UNIT 2.

2 ORGANIZATIONAL
STRUCTURE
 CONTENT
• Terminology
• Types of organizational structure
• Appropriateness of organizational structure
 ORGANIZATIONAL STRUCTURE
The organizational structure of a business shows the interrelationships and hierarchical arrangements
within the firm. For employees to achieve the organization’s goals collectively, human resources need to be
formally organized. The way in which people are organized determines who each employee reports to, and
the breadth and depth of the authority each person has (if any). 
TOK – ORGANIZATIONAL STRUCTURE & CULTURE

Can you learn about the corporate culture by looking at the organizational structure?
 ORGANIZATIONAL STRUCTURE -
TERMINOLOGY
• Levels of hierarchy
• Chain of command
• Span of control
 ORGANIZATION - TERMINOLOGY
• Delegation
• Centralization
• Decentralization
• Bureaucracy
• Delayering
• Matrix structure (organizational structure by function, by product/project)
 TALL (VERTICAL) ORGANIZATIONAL STRUCTURE
• Traditional organizational form of a business and it is common in well – established businesses.

• It has many levels of hierarchy

• Narrow span of control
• Centralized
• Long chain of commands
• Autocratic leadership
• Limited delegation
 FLAT (HORIZONTAL) ORGANIZATIONAL STRUCTURE
• Has become popular with businesses set up since 1960s
or with those attempting to reinvent themselves.

• Few levels of hierarchy

• Wider spans of control
• Decentralized decision making
• Shorter chain of commands
• Democratic leadership
• Increased delegation
 ORGANIZATIONAL STRUCTURE BY HIERARCHY/BY
FUNCTION
• A way to show an organizational structure is by showing hierarchy. Individuals on the top have more
authority than those bellow them.

• An organizational structure can be presented by function, indicating what employees do. Employees are
grouped by department.
 ORGANIZATIONAL STRUCTURE BY PRODUCT/BY REGION
• A way to show an organizational structure is by what the business produces.

• An organizational structure can be also is according to where the business operations are.
 Exam Practice Question - Gene Simons
Manufacturer (GSM)
Gene Simons Manufacturer (GSM) is a small producer of plastic toys. In recent years, the business has grown
quite significantly so there are now nearly 70 workers. GSM expects the business to keep growing, with almost
100 workers by the end of next year. While demand for plastic toys has fallen in many European markets, GSM is
happy that increased disposable incomes in Asia has meant overall sales to toy shops has increased.

However, GSM is concerned that labour productivity in its factory has declined, despite the increased overtime
payments made to workers. This is frustrating as GSM has spent a lot of money automating production in its
factory. Labour turnover has also increased, so GSM has not been able to benefit from economies of scale.

Gene Simons is the chief executive officer (CEO) of the company and has an assistant executive who reports
directly to him. There are four directors: Marketing, Human Resources, Production and Accounting. The Marketing
Director has three workers who report to her. The Human Resources has 2 people who report to her: the
Recruitment and Training Manager, and Remunerations Manager (who is responsible for two other employees).
The Production Director oversees the Factory Manager, who controls 50 workers. The Accounts Director is in
charge of two staff members.
 Exam Practice Question - Gene Simons
Manufacturer (GSM)

(a) Define the term span of control. [2 marks]

(b) State Gene Simon’s direct span of control. [1 mark]

(c) On a separate piece of paper, construct an organization chart for GSM.

[4 marks]

(d) From your organization chart, identify the number of levels in the hierarchy at GSM.
[1 mark]

Using information in the case study and the organization chart, examine the causes of and
(e)
solutions to GSM’s labour productivity problem. [10 marks]
 Appropriateness of different organizational
structures given a change in external factors
Managers might question the appropriateness of organizational structures given changes in external factors.
These may be planned (such as a merger or joint venture) or unplanned (such as a hostile takeover or
outbreak of an infectious pandemic). External factors that might prompt a change in an institution's
organizational structure include technological advances, the intensity of competition, and changes to the
growth and evolution of businesses.
 ATL ACTIVITY – CASE STUDY
Consider the appropriateness of organizational structures given the changes in the external factors featured
in the video.
TOK – ORGANIZATIONAL STRUCTURE
How useful are the images and metaphors used to talk about organizational structure (for example:
chains, layers, vertical, horizontal, matrix, shamrock)?
CIRCULAR BUSINESS MODELS (BT)

“Never doubt that a small group of thoughtful, committed citizens can

change the world; indeed, it is the only thing that ever has.”
- Margaret Mead (1901 - 1978), American cultural anthropologist
CIRCULAR BUSINESS MODELS
Traditional business models (also called linear business models) have focused on costs, revenues, and profits related to
business activities, often with a short-term outlook. They empathise a linear approach of products that are created, consumed, and 
chucked (thrown away or disposed of).
By contrast, circular business models (CBM) focus on the long-term environmental consequences and sustainability matters
related to business activities.

In essence, traditional business models focus on profitability whereas CBMs also focus on people and the planet. This means that
using circular business models can be profitable and sustainable for businesses in the long term.
CIRCULAR BUSINESS MODELS
CBMs are increasingly important due to changing production and consumption patterns, such as shorter life spans of consumer
goods such as smartphones, tablet computers, motor vehicles, trainers (sneakers), and other items of clothing (fast fashion). Many
of these consumer goods are simply replaced (and often thrown away) long before their useful product life cycle.

