PRINCIPLE OF MANAGEMENT (EIB10303)

M03

INDIVIDUAL ASSIGNMENT 1

Prepared By:
NURUL NADZIRAH BINTI MOHAMED (62215118337)

Prepared For:
MADAM MARHAINI BINTI IBRAHIM

Submission Date:
19 DECEMBER 2018
ORGANIZATIONAL STRUCTURE

The typically hierarchical arrangement of lines of authority, communications, rights

and duties of an organization. Organizational structure determines how the roles, power and
responsibilities are assigned, controlled, and coordinated, and how information flows
between the different levels of management. A structure depends on the organization's
objectives and strategy. In a centralized structure, the top layer of management has most of
the decision making power and has tight control over departments and divisions. In a
decentralized structure, the decision making power is distributed and the departments and
divisions may have different degrees of independence.

FUNCTIONAL ORGANIZATIONAL STRUCTURE

An organization is a social unit of individuals that is designed and managed to

achieve collective goals. As such organizations are open systems that are greatly affected by
the environment they operate in. Every organization has its own typical management
structure that defines and governs the relationships between the various employees, the tasks
that they perform, and the roles, responsibilities and authority provided to carry out different
tasks. An organization that is well structured achieves effective coordination, as the structure
delineates formal communication channels, and describes how separate actions of
individuals are linked together. Organizational structure defines the manner in which the
roles, power, authority, and responsibilities are assigned and governed, and depicts how
information flows between the different levels of hierarchy in an organization. The structure
an organization designs depends greatly on its objectives and the strategy it adopts in
achieving those objectives. An organizational chart is the visual representation of this
vertical structure. It is therefore very important for an organization to take utmost care while
creating the organizational structure. The structure should clearly determine the reporting
relationships and the flow of authority as this will support good communication that will
result in efficient and effective work process flow.

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 This organizational chart shows a broad functional structure at FedEx, it shows that
the job description were divided into several task, based on what FedEx need to have in
order to achieve their organization goal. Each different function is managed from the top
down via functional heads.

Advantages of Functional Structure

Functional departments arguably permit greater operational efficiency because
employees with shared skills and knowledge are grouped together by functions performed.
Each group of specialists can therefore operate independently with management acting as
the point of cross-communication between functional areas. This arrangement allows for
increased specialization.

Disadvantages of Functional Structure

A disadvantage of this structure is that the different functional groups may not communicate
with one another, potentially decreasing flexibility and innovation. Functional structures
may also be susceptible to tunnel vision, with each function perceiving the organization only
from within the frame of its own operation. Recent trends that aim to combat these
disadvantages include the use of teams that cross traditional departmental lines and the
promotion of cross-functional communication.

Functional structures appear in a variety of organizations across many industries.

They may be most effective within large corporations that produce relatively homogeneous
goods. Smaller companies that require more adaptability and creativity may feel confined by
the communicative and creative silo functional structures tend to produce.

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GEOGRAPHIC ORGANIZATIONAL STRUCTURE

Geographic organizational structures are often well-suited for very large entities, such
as automobile manufacturers, that need to locate production facilities in which labour costs
are favourable and supplies readily available, but they also need support organizations for
dealerships that are located everywhere the company's autos are sold. In some instances,
however, even smaller organizations benefit from geographic organizational structuring. For
example, Firewire Surfboards, a small surfboard manufacturer have its own manufacturing
facility in one beach town in the hometown of the founder but retail stores in areas where
there is a lot of surfboarding, such as Hawaii, Southern California and Australia.

GEOGRAPHICAL STRUCTURE FOR FIREWIRE SURFBOARDS

Advantages of Geographic Structure

In both of the above examples, a geographic organizational structure was necessary in

order to meet each company's need for one or more manufacturing facilities, and also to
service far-flung divisions, territories, regions or surfing enthusiasts in different parts of the
world. With geographic organizational structures, it is usually not so much that the company
has chosen this structure over other possible choices because of its inherent advantages or
more the case, that it is the only structure that fulfils the company's basic needs. Some
disadvantages inherent in the structure may remain, and will have to be dealt with.

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Disadvantages of Geographic Structure

Geographic organizational structures work best with strong leadership in a company,

