ORGANIZATIONAL
ASPECT

An organization structure is the way in
which the tasks and subtasks required to
implement a strategy are arranged.

An organization chart is a diagrammatical
representation of structure.
STRUCTURING AN EFFECTIVE
ORGANIZATION

Provides the capacity the firm requires to
consistently and predictably manage its
daily work routines.
STRUCTURE STABILITY

Provides the opportunity to explore
competitive possibilities and allocate
resources to activities that will shape the
competitive advantages of the firm that it
will need to be successful in the future.
STRUCTURE FLEXIBILITY
Structure dictates how objectives and
policies will be established.
 Structure dictates how resources will be
allocated.
 Categorized in five types:

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◦
◦
◦
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Entrepreneurial Structure
Functional Structure
Divisional Structure
Strategic Business Unit Services (SBU)
Matrix Structure
STRUCTURE

The most elementary form of structure
and is appropriate for an organization that
is owned and managed by one person.

A small-scale industrial unit, a small
proprietary concern, or a mini-service
outlet may exhibit the characteristics of
organizations.
ENTREPRENEURIAL
STRUCTURE/FLAT STRUCTURE

Advantages of Entrepreneurial
Structure
◦ Quick decision-making, as power is centralized.
◦ Timely response to environmental changes.

Disadvantages of Entrepreneurial
Structure
◦ Excessive reliance on the owner-manager and
so proves to be demanding for the ownermanager
ENTREPRENEURIAL
STRUCTURE/FLAT STRUCTURE

Disadvantages of Entrepreneurial
Structure
◦ May divert the attention of owner-manager to
day-to-day operational matters and ignore
strategic decision
◦ Increasingly inadequate for future
requirements if volume of business expands
ENTREPRENEURIAL
STRUCTURE/FLAT STRUCTURE

As the volume of business expands, the
entrepreneurial structure outlives its
usefulness. The need arises for specialized
skills and delegation of authority to
managers who can look after different
functional areas. The functional
structure seeks to distribute decisionmaking and operational authority along
functional lines. Most widely used as
simple and least expensive.
FUNCTIONAL STRUCTURE

Advantages of functional structure
◦ Efficient distribution of work through
specialization.
◦ Delegation of day-to-day operational functions.
◦ Providing time for the top management to
focus on strategic decisions.
FUNCTIONAL STRUCTURE

Disadvantages of functional structure
◦ Creates difficulty in coordination among
different functional areas.
◦ Creates specialists, which results in narrow
specialization, often at the cost of the overall
benefit of the organization.
◦ Leads to functional, and line and staff conflicts.
◦ Minimizes career development opportunities.
◦ Poor delegation of authority, inadequate
planning for products and markets.
FUNCTIONAL STRUCTURE

The structural needs of expansion and
growth are satisfied by the functional
structure but only up to a limit.

There comes a time in life of organizations
when growth and increasing complexity in
term of geographic expansion, market
segmentation and diversification make the
functional structure adequate.
DIVISIONAL STRUCTURE

It can be organized by:
◦ Geographic area
◦ Product or service
◦ Customer
◦ Process
DIVISIONAL STRUCTURE

Advantages
◦ Clear accountability.
◦ Higher employee morale.
◦ Creates career development opportunities for
managers.
◦ Allow s local control of situations.
◦ Leads to a competitive climate within an
organization.
◦ Allows new businesses and products to be
added easily.
DIVISIONAL STRUCTURE

Disadvantages
◦ Can be easily to set up
◦ Each division requires functional specialists
◦ Duplication of staff services, facilities, and
personnel
◦ Managers must be well qualified
◦ Requires an elaborate, headquarters-driven
control system
◦ Competition between divisions may become so
intense that it is dysfunctional
DIVISIONAL STRUCTURE

Any part of a business organization, which
is treated separately for strategic
management purposes. When
organizations face difficulty in managing
divisional operations due to an increasing
diversity, size, and number of divisions, it
becomes difficult for the top management
to exercise strategic control.
THE STRATEGIC BUSINESS UNIT
(SBU)

Advantages of Strategic Business Unit
(SBU)
◦ Establishes coordination between divisions
having common strategic interests.
◦ Facilitates strategic management and control of
large, diverse organizations.
◦ Fixes accountability at the level of distinct
business units.
THE STRATEGIC BUSINESS UNIT
(SBU)

Disadvantages of Strategic Business
Unit (SBU)
◦ There are too many different SBUs to handle
effectively in a large, diverse organization.
◦ Difficulty in assigning responsibility and
defining autonomy for SBU heads.
◦ Addition of another layer of management
between cooperate and divisional
management.
THE STRATEGIC BUSINESS UNIT
(SBU)

Most complex of all designs – requires
both vertical and horizontal flows of
authority and communication. In large
organizations, there is often a need to
work on major products or project each of
which is strategically significant.
THE MATRIX STRUCTURE

Most complex of all designs – requires
both vertical and horizontal flows of
authority and communication. In large
organizations, there is often a need to
work on major products or project each of
which is strategically significant.
THE MATRIX STRUCTURE

Advantages of The Matrix Structure
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Project objectives are clear
Many channels of communication
Workers can see visible results of their work
Shutting down a project can be accomplished
relatively easily
◦ Facilitates the use of specialized personnel,
equipment, and facilitates.
THE MATRIX STRUCTURE

Disadvantages of The Matrix
Structure
◦
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Can result in higher overhead
Dual lines of budget authority
Dual resources of reward and punishment
Shared authority
Dual reporting channels
Need for an extensive and effective
communication system
THE MATRIX STRUCTURE