Comprehensive Analysis: Organizational Structures and System Theory

This report provides an in-depth analysis of various organizational structures, specifically focusing on functional, divisional (product-based), and matrix structures. It explores the advantages and disadvantages of each structure, offering real-world examples of companies that utilize them, such as ...Read More

ANALYSIS OF ORGANIZATIONAL STRUCTURES AND RELATIONSHIP TO SYSTEM
THEORY
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Analysis of Organizational Structures and Relationship to Systems Theory 2
Executive summary
Organizational structures are playing a major role in the growth and development of
organizations in an ever-growing complex and volatile business environment. There are various
types of organizational structures, however, this report will only focus on the three primary
organizations structures which are functional, divisional and matrix structures. Additionally, it
will focus on their positive and negative attributes and give real-world examples of firms that
utilize the different organizational structures while illustrating the relationship to systems theory.

Analysis of Organizational Structures and Relationship to Systems Theory 3
Contents
Analysis of Organizational Structures and Relationship to Systems Theory..................................4
Introduction......................................................................................................................................4
Functional organizational structure.................................................................................................4
Advantages...................................................................................................................................5
Specialization...........................................................................................................................5
Accountability..........................................................................................................................5
Disadvantages..............................................................................................................................5
Poor communication and collaboration....................................................................................5
Limited to a large firm..............................................................................................................5
Divisional organizational structure: product based.........................................................................6
Advantages...................................................................................................................................7
Effective product service delivery............................................................................................7
Access of resources..................................................................................................................7
Disadvantages..............................................................................................................................7
Consequences of internal competition.....................................................................................7
Overall management.................................................................................................................7

Analysis of Organizational Structures and Relationship to Systems Theory 4
Matrix divisional structure...............................................................................................................8
Advantages...................................................................................................................................8
Effective communication.........................................................................................................8
Increase in motivation..............................................................................................................8
Disadvantages..............................................................................................................................9
Expensive.................................................................................................................................9
Internal complexities................................................................................................................9
Conclusion.....................................................................................................................................10
References......................................................................................................................................11
List of figures
Figure 1: functional organization structure ………………………………………………………6
Figure 2: divisional organization structure ………………………………………………………7
Figure 3: matrix organizational structure ………………………………………………………...9

Analysis of Organizational Structures and Relationship to Systems Theory 5
Analysis of Organizational Structures and Relationship to Systems Theory
Introduction
Today’s organizations are facing larger market opportunities and a wider target audience but in a
volatile and more complex business environment. Therefore, firms are required to have effective
organizational structures that will complement their business models and performance in their
business activities in a volatile and more complex business environment, regardless of their size
in the local or international markets.in relation to this context organizational structures have a
strong relationships to systems theory whey organizations are termed as systems that have to
adapt to the changes in their environment so as to achieve effective decision making, which will
go a long way in meeting a firm's goals and objectives in the long run (Bai, Feng, Yue and Feng
2017). Therefore, this report will focus on the various organizational structures and elaborate
their relationships to systems theory through giving a wide range of examples.
Functional organizational structure
The functional organizational structure is one of the most commonly used types of organizational
structure.it is mainly characterized by departmentalizing an organization based on common job
functions. This means marketers in an organization can be grouped in one department,
salespeople and customer service in a separate different department (Bai et al.2017).

Analysis of Organizational Structures and Relationship to Systems Theory 6
Figure 1: functional organization structure(Devaney 2014)
Advantages
Specialization- through functional organizational structure a firm is able to focus and specialize
on the set of skills according to each department which increases productivity and efficiency in
employee output
Accountability - through functional organizational structure a firm has a clear line of
management which increases implementation of new strategies in the firm, nevertheless, each
employee understands their roles and their colleagues’
Disadvantages
Poor communication and collaboration - this is mainly adamant across the various functional
silos within a firm where departments have an ineffective pipeline of communication between
them making sharing of ideas or grievances affecting the firm’s performance in the long run.
Limited to a large firm. The functional organizational structure is only limited and suitable for
large cooperate not small business where employees may be individually responsible for many
functions.

Analysis of Organizational Structures and Relationship to Systems Theory 7
Starbucks has a good outline of a functional organizational structure where it has marketing,
finance and a human resource department which are at the top of the corporate structure of the
firm, which are characterized by a hierarchy. For example, the HR department facilities policies
that a specific to recruitment, performance monitoring and organizational wide development and
implementation for the purpose of achieving a competitive advantage over its rivals in the
business environment. systems theory relates to this context by allowing departments to adapt to
the business environment through effective decision making that leads to the development of
policies and their implementation allowing the firms to have a competitive strategy to counter the
volatility of the business environment (Glowik 2017).
Divisional organizational structure: product based
The divisional organizational structure generally differs from other structures such as functional
structure by focusing on the different products a firm has to offer in a specific market. Therefore,
each product has, for example, a sales, marketing and customer service department who are
entirely focused on the success of a firm’s specific product or in other words each division within
the organization is dedicated to a particular product line (Baker 2017).
Figure 2: divisional organization structure: product based(Devaney 2014)

