Structures Understanding Business Higher Business Management 1

Ways to Structure By function: Arranging the business according to what each section or department does By product or activity: Organising according to the different products made By place: Geographical or regional structure By customer: Where different customer groups have different needs By process: Where products have to go through stages as they are made Features, characteristics, benefits and drawbacks of different organisational structures

Functional Structure Functional Structure 3 Managing Director Company Secretary Sales Marketing Human Resources Recruitment Training Finance R and D Operations Warehouse Manager Quality 3

Functional Structure Functional Structure Advantages Specialisation – each department focuses on its own work Accountability – someone is responsible for the section Clarity – know your and others’ roles Disadvantages Closed communication could lead to lack of focus Departments can become resistant to change Coordination may take too long Gap between top and bottom

Product/Service Structure

Organisation by Product/Activity Product/Service Structure Advantages Expertise can develop in dealing with each product/service Managers can easily identify how each product is performing Decisions can be more responsive to changes in the business environment Disadvantages Duplication of functions (e.g. different sales force for each division) Divisions may find themselves competing with each other Lack of central control over each separate division

Place Structure Organisation by Place Coca Cola

Place Structure Organisation by Place Advantages Serve local needs better More effective communication between firm and local customers Better knowledge of local staff Disadvantages Conflict between local and central management Duplication of resources and functions

Organisation Structures Organisation Charts Organisation Structures Hierarchical Structure Managing Director Senior Managers Middle Managers Workers

Organisation Structures Organisation Charts Organisation Structures Matrix Structure Marketing Sales R&D Project HR Production Finance 10

Organisation Structures Organisation Charts Entrepreneurial MD Finance Production Sales Marketing R&D 11

Organisation Structures Centralised Important decisions are made at the head office Very little delegation Easier to promote a corporate image Decentralised Important decisions made by managers Employees are motivated and empowered

Structure Key Terms Some Key Terms Authority the right to make decisions and carry out tasks Span of control the number of people a superior is responsible for Chain of Command the relationship between different levels of authority in the business Hierarchy shows the line management in the business and who has specific responsibilities Delegation authority to carry out actions passed from superior to subordinate Empowerment giving responsibilities to people at all levels of the business to make decisions Line relationship vertical line on an organisation chart Functional relationship horizontal line on an organisation chart