in which management and employees share a vision. Daimler AG, for instance, has its
headquarters in Stuttgart, Germany, and has manufacturing facilities in several European
locations, and has sales divisions all over the world. Nevertheless, despite the enterprise
being broadly distributed, the strength of the brand, which originates with Mercedes-Benz
and its commitment to quality and luxury products has enabled the company to operate these
far-flung divisions, with relative consensus and a shared sense of mission. If these qualities of
strong leadership, brand identification and a well-understood mission are not predominant, a
geographically organized company can suffer. When Chrysler and Fiat merged, for example,
the problems with geographical structure became apparent. The merged company has its
headquarters in London for tax purposes, it has manufacturing in several countries, and it has
internal disagreement between Italian leadership and American sales divisions. There is little
sense of a shared mission. In several American cities, Fiat sales and Alpha Romeo sales have
little connection with one another, physically or psychologically, and both are located blocks
away from Dodge Jeep Chrysler sales. Although the formal organizational structure requires
American middle-management to oversee all three divisions, long-time Dodge Jeep Chrysler
employees, who are used to selling Dodge Ram trucks, macho-looking Jeeps and other larger
vehicles, are generally uninterested in Fiats and Alphas. As a result, although on paper it
would seem that the Fiat 500e, a sassy little all-electric vehicle, is highly saleable, sales have
been dismal, and in 2018, it was rumoured to be discontinued. The Alpha is sometimes paired
with a Fiat dealership, but it is often offered as a choice in a luxury car dealership that has no
organizational connection to Dodge Jeep Chrysler. At times, as in Pasadena, California, the
two organizations are competing for the same customer in the same geographic area.

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MATRIX ORGANIZATIONAL STRUCTURE

The matrix structure is a type of organizational structure in which individuals are

grouped via two operational frames. Organizations can be structured in various ways, and
the structure of an organization determines how it operates and performs. The matrix
structure is a type of organizational structure in which individuals are grouped by two
different operational perspectives simultaneously. This structure has both advantages and
disadvantages but is generally best employed by companies large enough to justify the
increased complexity. In matrix management, the organization is grouped by any two
perspectives the company deems most appropriate. Common organizational perspectives
include function and product, function and region, or region and product. In an organization
grouped by function and product, for example, each product line will have management that
corresponds to each function. If the organization has three functions and three products, the
matrix structure will have nine potential managerial interactions. This example illustrates
how inherently complex matrix structures are in comparison to other or more linear
structures.

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 In a matrix structure, the organization is grouped by both product and function.
Product lines are managed horizontally and functions are managed vertically. This means that
each function such as research, production, sales, and finance has separate internal divisions
for each product. Starbucks has a matrix organizational structure, which is a hybrid mixture
of different features from the basic types of organizational structure. In this case, the
structural design involves intersections among various components of the business. For
example, the company’s product-based divisions intersect with functional groups and
geographic divisions, which in turn intersect with other parts of the organization. The
following are the main features of Starbucks Coffee’s corporate structure are functional
hierarchy, geographic divisions, product-based divisions and teams.

Advantages of a Matrix Structure

Proponents of matrix management suggest that this structure allows team members to
share information more readily across task boundaries, countering the “silo” critique of
functional management. Matrix structures also allow for specialization that can both increase
depth of knowledge and assign individuals according to project needs. A disadvantage of the
matrix structure is the increased complexity in the chain of command when employees are
assigned to both functional and project managers. This increase in complexity can result in a
higher manager-to-worker ratio, which can in turn increase costs or lead to conflicting
employee loyalties. It can also create a gridlock in decision making if a manager on one end
of the matrix disagrees with another manager. Blurred authority in a matrix structure can
result in reduced agility in decision making and conflict resolution.

Disadvantages of a Matrix Structure

Matrix structures should generally only be used when the operational complexity of
the organization demands it. A company that operates in various regions with various
products may require interaction between product development teams and geographic
marketing specialists suggesting a matrix may be applicable. Generally speaking, larger
companies with a need for a great deal of cross-departmental communication benefit most
from this model.

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PRODUCT ORGANIZATIONAL STRUCTURE

Product organizational structure is a framework in which a business is organised in

separate divisions, each focusing on a different product or service and functioning as an
individual unit within the company. The structure may have several layers of managers and
employees. Each layer can have its own marketing team, its own sales team, and so on. A
manager typically reports to the head of the company by product type such as sporting goods,
housewares and general merchandise. Certain key functions finance or human resources may
be provided centrally. For example, Microsoft, a computer software business may divide its
structure according to its two distinct customer groups, home users and business users. In
such arrangement, all employees working on the development, sales or promotion of business
software would in one division, while everyone working on software for home users would
be in another.

CEO
Satya Narayana Nadella

Home Users Business Users

Working on software Development Sales

Advantages of a Product Structure

Product organizational structure may not suit everyone, but is likely to provide
distinct advantages to those businesses that have particular product lines that are substantially
different, require specialised expertise for production or distribution and target a few major
customers that make up most of the business. Product structure can also help business to
focus on specific market segments, to meet customer needs more effectively, to extend
knowledge or expertise within specialised divisions, to respond to market changes more
flexibly and quickly, to encourage positive competition between each department and to
coordinate and measure performance of each division directly.

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Disadvantages of a Product Structure

Product organizational structure does have certain disadvantages, including being

difficult to scale and potentially duplicating functions and resources, such as different sales
team for each division, dispersing technical expertise across smaller units, nurturing negative
rivalries among divisions, over-emphasising divisional, rather than organisational goals and
losing central control over each separate division. Product or divisional structure is mainly
suitable for larger companies with two or more key product lines, strategic customers or
markets.