Analysis of Organizational Structures and Relationship to Systems Theory 8
Advantages
Effective product service delivery -This organizational structure allows each division within the
organization is dedicated to a particular product line. This means that the main focus is to ensure
that particular products have maximum success archivable in its intended market and adapt to the
volatility of the business environment.
Access of resources- since each product line has its own president and vice president of senior
product executives, the access on required resources is much easier since its focus on quality
products service delivery is adamant in the product line.
Disadvantages
Consequences of internal competition -There might be situations where different products from
the same firm are competing in the same market. This could lead to the different product
divisions in the firm form undermining one another and causing division in the firm
Overall management- the overall management if the different product line division may be
cumbersome and brig difficulties since each product line division is unique and different from
the other
Microsoft cooperation has product base divisional structure, in regards to this, the firm uses
output or product as a criterion in grouping the firm’s resources and related personnel. For
example, the firm has a personal computing and intelligent cloud product line divisions focused
with coming up with products that will contribute to the overall products innovation capacity and
competitive advantage of Microsoft cooperation in the long run. Moreover, systems theory
relates to this context by allowing the different product line divisions to adapt to the business

Analysis of Organizational Structures and Relationship to Systems Theory 9
environment through product innovation and effective consumer segmentation and targeting
(Leih, Linden and Teece 2014). However, this is initially achieved through effective decision
making that leads to the development of policies and their implementation allowing the firm to
have a competitive strategy to counter the volatility of the business environment.
Matrix divisional structure
This a mere combination of divisional and functional organizational structures. Firms that have
matrix divisional structures are divided into specialization departments where a further division
is based on project and products.
Figure 3: matrix organizational structure (Devaney 2014)
Advantages
Effective communication-since matrix is the combination of functional and division structure
the presence of effective lines of communications exists which lead to effective decision making
and collaboration between different departments
Increase in motivation-matrix structure fosters democratic leadership style where inputs from
employees or project team members are put into consideration during decision making by the

Analysis of Organizational Structures and Relationship to Systems Theory 10
management team. This increase employee productivity and motivation which contribute to the
overall growth and development of the firm (Laub 2018).
Disadvantages
Expensive-it is expensive to initiate and maintain the matrix structure especially due to dual
management where two sets of leaders are required at each level which leads t double benefits
and salaries
Internal complexities-The presence of dual management could lead to confusion among
employees in regards on who to report to, additionally, different managers can contradict
instruction given to team members or employees which leads to hostility and further confusion.
Starbucks has a matrix organizational structure a combination of the functional and divisional
structure. The functional structure characterized by department hierarchy such as HR
department which is For example, the HR department facilities policies that a specific to
recruitment, performance monitoring and organizational wide development and implementation
for the purpose of achieving a competitive advantage over its rivals in the business
environment .additionally the functional structures are supplemented with product line divisions
such as coffee related products, brand and merchandise, and baked goods product line divisions
which allow Starbucks to focus on product development (Glowik 2017).However, system theory
applies to the matrix organizational structure with a context of adapting and overcoming the
business environment which tends to be more complex and volatiles. adapting and overcoming
the perks of the business environment could be achieved through effective decision making and
product innovation through a matrix organizational perceptive. The existence of an effective
communication channel and the semi-democratic leadership due to product line division allows

Analysis of Organizational Structures and Relationship to Systems Theory 11
the consideration of ideas and suggestions of employee and project team members before
decision making by the management team (Laub 2018). Product line division allows the focus on
product innovation which increase product serviced delivery in the long run. Therefore, systems
theory in matrix organizations structure plays a major role in adapting to the business
environment and gaining a competitive advantage leading to the achievement of the firm’s goals
and objective.
Conclusion
The business environment today has become increasingly volatile, competitive and more
complex over the last couple of decades. The structure of an organization plays a major role in
countering and adapting to the business environment. This report has discussed the three primary
organizations structures which are functional, divisional and matrix structures while discussing
their positive and negative attributes and additionally giving real-world examples. Systems
theory identifies an organization as a system that can adapt to a change in its surrounding and
affecting the firm in general. This has been elaborated further through the perspective of the
different primary organizational structures which overall leads to gaining a competitive
advantage which increases growth and development of the firm.

Analysis of Organizational Structures and Relationship to Systems Theory 12
References
Bai, W., Feng, Y., Yue, Y. and Feng, L., 2017. Organizational structure, cross-functional
integration and performance of new product development team. Procedia engineering, 174,
pp.621-629.
Baker, T., 2017. Management Myth# 4—A Business is Best Organized around Functions.
In Performance Management for Agile Organizations (pp. 107-124). Palgrave Macmillan, Cham.
Devaney, E. 2014. The Pros & Cons of 7 Popular Organizational Structures [Diagrams].
[online] Blog.hubspot.com. Available at: https://blog.hubspot.com/marketing/team-structure-
diagrams
Glowik, M., 2017. 4.7 Case study: Starbucks. Global Strategy in the Service Industries:
Dynamics, Analysis, Growth, p.156.
Laub, J., 2018. Considering Servant Organizational Structures. In Leveraging the Power of
Servant Leadership(pp. 233-254). Palgrave Macmillan, Cham.
Leih, S., Linden, G. and Teece, D., 2014. Business model innovation and organizational design:
a dynamic capabilities perspective.