Business Studies - Section Nine - Organisational Structure

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Organisational Structure

There are three mean ways a business can structure its organisation. However you do it, you end up with a diagram that looks slightly like an upside-down tree. Hence the name "organisation tree"

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1) You can organise by function...

  • You get this a lot in limited companies.
  • Each functional area does one part of the work of the business. Examples of functional areas are sales, marketing, customer service, operations, finance, human resources...and so on.
  • The main advantage is that specialists can concentrate on their particular job.
  • The main disadvantage is that the different departments may not work well together.
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2) You can organise by product...

  • This is common with large manufacturers who make lots of different products.
  • A product-based structure splits the organisation into different sectors. For example, Buy-It-All PLC has three sectors - home furnishings, toys and clothing.
  • The main advantage is that managers can make decisions that are relevant to each product sector.
  • A disadvantage is that there can be a wasteful duplication of resources between sectors.
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3) Or you can organise by region

  • This is normal for a multinational business.
  • The divisions may be regional or national.
  • The main advantage is that spreading management between regions makes day-to-day control easier.
  • A disadvantage is that there can be a wasteful duplication of resources between regions.
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