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FACULTY OF BUSINESS AND MANAGEMENT

SEMESTER: JANUARY 2012

BBPP1103

COURSE: BACHELOR OF ACCOUNTING WITH HONOURS

COURSE TITLE: PRINCIPLES OF MANAGEMENT

NAME

NORMADIYAH BT MASTUM

MATRICULATION NO

820803145494001

IDENTITY CARD NO.

820803-14-5494

TELEPHONE NO.

012-6625810

E-MAIL

normadiyah@oum.edu.my

TUTOR NAME

SHIRLEY KEN TZU TING

LEARNING CENTRE

KUANTAN, PAHANG

TABLE OF CONTENT
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Title

Page

1.0

Introduction

2.0

Functional Organizational Structure

2.1

Sample of Functional Structure

2.2

Justifications

5-6

3.0

Geographic Organizational Structure

3.1

Sample of Geographic Structure

3.2

Justifications

8-9

4.0

Product Organizational Structure

10

4.1

Sample of Product Structure

10

4.2

Justifications

11

5.0

Matrix Organizational Structure

12

5.1

Sample of Matrix Structure

12

5.2

Justifications

13 - 14

6.0

Conclusion

15

References

16 - 17

1.0

INTRODUCTION

There are many opinions and definitions on organisational structure. According (Shahrol
Aman Ahmad, 2011), Organisational structure refers to the development of an organisations
functions that are grouped and coordinated formally. Organisation structure is the work
arrangement at a section or department that directs the behaviour of individuals and groups
towards the achievement on an organisations objectives. In other words, organisational
structure determines the role of every single level in an organisation in order to achieve its
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goals and objectives smoothly. It also creates a system that connects any individual with
every sector in an organisation.
An organisation structure is usually displayed in graphical form that called an organisation
chart. Traditionally, the organisation chart is illustrated in the form of a pyramid chart with
individuals at the top of the pyramid having higher authority and responsibilities compared to
the individuals who are placed at the lower levels of the pyramid (Shahrol Aman Ahmad,
2011).
Other company or organisation have their own structure. Organisation can be structure in
many different way such us by functional structure, by regional or geographic structure,
product structure and matrix structure. Its important for the company to choose the suitable
organisation structure to ensure the company achieve their objectives or goals.

2.0

FUNCTIONAL ORGANISATIONAL STRUCTURE

Functional organisation is common and the most popular form of organisational structure.
According to wikipedia (2010), Functional organisation is a type of organisational structure
that uses the principle of specialization based on function and role. It allows decisions to
be decentralized since issues are delegated to specialized persons or units, leaving them the
responsibility of implementing, evaluating, or controlling the given procedures or goals.
Functional organisational structure can be used in all types of organisation but vary in their
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functions to reflect the organisations objectives and activities. Functional organizational
structure is best employed by smaller companies or those that focus on a single product or
service. Gupta (2009) states, Functional structures are the most common type of structural
design and have evolved from the concept of high specialization, high control framework of
manufacturing organization turned towards high efficient. This shows the agreement
towards the functions of such structure towards organization.
2.1

SAMPLE CHART OF FUNCTIONAL STRUCTURE

Figure 2.1: Functional structure chart of company Real Cleaning Ltd

Source: http://www.realcleaning.az/?/en/content/223/
2.2

JUSTIFICATIONS

Real Cleaning Ltd started operation in 2008. The company provides in cleaning activity and
renders its customer services in accordance with modern or current management principles.
Real Cleaning Ltd. is one of the best cleaning companies at the crossroads of Western Asia
and Eastern Europe. As shown, the organisational structure used by Real Cleaning Ltd. is
functional structure. The activities in the organisation are arranged according to functions or
area such as sales, human resource, marketing, finance and technical administrative. That
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means every department have their own staff. Examples the manager of supply and chief of a
warehouse are subordinates under the unit finance department. In other words, the areas or
departments contain personnel with various but related skills who are grouped by similarities.
It is understood that every unit handles one aspect of the product or service provided and the
top management is responsible in coordinating and linking each unit into one organisation.
This organisation design reflects the owner as general director, with all employees reporting
directly to him. This means that general director has full authority in organisation and has the
right to give directives to the departments managers under him. The company practising this
method can give authority to the general director to make decision even though it is on trivial
matter thus speeding up the decision making process. One big advantage of this is the
companys activities will not be hampered by a slow decision making process as it could be
taken directly by the general director.
Next, The Real Cleaning Ltd organisation structure forms those with similar or related
knowledge in the same place. This means that personnel with similar qualification and skills
are grouped together in one department. The advantages of this organization towards the
success of Real Cleaning Ltd are staff management is made easier, more specialized training
and workshops could be conducted and clearer career path could be realized by personnel.
Firstly, as the management of personnel is easier with the utilisation of such organisational
structure, Real Cleaning Ltd is able to optimize the usage of its personnel. In other words,
with the separation of specialised staff into specialized field and department, the work
delegation process can be done easier and faster. Next, the ability to provide training related
to specialization also benefits the company and its personnel. This is because a more focused
training can be given and this will avoid losses as unnecessary content could be omitted from
the personnel training programs. A more positive environment could also be created with
such structure as the training doesnt just coach the personnel but also encourage better
relationship among them. As stated by Nelson (2012), One benefit of a functional
organization structure is the positive atmosphere it provides for skill development. Because a
functional structure groups people performing similar tasks that require certain skills, more
experienced or talented group members serve as examples and mentors to individuals with
less experience. This leads to continuous growth and development within the organization
from simple day to day interaction, instead of having to rely on specialized seminars or
workshops to improve the quality of work coming out of a department.
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Cited from: The Advantages of Functional Organization Structure | eHow.com

