Lecture 3

Lecture 3
Function and Structures

within an Organization
Contents
I. Organizational structure
II. International business organization
I. Organizational
structure
Organizational structure
• Business organisations are characterized by a division of labor

which allows employees to specialize in particular roles and to
occupy designated positions in pursuit of the organization's
objectives
• The structure is important because it reflects the needs of the
organization within its existing context and taking into account of
its future requirement
• Popular organizational structures: functional, multidivisional,
matrix, project based etc. …
Purpose of organizational
structure
• Through its structure an organization should be able to:
• Achieve efficiency in the utilization of resources;
• Provide opportunities for monitoring organizational performance;
• Ensure the accountability of individuals;
• Guarantee co-ordination between the different parts of the
enterprise;
• Provide an efficient and effective means of organizational
communication;
• Create job satisfaction, including opportunities for progression; and
• Adapt to changing circumstances brought about by internal or
external developments.
Organizational chart
• Organizational chart designates the formal pattern of role

relationships and the interactions between roles and the
people occupying them
Functional structure
• In this type of structure, activities are clustered together

by common purpose or function
• Most organization structures reflect a degree of
functional specialization, with individuals occupying
roles in departments, such as: Finance, Marketing,
Production, R&D etc.
Functional structure chart
• It is most relevant to small or start up organizations.

• Main advantages:
• Chief executive in touch with all operations
• Reduces/simplifies control mechanisms
• Clear definition of responsibilities
• Specialists at senior and middle management levels
• Disadvantages:
• Senior managers overburdened with routine matters
• Senior managers neglect strategic issues
• Difficult to cope with diversity
• Coordination between functions difficult
• Failure to adapt
Divisional structure
• A divisional structure is built up of separate divisions on

the basis of products, services or geographical areas
• Each divisions operates as a profit center
• Divisionalization often comes about as an attempt to
overcome the problems that functional structures have in
dealing with the diversity mentioned above
Divisional structure chart
• Advantages
• Flexible (add or divest divisions)
• Control by performance
• Ownership of strategy
• Specialization of competences
• Training in strategic views
• Disadvantages:
• Duplication of central and divisional functions
• Fragmentation and non co-operation
• Danger of loss of central control
Matrix structure
• A matrix structure combines different structural

dimensions simultaneously, for example product divisions
and geographical territories or product divisions and
functional specialisms
• Staff typically report to two managers rather than one
Matrix structure chart
• MATR
IX 2
• MATR
IX 3
Matrix structure
• Advantages:
• Integrate knowledge
• Flexible
• Allow dual dimensions
Matrix structure
• Disadvantages:
• Length of time to take decision
• Unclear job and task responsibilities
• Unclear cost and profit responsibilities
• High degree of conflict
Project based structures
• A project-based structure is one where teams are created,

undertake a specific project and are then dissolved.
• A lot of firms rely heavily on project teams with a finite life
span
• This type of structure is most common in organizations that
delivers expensive goods or services and those delivering
time-limited events
• Some example: civil engineering, information system, film,
event planning, sports, consulting, etc. …
Project based structures
Advantages Disadvantages
• Highly flexible • May get out of control
• Good control of each project • Constant breaking up 
• Integrate knowledge hinder the accumulation of
knowledge
II. International business
organizations
What is international business?
• 1. Have subsidiaries/ branches/ agents in

other countries
• 2. Have affiliates with other companies in
other countries : exchange employees,
franchises ….
• 3. Export or import to other partners in other
countries
International business
• Transnational • Multinational
Companies companies
International business
https://pediaa.com/difference-between-multinational-and-transnational/
Criteria
Transnational Companies Multinational companies
Definition - Have many companies around - Operate in more than one country
the world - Have a centralized management
- Do NOT have a centralized system.
management system.
Operation - Do NOT have subsidiaries but just - Own a home company and its
many companies. subsidiaries.
Local - Be able to gain more interest in - Have a centralized management
response the local markets where they system, there will be some barriers in
maintain their own systems. decision making.
Multinational structures
• International divisions
• An international division is a stand-alone division added
alongside the structure of the main home-based business
• Adopted by corporations with large domestic markets,
entry in overseas markets is relatively small compare to
domestic markets
• Local subsidiaries:
• These subsidiaries typically have most of the functions
required to operate on their own in their particular local
market – one form of geographic divisional structure
• High local responsiveness but loosely coordinated
• Relationship and taste are very important  due to
localization
• Global product divisions:

• This kind of structure is often used where economies of
scale are very important  maximize cost efficiency
• Very little scope for adaptation to local taste or regulation
in particular markets
Transnational structures
• The transnational structure combines local responsiveness with

high global coordination
• It is similar to matrix but distinguish themselves by their focus on
knowledge-sharing, specialization and network management
• Knowledge sharing: A good idea that has been developed locally is
offered for adoption by other national or regional units around the
world.
• Specialization: A national unit that has a competency will focus on
that competency on behalf of other unit across the world
• Network management: Corporate centre has the role of managing
this global network of specialism and knowledge
Multinational/Transnational
structures
Global Coordination
Low High
Global
International
product
Local divisions
divisions
independence
and
responsivenes
s Local Transnationa
subsidiaries l corporation
High
Strategy and structure fit
Strategy/Structur Divisional Matrix Project Transnational

Functional
e
Diversification * *** ** ** **
Internationalizatio * ** *** * ***

n
Innovation ** * ** *** **
• Diversification raises the corporate strategy challenges of control and accountability within
widely different businesses
• Internationalization strategies raise dilemmas over global scale, horizontal coordination and
local adaptation
• Innovation strategies typically require knowledge creation and knowledge-sharing
Discussion
• Name some corporations with the following structure and

draw their organizational charts:
• Functional structure
• Divisional structure
• Matrix structure
• Project based structure
THE END

Lecture 3 - Functions and Structure Within A Business Organization

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Function and Structures

• Business organisations are characterized by a division of labor

• Organizational chart designates the formal pattern of role

• In this type of structure, activities are clustered together

• It is most relevant to small or start up organizations.

• A divisional structure is built up of separate divisions on

• A matrix structure combines different structural

• A project-based structure is one where teams are created,

• 1. Have subsidiaries/ branches/ agents in

• Global product divisions:

• The transnational structure combines local responsiveness with

Strategy/Structur Divisional Matrix Project Transnational

Internationalizatio * * * ***

• Name some corporations with the following structure and

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