Hierarchies consist of different levels in a business, and each level has a certain amount of responsibility over the levels that are below.
Normally, as you move up a hierarchy, the number of people at each level decreases. Those at the top of a hierarchy have the most control, and those at the bottom have the least.
Businesses can organise themselves by function, which involves separating the business out into functions and giving them one part of the business to manage.
Examples of functions include customer service, finance and human resources.
A benefit of orgainising a business by function is that it allows specialists to concentrate on a particular job. A disadvantags is that the different departments in the business may not work well when they need to work together.
Businesses can organise themselves by product, and this usually occurs with large manufacturers that produce a wide variety of products.
When organising by product, the business is divided into different sectors (secors are the different catagories of the products that are produced.
An advantage of this structure is that decisions can be made that are relevent to each individual sector. A disadvantage of this organisational structure is that there can end up being a wasteful duplication of resources between the secors.
Firms that are multinational can divide the organisation of their business up by region. The divisions could be done by regions or nations, depending on how big the business is.
An advantage of this structure is that it makes day-to-day control over the business easier. A disadvantage of ths organisational structure is that there can be a wasteful duplication of resources.
Centralised organisations are ones where decisions are made by one or a few seniour members at the top of the heirarchy, and nobody else.
This could be good because seniour managers normally have a lot of experience and have a clear overview of the whole business and its needs. It also means that polocies will be uniform throughout the whole business.
A disadvantage of centralised organisational structures is that decision making could be slowed down because of how long it takes for them to get to all of the employees. The organisation can react very slowly to the decisions that are made.
People at the top of business hierarchies can become very powerful. Problems can occur is the peiople at the top of the heirarchy lack specialist knowledge, because they're likely to make poor decisions.
In decentralised oranisational structures, the power to make decisions is shared with a range of staff.
An advantage of this is that employees can use expert knowledge of their own sectors to make decisions, and decisions are likely to be made quickly.
A disadvantage is that inconsistencies can develop in different sections of the business, and the decisions that are made might not see to the overall needs of the business.