A2 - Business - Competitive organisational structures

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Organisational structures in larger businesses

It would be very misleading to assume that organisations develop a single structure which never changes, or that there is a perfect organisational structure which can best meet the needs of all businesses. The reality of modern business life is that the organisation of the company probably will and should change on a regular basis as it adapts to changes in the marketplace. There are three types of organisational structure appropriate to larger organisations and it is quite likely that within a larger company more than one type will appear:

  • A traditional hierarchical structure may be appropriate for the marketing function where confidential or sensitive data is involved, processes are important and a consistency of service is expected.
  • A matric structure, which is project-based, may be appropriate for the marketing function. If the market is divided up geographicaaly or by type of customer, sales teams will have different goals. On the other hand, each product within the portfolio could have a dedicated marketing team.
  • An informal structure has no obvious 'organisation', although a support system will be in place. This approach may be the best way to operate a research and development fucntion where creativity is very important.

When deciding on the best structures to use within the company, senior executives may take the following factors into consideration:

  • If there are a lot of highly skilled, specialised employees, the structure is likely to be less formal than if the makority of employees are semi-skilled or unskilled.
  • The business environment will also have an impact on the organisational structure. If the market is very competitive and market conditions are difficult, there will be pressure to reduce costs by streamlining the structure and speeding up the decision-making process and responsiveness of the business to changes in the market.
  • If the company wishes to move away from risk-taking culture as it grows and wishes to become a more established force in the market emphasising quality rather than innovation, then a more formal structure may be introduced.
  • The leadership style of the senior executives will affect the structure: those who wish to retain control of decision-making are likely to prefer a tall, hierarchical structure with narrow spans of control. Leaders who prefer a delegate decision-making are more likely to favour a wider span of control or a matric structure.

Impact on competitiveness

However the organisation is structured, its effectiveness will be judged in terms of how efficiently the business performs.

  • How quickly are strategic decisions made? If the company is struggling to maintain its makrt share or losing out to rivals in the market, this would suggest that the strategic decision-making is too slow.
  • Does the business operate efficiently at minimum cost? The structure of the organisation may be inefficient with unnecessay levels of management. This is particularly relevant where there have been significant advances in technology and tasks can be completed more quickly and efficiently than in the past.
  • How effective are the channels of communication within the…


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