Then, functional organisational structure has also given advantage towards the performance
of a company and in this case Real Cleaning Ltd. This is because as the main goal of the
structure is to gather all the resources necessary for a single activity as a unit, it allows each
unit to reach its greatest potential and prevent over-use of limited resources. The specialized
training and involvement from the management could also identify outstanding personnel
who could be placed in the most effective area of specialization. Hence, with different teams
with specialized contributions work together to achieve the companys goals and objectives,
functional

3.0

organisational

structure

could

be

big

benefit

to

company.

GEOGRAPHIC ORGANISATIONAL STRUCTURE

(Ledbetter, 2003) refers Geographical structure as a structure that groups the organizations
users or customers together by geographical area. A geographical organisational structure
groups representative from each functional department into units formed to serve a specific
market or region. Geographical units can be highly effective if they are located within the
regions as they serve and employ workers from the local labour pool.

3.1

SAMPLE CHART OF GEOGRAPHIC STRUCTURE

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Figure 3.1: Geographical structure chart of NovEnergia II

Source: http://www.novenergia.com/Corporate/group_organization.htm

3.2

JUSTIFICATIONS

NovEnergia II is a European investment fund registered under Luxembourg law as a SICAR

(Socit d'Investissement Capital Risque or Risk Capital Investment Company) and the
company starts the operations in 2004. NovEnergia II primarily, uses geographic structure for
managing its business. From the beginning, Novenergia II Board of Directors opted for
investing in Portfolio Companies linked to the development of power projects in different EU
countries.For every project a portfolio company is created, under the supervision of holding
companies, specially created in every country and, in most cases, 100% owned by the SubFund. The top governance of these holding companies is directly carried out by members of
the Board of Directors, thus conveying the Board policies to be applied in the different
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geographic areas.To support the Green Field preferential project development, Novenergia II
holds a services company, providing specialized technical support through high experience
experts in different project types.
Cited from: http://www.novenergia.com/home.htm

From its origin in Portugal, Novenergia II has evolved into a European holding of energy
companies, with well-known subsidiaries in Spain, Italy, France, Bulgaria, Hungary, Romania
and Poland. NovEnergia II utilises geographic organisational structure has extra benefit in
communication as it becomes more personal between the representatives. In other words, for
a company that expands its circle of business to other countries should utilise geographic
organisational structure as it could encourage more personal communication between the
representatives in other countries as they are locally appointed to serve for the company. Due
to this, a more comfortable communication can be established thus making goals and
objectives achievement an easier task. Personnel in a geographical structure also work
collaboratively thus teamwork could be established. In other words, a strong collaboration
among the members of the company leads to a more collaborative planning and decisionmaking process, supportive working environment and understanding of each others
personalities and work styles.
The company could also hire local managers and this is an advantage as they are familiar
with the local culture, lifestyle, business environment and expectations. This is because local
managers understand the local better if compared to outsiders. For example, a local manager
understands the expectations and culture of the consumers while outsiders may find
difficulties to understand the people thus wastage can be avoided. Another advantage is local
managers could meld the local culture with the company culture thus ensuring the companys
goals and objectives are aligned with the local conditions.
Another advantage is on the acceptance of local customers towards the company. This is
because with local representatives, a more convenient communication could be engaged with
the local thus better trust could be created. This could promise a more efficient customer
service as customers are comfortable with the representatives and no barriers between them.
This is agreed by Ingram (2012) who states focusing all functions on one geographical area
allows each department to operate with precision: product attributes can be altered to suit
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local tastes; workplace policies can be altered to fit local workers; marketing can be tailored
to the specific market; sales practices can stay within culturally acceptable boundaries; and
pricing schemes can fit local trends.
Cited from: http://smallbusiness.chron.com
Finally, a geographical structure could offer strategic advantages to the company. This is
because the company could get new ideas from different perspectives and resources. A study
on the different culture between the countries could also be used to produce products that suit
most of the locals thus the usage of resources could be reduced. Hence, a company that needs
to expand its empire should give priority in using such structure in order to get the optimum
benefits.

