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Organisational Structures

BTEC Business

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Why Have a Structure?

• All businesses have to organise
what they do

• A clear structure makes it easier to see

which part of the business does what

• There are many ways

to structure a business

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Some Key Terms

• Flat or tall structure
• Span of control
• Chain of command
• Hierarchy
• Delegation
• Empowerment

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Ways to Structure a Business

• By function: arranging the business
according to what each section
or department does

• By product or activity: organising

according to the different products made

• By area: geographical or regional

structure

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Ways to Structure a Business

• By customer: where different customer
groups have different needs

• By process: where products have to go

through stages as they are made

• What are the advantages/disadvantages

of different types of business structure?

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Pros and Cons of Different

Structures
• This depends on the business type,
size and structure used
• Let’s look at a functional structure:
Chief Executive

Board of Directors

Production Marketing Accounts Personnel IT

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Functional Structure
Advantages Disadvantages
• Specialisation – each • Closed communication
could lead to lack
department focuses
of focus
on its own work
• Departments can
• Accountability – become resistant
someone is to change
responsible for the • Coordination
section may take too long
• Clarity – know your • Gap between top and
bottom
and others’ roles

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An Example of Organisation
by Product/Activity
Hewlett Packard

Imaging and Personal Enterprise HP Financial

HP Services
Printing Group Systems Group Systems Group Services

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Organisation by
Product/Activity
Advantages Disadvantages
• Clear focus on market • Duplication of
segment helps meet functions (e.g.
customers’ needs
different sales force
• Positive competition
between divisions
for each division)
• Better control as each • Negative effects of
division can act as competition
separate profit centre • Lack of central
control over each
separate division

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Organisation by Area
Hewlett-Packard’s
Headquarters Worldwide
Hewlett Packard

Americas Europe, Middle East, Africa Asia Pacific

Houston, Texas Geneva, Switzerland Hong Kong

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Organisation by Area
Advantages Disadvantages

• Serve local needs • Conflict between

better local and central
• Positive competition management
• More effective • Duplication of
communication resources and
between firm and functions
local customers

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Other Organisational
Structures
• By Customer:
Similar effects to structuring
by product

• By Process:
Similar to structuring by function

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Organisational Structures
• Now go to the Activity for more……

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