Definition of organizational structure and its purpose
Refers to formalized patterns of interactions linking- Task, Technological, People
Purpose: To identify the executive, managerial, and administrative organization of a firm and indicates responsibilities and hierarchical relationships
Influences the flow of information
Structure provides a balance between:
- The need for division of tasks into meaningful groupings
- The need to integrate these groupings for maximum efficiency and effectiveness
What is a simple structure
It is the oldest and most common organizational form where:
- The organization is small, with a single or very narrow product line
- The owner-manager makes most of the decisions
- The staff serves as an extension of the top executives
What is a functional structure
It is where the major functions of the firm are grouped internally:
- Organizations with a single or closely related product or service, high production volume, some vertical integration
- Owner-manager/CEO needs specialists in various functional areas
- CEO has responsibility for coordination and integration of the functional areas mainly related to product-market activities or multiple activities in the value chain
What is a divisional structure
Also known as (Multi-division or M form) is where the units are grouped around products, projects, or product markets
- Divison are relatively autonomous, consisting of products and services that are different from those of other divisions
- Each division includes its own functional specialists
- Division executives: determine product-market and financial objectives as well as the division’s contribution to the corporation
What is the SBU structure
Where multiple divisions with similar products, markets, or technologies are grouped into higher-level units to achieve synergy
- Variation on the divisional structure that is normally employed in highly diversified firms
- Similar divisions are grouped into homogeneous units to avoid a large span of control
- Synergies within SBUs are achieved through- leveraging core competencies, sharing infrastructure, using market power
- Each of the SBUs operate as a profit center
What is a holding company structure
Also known as a conglomerate, is where businesses in a corporation’s portfolio are the results of unrelated diversification
- Verification on the divisional structure
- Similarities are few, so synergies are limited
- Operating divisions have very high autonomy
- Corporate offices are small and have limited involvement, relying on financial controls and incentive programs to obtain performance
What is a matrix structure
Where functional departments are combined with product groups or (Geo units) on a project basis:
- Individuals have two managers
- Shared responsibility
- Product managers handle development, manufacturing and distribution of their own line
- Geographic managers responsible for profitability of the business in their regions
- Functional managers responsible for effective and efficient operations of their functions
