There are several ways to structure a business organization, including functional, divisional, and geographic structures. A functional structure groups employees by department and specialization, with advantages of specialization and clear roles but risks of siloed communication. Divisional structures group functions according to products, markets, or customers served, allowing for customer focus but potential duplication and lack of central control. Geographic structures serve local needs but can create conflicts between local and central management.

1. 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

2. 4 - Organizational Theory A functional structure is the bedrock of horizontal differentiation. It is the first “structure” that organizations adapt as they grow. Functional Structure Research and Development Sales and Marketing Manufacturing Materials Management Finance CEO

3. 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

4. Authority – the right to make decisions and carry out tasks Span of control – the number of people a superior is responsible for Chain of Command – the relationship between different levels of authority in the business Hierarchy – shows the line management in the business and who has specific responsibilities Delegation – authority to carry out actions passed from superior to subordinate Empowerment – giving responsibilities to people at all levels of the business to make decisions

5. Let’s look at a functional structure: Production Marketing Accounts Personnel IT Board of Directors Chief Executive

6. Advantages Specialisation – each department focuses on its own work Accountability – someone is responsible for the section Clarity – know your and others’ roles Disadvantages Closed communication could lead to lack of focus Departments can become resistant to change Coordination may take too long Gap between top and bottom

7. Imaging and Printing Group Personal Systems Group Enterprise Systems Group HP Services HP Financial Services Hewlett Packard

8. 4 - Organizational Theory Divisional structure — a structure in which functions are grouped together according to the specific demands of products, markets, or customers. The type of divisional structure selected is driven by the specific type of control problem experienced.

9. Advantages Clear focus on market segment helps meet customers’ needs Positive competition between divisions Better control as each division can act as separate profit centre Disadvantages Duplication of functions (e.g. different sales force for each division) Negative effects of competition Lack of central control over each separate division

10. Hewlett-Packard’s Headquarters Worldwide Americas Houston, Texas Europe, Middle East, Africa Geneva, Switzerland Asia Pacific Hong Kong Hewlett Packard

11. Advantages Serve local needs better Positive competition More effective communication between firm and local customers Disadvantages Conflict between local and central management Duplication of resources and functions