Business

Study Notes

Organisational structure basics

Level:
GCSE, AS, A Level
Board:
AQA, Edexcel, OCR, IB

The way in which a business is organised has a direct effect on its competitiveness. For a business to be able to achieve its aims and objectives, it needs to organise its people in a suitable way – that is known as the “organisational structure”.

The organisational structure of a business is important because it determines:

  • Authority and responsibility – who is responsible for whom and who is in charge?
  • Individual job roles and titles
  • The people to whom others are accountable
  • The formal routes through which communication flows in the business

One way to think of the organisation structure is of an explanation of the “command and control” system in a business.

The organisation structure of a business will depend on several factors, including:

Factor Explanation
Size of the business Small businesses will tend to have informal or flat hierarchical structures. Larger and more complex businesses will develop more complicated and detailed structures involving more layers of hierarchy, departments and functions
Type of business Does the business operate from just one or several locations? Is the business in the service or manufacturing sector? Does it have overseas operations or outsource any significant business activities?

Is the workforce mainly unskilled, semi-skilled, highly skilled?

Management and leadership style Often over-looked, but very important. An autocratic leadership style will often result in a very different structure compared with one designed by a leader who prefers to delegate responsibility
The competitive environment Organisation structures are often influenced and changed by developments in the market – for example changes in the use of distribution channels, suppliers, competitor actions

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