BBPP1103

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, PAHANG1

BBPP1103

TABLE OF CONTENT

Title Page

1.0 Introduction 3

2.0 Functional Organizational Structure 4

2.1 Sample of Functional Structure 4

2.2 Justifications 5 - 6

3.0 Geographic Organizational Structure 7

3.1 Sample of Geographic Structure 7

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

2

BBPP1103

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

organisation’s 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 organisation’s objectives”. In other words,

organisational structure determines the role of every single level in an organisation in order to

achieve its 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.

3

BBPP1103

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

functions to reflect the organisation’s 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/223/4

BBPP1103

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

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

company’s 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

5

BBPP1103

the personnel training programs. A more positive environment could also be created with

such structure as the training doesn’t 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.”

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 company’s goals and objectives,

functional organisational structure could be a big benefit to a company.

6

BBPP1103

3.0 GEOGRAPHIC ORGANISATIONAL STRUCTURE

(Ledbetter, 2003) refers “Geographical structure as a structure that groups the organization’s

users or customers together by geographical area”. A geographical organisational structure

group’s 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

Figure 3.1: Geographical structure chart of NovEnergia II

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

7

BBPP1103

3.2 JUSTIFICATIONS

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

(Société d'Investissement à 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 Sub-

Fund. 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

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

decision-making process, supportive working environment and understanding of each other’s

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 8

BBPP1103

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 company’s

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

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.

9

BBPP1103

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

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/

10

BBPP1103

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

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

couldn’t 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 team’s 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.

11

BBPP1103

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)

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/

12

BBPP1103

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

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.

13

BBPP1103

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.

14

BBPP1103

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

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)

15

BBPP1103

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

Gupta, A. (2009, September 20). Functional vs Divisional Structure. Retrieved March 1,

2012, from Practical Management - Designing A Better Workplace: http://www.practical-

management.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-geographical-

organizational-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-organization-

structure.html

Organizational Structure. (2012). Retrieved March 1, 2012, from IBA Group:

http://ibagroupit.com/services/mainframe-software/

.

16

BBPP1103

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

17