Strategic Management: Formulation and Implementation

Organizational Forms

This section discusses the six major types of structures that are available to organizations: functional, geographic organization, decentralized business divisions, strategic business units, matrix structures and hybrid structure.

Each type has major advantages and disadvantages.

Functional Structure

The functional structure is characterized by the simultaneous combination of similar activities and the separation of dissimilar activities on the basis of function. All engineers are located in the engineering department, and the vicepresident of engineering is responsible for all engineering activities. The same is true in marketing, research and development, and manufacturing.

The functional organizational form is one of the most common organizational structures found in firms pursuing a strategy of concentration or very high relatedness. A functional structure is most appropriate when the organization is small to medium size and relatively stable.

Two types of functional organizational approaches are diagrammed in Figure 32. "typical" functional organization structure and a process oriented functional structure.