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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
department focuses communication
on its own work could lead to lack
of focus
• Accountability –
• Departments can
someone is become resistant
responsible for the to change
section • Coordination
• Clarity – know your may take too long
and others’ roles • Gap between top
and bottom
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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 • Duplication of
market segment functions (e.g.
helps meet different sales force
customers’ needs
for each division)
• Positive competition
between divisions • Negative effects of
• Better control as competition
each division can act • Lack of central
as separate profit control over each
centre 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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