 By contrast, some businesses such as IKEA are encouraging consumers to waste less. Watch this short news report about how
IKEA creates incentive for customers to recycle (and resell) their once-loved (unwanted) furniture.
FIVE CIRCULAR BUSINESS MODEL
The IB syllabus refers to the five circular business models featured in the The Organization for Economic
Cooperation and Development's "Re-Circle Resource Efficiency and Circular Economy Project". The OCED's five
circular business models are:
• (i) Circular supply models
• (ii) Resource recovery models
• (iii) Product life extension models
• (iv) Sharing models, and
• (v) Product service system models
 FIVE CIRCULAR BUSINESS MODELS – CIRCULAR SUPPLY
MODEL
Circular supply models are a type of circular business model that focus on replacing scarce and
natural resources with renewable, recyclable, and/or biodegradable resource inputs. They are
suitable for businesses that need and/or wish to replace scarce non-renewable resources with
fully renewable, recyclable, or biodegradable resources in the production process. Replace
traditional material inputs with renewable, bio-based, recovered ones.

Hence, with a circular supply approach, the resulting benefits are waste minimization, efficient use
of scarce resources, and a reduction in the firm's overall costs of production.
 FIVE CIRCULAR BUSINESS MODELS – RESOURCE
RECOVERY MODEL
Resource recovery models are a type of CBM that focus on recycling waste (such as glass, plastics, and aluminum cans)
into reusable raw materials, thereby diverting waste from final disposal. At the same time, this puts less pressure on the
economy's scarce resources, and reduces the need for further extraction and processing of non-renewable natural
resources. Produce secondary raw materials from waste.

According to a report by the OECD, producing raw materials via recycling, rather than from non-renewable natural
resources, can reduce greenhouse gas emissions by as much as 90%.

The benefits of using a resource recovery circular business model include:

• Preservation of the earth's scare and natural resources
• Minimizing risks of harm to people and the planet, including wildlife and ecosystems
• Saving landfill space (traditionally used for waste disposal and accumulation)
• Reducing pollution to the land, air, and waters.
FIVE CIRCULAR BUSINESS MODELS – RESOURCE
RECOVERY MODEL
FIVE CIRCULAR BUSINESS MODELS – PRODUCT LIFE EXTENSION
MODELS
As the name suggests, product life extension models are circular business models based on the notion that
businesses try to extend the product life cycle of their goods. In a traditional disposable society, products and
materials, such as old consumer electronic goods, would be thrown away or wasted.

Extending the product life cycle of consumer goods and educating people about the harm caused by frequent
upgrades and purchasing of replacement products before their best sell-by date can help to reduce the need for
businesses to use the earth's finite resources to produce more consumer goods and services.
FIVE CIRCULAR BUSINESS MODELS – SHARING MODELS
Sharing models are a category of circular business models that focus on allowing customers to share
products that have a low ownership and/or usage rate, instead of consumers having to purchase and
own such items for themselves that are often used just the once. Hence, sharing models enable
products to be used more efficiently, providing a better use of an economy's scarce resources.

Changes in the external environment, including greater awareness of the impact of commercial
activities on ecological sustainability mean that an increasing number of businesses are providing
services where customers share products rather than owning them outright.
FIVE CIRCULAR BUSINESS MODELS – PRODUCT SERVICE
SYSTEM MODEL
These circular business models focus on organizations providing a service instead of selling tangible
products, whilst consumers buy a service to fulfil their needs instead of buying a physical product to
do so. Businesses typically use a subscription model as part of their pricing strategy (pricing method
).
FIVE CIRCULAR BUSINESS MODELS – ADVANTAGES
• Environmental protection
• Resource preservation
• Adapting to consumer needs and preferences
• Employee moral
• Attracting investors
• Avoiding negative media coverage and criticism
• Gaining competitive advantage
FIVE CIRCULAR BUSINESS MODELS – DISADVANTAGES
• Higher costs
• Risk liability, insurance, transparency, workforce protection
• Local and regional contexts
• Not all prioritize the circular economy
 ATL Activity 5 (Research, Thinking, and Self-
management skills) - The upcycling challenge
Upcycling is about taking old household objects, such as toys and furniture, and adding your own
creativity and craft to make something new and of practical value. Upcycling Day is on 24th
June each year and is used to celebrate the art of upcycling and focuses on sustainable use of
household goods, recycling items instead of being wasteful, and the many different ways we can
reuse things that we might otherwise think are no longer useless.
Upcycling Day naturally arose as a way to bring attention to the craze and to encourage people to get
involved in wasting less (throwing less away) and upcycling more. The art of upcycling is celebrated
by those who are dedicated to finding sustainable ways of living and to save our planet as well as
those who are artistically creative to find new ways to use the old things cluttering our homes and
lives, avoiding more waste clogging our landfills.

All students should try to upcycle one item from school. Each participant should explain their
upcycled product and the processes used to create this. This activity also links well to the key
concept of creativity.
As a class, you will vote on the best upcycled product! 
 ATL Activity 5 (Research, Thinking, and Self-
management skills) - The upcycling challenge
• Explain the traditional use of the object.
• Plan the steps of upcycling the object.
• Explain the new use of the object.
• Link your plan with one of the 5 circular business model strategy.
ATL ACTIVITY IN PAIRS
Discuss how circular business models, such as sharing models and product service system models, can
cause managers to question the appropriateness of existing organizational structures in their institutions.