4.0

PRODUCT ORGANISATIONAL STRUCTURE

Product organisational structure is based on products where employees will work in different
unit and each unit is responsible of producing a product. In other words product structure
refers to the grouping of activities by the product produced.

4.1

SAMPLE CHART OF PRODUCT STRUCTURE

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Figure 4.1: Product structure chart of Nature Group

Source: http://www.cnnatureprinting.com/
Hangzhou Nature Printing Co., Ltd. established in 2000, belong to Nature Group. the strive
to develop global paper products market from the beginning, focus on the special group of
children, and provide them the superior and most comfortable reading environment. We offer
a wide range of children's book products, including paper books, card reading books,
hardcover books, board books, pop-up books, colour box, display paper packaging and other
related products.
Cited from: http://www.cnnatureprinting.com/

4.2

JUSTIFICATIONS

Nature Group uses product organisational structure. This structure is used by the organization
because the organization is broken up into three groups based on the products manufactured
and sold. As seen in the organizational chart, each major product area is placed under the
responsibility of a manager. Each area is then divided into different departments such as
marketing dept., R&D dept., QA dept., manufacturing dept., technical dept., A&M dept. and
financial dept. This shows that the departments focus only on specialized product produced
by the group. For example, in the Nature Printing Co., all the departments give full focus on
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the printing area. In other words, every department under the Nature Printing Co. gives
attention on the development of printing projects while the departments of different product
areas focus on the products developed by them.
The Nature Group utilizes this structure because this organizational structure provides
complete authority over a project developed under the product area. For example, the Nature
Printing Co has full authority over the projects developed in the area while the others
couldnt interfere in any action regarding the projects. As the company focuses on full
authority based on the product produced, every personnel works directly under a project
manager. It means that the project manager for the product produced has full control of the
employees and activities towards achieving the teams goals and objectives.
Another advantage is the structure could eliminate wastage as unprofitable product lines
could easily be identified thus could be eliminated fast. The next advantage is personnel
could maintain expertise on a given project thus a loyalty to the project could be maintained.
The personnel morale could also be affected by the products produced thus a better
production of products could automatically boost the personnel morale. This means that the
personnel understand that the products produced by their group determine their quality thus a
more focus on maintaining and increasing the quality of the products produced is taken by
them.

5.0

MATRIX ORGANISATIONAL STRUCTURE

The matrix structure is based on flexible project teams that include both functional specialists
and product or project specialists. Ledbetter (2003) explains matrix as a structure that
simultaneously groups people in two ways by the function of which they are a member
and by the product team on which they are currently working. Hence, The goal of the
matrix is to provide a high level of integration between function and product, and to do so
without using extensive resources. It ensures a high level of cross-unit collaboration and
accountability. (K. Pelly Periasamy, 2002)
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5.1

SAMPLE CHART OF MATRIX STRUCTURE

Figure 5.1: Matrix structure chart of IBG Group

Source: http://ibagroupit.com/about/structure/
IBA Group is one of the largest IT service providers in Eastern Europe performing onshore,
near-shore and offshore projects with over 2,500+ IT and business professionals. IBA Group
has software development centres in the Republic of Belarus, the Czech Republic, and
Kazakhstan.
Cited from: http://ibagroupit.com/about/structure/
5.2

JUSTIFICATIONS

IBA Group is governed by the Board of Directors that includes key owners and top managers.
The Board outlines company's strategic objectives and goals. Meanwhile, the president and
vice president are in charge or resposible for translating these strategic goals into action. The
company is composed of several interrelated business units including Software Development
Centers (DC), Business Development Center, Technical Center, Training Center, Information
Systems Testing Center, as well as Sales & Marketing, Human Resource, and Finance &
Administrative Departments. Software Development Centers have Production, Quality
Assurance (QA) and Project Management (PM) Departments. The company have spent years
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building and refining our organizational structure to ensure the consistency and quality of the
development processes. For its development centres, IBA employs a matrix organizational
structure that is flexible and adaptive to customer requirements. A software department
typically consists of several project teams. A team is headed by a Project Manager and may
include employees from different production departments. Each team member is accountable
to the Project Manager and the Head of his/her production department.
Cited from: http://ibagroupit.com/about/structure/

