Structural Consideration &

Type of Structure

What is Organization Structure?

A organization structure is the way how tasks and

sub-tasks required to implement a strategy are

arranged.
Organization structure is the formal system of tasks
and authority relationship that control how people
coordinate their actions and use resources to achieve
organizational goals.
Structure balances the need for specialization with
the need for integration.

Type of Structure
Simple
Functional
Divisional
Strategic Business Unit
Matrix

Simple Organizational Structure

An organizational form in which the owner-manager

makes all major decision directly and monitors all

activities while the staff serves as an extension of the
managers supervisory authority.
In the smallest business enterprise, the simple
structure prevails.
All strategic and operating decisions are centralized
in the owner-managers domain.

A simple structure
Owner-Manager

Employees

Advantages

Disadvantages

Facilitates control of all the

Very demanding on the

businesss activities.
Rapid decision making and
ability to change with
market signals.
Simple and informal
motivation / reward /
control systems

owner-manager.
Increasingly inadequate as
volume expands.
Does not facilitate
development of future
manager.
Tends to focus ownermanager on day to day
matters and not on future
strategy.

Functional Organizational Structure

Functional organization is a type of organization

structure that uses the principle of specialization

based on function or role, it allows decision to be
decentralized since issue are delegated to specialized
persons or units, leaving them the responsibility of
implementing evaluating or controlling the given
procedures or goals.

Functional Structure
Chief Executive officer

Staff Function
Finance/personnel
Line
Production

functions

Marketing

Engineering

Advantages

Disadvantages

Efficiency through

Promotes narrow

specialization
Improved development of
functional expertise.
Differentiates and delegates
day to day operating
decisions.
Retain centralized control of
strategic decisions.

specialization and potential

functional rivalry or conflict.
Difficulty in functional
coordination and interfunctional decision making.
Staff-line conflict.
Limits internal development
of general managers.

Divisional Organizational Structure

A divisional structure divides the company into

division that bring together those employees

involved with a certain type of product or market
service.
A type of organizational configuration that groups
together those employees who are responsible for a
particular product type or market service accordingly
to workflow. The divisional structure of a business of
a business tends to increase flexibility and it can also
be broken down further into product market and
geographic structure.

Divisional Organization Structure

Chief Executive Officer
Vice President
Administrative Services

General manager
Division A

Vice President
Operating Support

General manager
Division B

General manager
Division C

Personnel

Personnel

Personnel

Accounting/Control

Accounting/Control

Accounting/Control

Division Planning

Division Planning

Division Planning
Marketing

Marketing

Marketing

Production/Operation

Production/Operation

Production/Operation

Advantages

Disadvantages

Forces coordination and

Fosters potentially

necessary authority down to

the appropriate level for rapid
response.
Sharply focuses accountability
for performance.
Retain functional
specialization within each
division
Good training ground for
strategic managers.

dysfunctional competition
for corporate level
resources.
Problem with the extent of
authority given to division
managers.
Potential for policy
inconsistencies between
divisions.

Strategic Business Unit

A strategic business unit is a profit centre which

focuses on product offering and market segment,

SBUs typically have a discrete marketing plan
analysis of competition and marketing campaign,
even though they may be part of a large business
entity.

SBU Organization Structure

Chief Executive Officer
Vice President
Administrative Services

Group Vice President

SBU1

Vice President
Operating Support

Group Vice President

SBU2

Divisions
A

Group Vice President

SBU3

Divisions
C

Divisions
C

Advantages

Disadvantages

Improves coordination

Places another layer of

between division with similar

strategic concerns and
product/market environment.
Facilitates distinct and indepth business planning at
the corporate and business
levels.
Channels accountability to
distinct business units.

management between the

divisional and corporate
management.
Dysfunctional competition for
corporate resources may
increase.
The role of the group vice
president can be difficult to
define.

Matrix Organization Structure

An organization structure that facilitates the

horizontal flow of skill and information. It is used

mainly in the management of large projects or
product development processes drawing employees
from different functional disciplines for assignment
to a team without removing them from their
respective positions.

Matrix Organizational Structure

Chief Executive Officer

Vice President
Engineering

Vice President
Engineering

Vice President
Engineering

Vice President
Engineering

Project
Manager
A

Engineering
Staff

Production
Staff

Purchasing
Agent

Administration
Coordination

Project
Manager
B

Engineering
Staff

Production
Staff

Purchasing
Agent

Administration
Coordination

Engineering
Staff

Production
Staff

Purchasing
Agent

Administration
Coordination

Project
Manager
C

Advantages

Disadvantages

Accommodates a wide variety

Dual accountability can create

of project oriented business

activity.
Good training ground for
strategic managers.
Maximize efficient use of
functional managers.
Fosters creativity and
multiple sources of diversity.

confusion and contradictory

policies.
Necessitates tremendous
horizontal and vertical
coordination.

Thank You