This document focuses on organisational structures.We focus on Functional, Product, Matrix, Network structures etc. For Management Practice, it is also essential to know about Elements of Organisational Structure ( Standardisation, Specialisation , Delegation , Span of Control etc) .

1. TOPIC 3 : Organizational design ( Chapter 8 )
Discuss and explain types of organizational structures
(This is under Chapter 8.5)
Functional Structure: the organization is divided into
groups according to their areas of expertise and the
resources they draw on to perform a common set of
tasks . Activities such as market research, sales,
advertising , and even public relations belong under the
marketing function , while those activities concerned
with the production of goods are under the operations
function .
Advantages :
 Promotes skill specialization.
 Reduces duplication of resources and increases
coordination within the functional area.
 Promotes high-quality technical problem solving.
 Centralizes decision-making.
 Facilitates transversal management.
*BE ABLE TO EXPLAIN THESE

2. Disadvantages:
 Emphasizes routine tasks.
 Reduces communication between departments.
 May create conflict over product priorities.
 May make interdepartmental scheduling difficult.
 Focuses on departmentalization rather than
organizational issues and goal.
Product or service structure: the organization divides
the organization into self-contained units. In the case of
product departmentalization , the organizing of
activities focuses on the product / service being
produced .
Advantages:
 Is suited to fast changes in a product.
 Allows greater product visibility.
 Fosters a concern for consumer demand.
 Clearly defines responsibilities
Disadvantages:
 May not use skills and resources effectively.
 Does not foster coordination of activities across
product lines.
 Fosters politics in resource allocation.

3.  Limits career mobility for personnel outside their
product line
Geographic structure: groups all functions for a
geographic area at one location under one manager
rather than dividing functions among different
managers or grouping all tasks in one central office. It is
commonly used by organizations with operations in
many different locations. Many regional organizations
including South African Breweries , Unilever ,
Accenture and Metropolitan have set up regional and
district offices
Advantages :
 Equipment used for products is all in one place,
saving time and costs.
 Managers develop expertise in solving problems
unique to one location.
 Managers know customers problems
Disadvantages :
 All functions -accounting, purchasing ,
manufacturing , and customer service are
duplicated at each location
 There may be conflict between each location’s
goals and corporate goals

4.  Extensive rules and regulations may be required to
coordinate and ensure uniformity of quality among
locations
Customer structure :
Customer structure involves organizing around the type
of customer served . It is used when management
wants to ensure focus on the customer needs rather
than on the organization’s skills . This structure is
generally used to differentiate products and offer
different terms to different customers ( for example
production of different models and volume discounts
to bulk-buying customers and not-for-profit customers)
Advantages:
 Allows greater customer focus
 Clearly identifies key customers
 Is suited to understanding customer needs
 Develops managers who become customer
advocates
Disadvantages :
 Does not foster coordination between customers
 Fosters politics in resource allocation

5.  Due to the focus on customers, customers tend to
be very demanding
 Restricts problem solving to a single type of
customer
Network Structure : This form of organizational
design permits the effective and efficient
processing of information . With network
departmentalization , the organization
subcontracts some or all of its operating functions
to other organisations , and coordinates their
activities through managers and other personnel
at its headquarters or by a virtual organization .
For example , the shoprite Group uses a network
of different suppliers in different regions and
countries and estimate that they do business with
three time more local growers than other South
African retailers .
Advantages :
 lean structure
 very few employees on payroll
 workforce flexibility
 specialized teams
 lower cost

6. Disadvantages :
 little hands-on control
 operations not under one roof
 structure changes rapidly
 characterized by contractors
Matrix Departmentalisation :
This structure combines the advantages of functional
and product organizational structures to increase the
ability of managers and employees to process
information . In a matrix organization , project
managers are appointed to head the project and are
provided with necessary skills from various functional
areas such as engineering , manufacturing , sales and
project managers
Advantages:
 achieves coordination to meet dual demands of
efficiency and changing customer preferences
 encourages flexible sharing of human resources
across product lines
 allows employees to learn new skills in different
areas
 Works best in organisations with limited resources
and multiple products

7. Disadvantages
 Requires people to work for two bosses- functional
and product – which can be frustrating and
confusing
 Requires people to develop good interpersonal
skills
 Requires managers and other employees to
understand and accept organic rather than
mechanistic management
 Requires a skilled matrix manager who can
maintain a balance between functional and
product interests