1. Structures
Understanding Business
Higher Business Management 1

2. 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

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

4. 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

5. Product/Service Structure

6. 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

7. Place Structure
Organisation by Place
Coca Cola

8. 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

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

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

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

12. 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

13. 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