmanagement apparatus, production organization, making inventory, handlinginternal, investigating and solving the employee’s complaints and letters ofdenunciations, doing paper work, office service

- The use of staff at the administrative department is reasonable

* Sales Department

- Organizational structure: There are 5 persons, including: a senior clerk, twostaffs who make short and long term business plans, sign business contracts,and carry out accounting business regime Two staffs are business agentswho search for new markets to sell the company’s product

- Functions and Tasks: to be in charge of setting up short - and - long - termbusiness plans They must report to director about turnover, cost, andtransactions performed, purchasing negotiations and supply of raw materials,product consumption Director will approve, monitor, check and evaluate the

implementation results Managing product which is sold through wholesaleagencies and retailers

- The use of staff: Sales department are run by 5 people, 2 people havegraduated from university, 2 others have had college degrees, and one hasgraduated from vocational school Arrangement of employees is notreasonable because of not much work to be done They should transfer anemployee to make clerical staff

c Workshop.

Foreman is responsible to director for all activities of the company’sproduction unit There are 3 management staffs in the workshop Including:

Diagram 4: Management apparatus of the company's workshop

- A foreman will base on the company’s production plan and co-ordinatewith other departments in order to prepare the manufacturing conditions,