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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