Matrix organisational structure is a suitable structure IBA Group company that carries out
different projects that need expertise from different units. This enables the sharing of
resources across functional units while maintaining traditional hierarchical structure. This is
because the projects conducted by the company may need different group of professionals
thus the matrix structure enables the company to execute different projects with the available
resources.
Another reason why the IBA Group chooses matrix structure is it allows supervisors to focus
on their areas of expertise with the same group of team members. For example, functional
supervisors focus on managing employee while project supervisors give focus on specific
projects. This enables employees to specialize in a particular field thus they could excel at
tasks in their field of focus.
The next cause is employees may have the opportunity to develop a wider set of skills as they
are always placed together with members of other functional areas due to the projects
conducted. This is because the structure allows information and resources to travel smoothly
and fast between functional areas. The collaboration allows complex challenges and
objectives to be handles and achieved easier.
Finally, it could be understood that matrix organisational structure can give many benefits
especially to a company that needs to carry out different projects or produce different
products that need expertise across the functional units in the company.

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6.0

CONCLUSION

As for the conclusion, organisational structure is very important to companies as it enables

companies to segregate task and projects effectively thus lessen the use of extra resources.
This explains the importance of organisational structure in determining the performance of a
company or organisation. Wolf (2002) states, good organization structure influences the
execution behaviours of a company. Structure not only shapes the competence of the
organization, but also the processes that shape performance. (Ledbetter, 2003). In other
words, the success of a company is not just determined by the resources but also the
arrangement of task and activities of the company. this means that failure in utilising a more
effective organisational structure may lead to the failure of a company. This is also agreed by
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Clemmer (2003) with this statement, good performers, in a poorly designed structure, will
take on the shape of the structure. (Clemmer, 2003; Ledbetter, 2003).
Organisational structure also enables personnel to realize their roles and importance to the
company and view their future path in their career field. Thus, it has proven that companies
that need to be successful in the industries they venture in must employ suitable
organisational structures. As stated by Underdown (2003), Once an organisation decides
how it wants its members to behave, what attitudes it wants to encourage, and what it wants
its members to accomplish, it can then design its structure and encourage the development of
the cultural values and norm to obtain these desired attitudes, behaviours and goals.
(Ledbetter, 2003).

(Words: 2986)
REFERENCES

Bhattacharyya, D. K. (2009). Organisational System, Design, Structure and Management.

Mumbai India: Global Media.
Company Information. (2012). Retrieved March 1, 2012, from Real Cleaning Co.:
http://www.realcleaning.co.uk/
Group

Organization.

(2012).

Retrieved

March

1,

2012,

from

Nonevergia:

http://www.novenergia.com/Corporate/group_organization.htm

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Gupta, A. (2009, September 20). Functional vs Divisional Structure. Retrieved March 1,
2012, from Practical Management - Designing A Better Workplace: http://www.practicalmanagement.com/Organization-Development/Functional-Vs-Divisional-Structure.html
Hangzhou Nature Printing Co. Ltd. (2011). Retrieved March 1, 2012, from Nature:
http://www.cnnatureprinting.com/v4.html
Ingram, D. (2012). The Advantages of Geographical Organizational Structure. Retrieved
March 1, 2012, from Chron.com: http://smallbusiness.chron.com/advantages-geographicalorganizational-structure-717.html
K. Pelly Periasamy, H. W. (2002). Organizational Structure For Electronic Commence. A
Qualitative Investigation , 599.
Ledbetter, R. (2003). Organizational Structures: Influencing Factors and Impact in the Grand
Prairie Fire Department. Grand Prairie: Executive Fire Department Program
Nelson, L. (2012). The Advantages of Functional Organization Structure. Retrieved March 1,
2012, from ehow: http://www.ehow.com/list_6544799_advantages-functional-organizationstructure.html
Organizational Structure. (2012). Retrieved March 1, 2012, from IBA Group:
http://ibagroupit.com/services/mainframe-software/
.
Shahrol Aman Ahmad, A. R. (2011). Organisation Design. In A. R. Shahrol Aman Ahmad,
Principles of Management (p. 57). Selangor: Meteor Doc. Sdn Bhd.
Wikipedia. (2010, August 30). Retrieved March 10, 2012, from Functional Organization:
http://en.wikipedia.org/wiki/Functional_organization

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