CHAPTER 6

ORGANIZATIONAL SYSTEMS

ORGANIZATIONAL STRUCTURE
• The organizational structure of an organization/company is subject to many factors like
technological breakthroughs by competitors, changes in customer lifestyles, and those
that are environmental in nature.

• Management, employees, suppliers, customers, government, and society are examples

of internal factors that significantly affect organizations one way or another.
• Types of organizational structures range from functional to territorial, or from product to
market-centered to matrix.

Functional Organizational Structure

• Organizations adopt a specific structural arrangement for a reason. Management needs

to bring together the human, technical, marketing, and financial resources of the
organization.

• Particularly, human resources are brought together in units, teams, or projects so that
job specialization can be optimized while special skills can be best managed.

• There is a need for the marketing department to interact and coordinate with personnel
in other major functional areas.

• The production/operations department follows the requirements set by the marketing

department.

• The financial department efficiently allocates funds to achieve the organization's set
objectives. All these departments need to act together.

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 Territorial Organizational Structure

• As an organization begins to serve its customers who are spread over a growing
geographical area, a territorial structure becomes a viable design.
• In this system, the target market is divided into geographical units according to certain
criteria.

• Territorial structural arrangements have several advantages:

1. Local markets can be cultivated by personnel familiar with the history of customers
in the area and their culture,

2. The company and its sales force can respond quickly to changes in the competitive
environment.
3, There is closer contact between managers familiar with the territory and their
subordinates.
4. Because management is familiar with local conditions, it can make quicker strategic
decisions.

PRODUCT ORGANIZATIONAL STRUCTURE

 Traditionally, organizational divisions follow a product structure. In some companies,

the sub-businesses are assigned to product group managers, each of whom are given
key operating and staff functions.

• There are four courses of action that an organization can implement to improve or
replaceany product management structure:
1. Conduct training programs in forecasting, interpersonal skills, planning, motivation,
and control.
2. Switch from a marketing manager to a marketing team that implements activities to
effectively market the product.

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 3. Eliminate product managers of minor brands and consolidating them with other
products.
4. Establish divisions around the major company products and use functional structural
arrangements within divisions.
Market-Centered Organizational Structure
• It describes the wide range of structural forms that center on a group of customer needs
rather than a region, product line, or function. It is decentralized by market; a profit
center.
• The following situations are suited for the market-centered structure:
 When a competitor threatens market leadership, market centering can restore a
competitive advantage.
 When a new-product is introduced, a market-centered approach can stimulate
new ideas.
 When a product manufacturer wants to diversify into high profit margin services
 When marketing related products or services requires market intelligence
 When a manufacturer shifts to feature the financial benefits of customer profit
improvement, market centering makes it easier to gather information on how
customers make their profits.
 When a marketer wants to attract more entrepreneurial managers, market
centering offers managers wide responsibilities and a variety of supervisory
duties.

SBU Organizational Structure

• This division structure raises the issue of whether any marketing functions should be
performed at the corporate staff level.
• The decision whether to maintain some corporate level marketing staff services depends
primarily on the size of the division.
• If a division is large enough to afford its own marketing structure, it will usuaIIy have one.

• The figure shows an SBIJ structural arrangement. A group vice-president who is directly
responsible to the chief executive officer of the company heads each SBIJ.

• This type of structure places emphasis on planning and analysis of company strategies.

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 Matrix Organizational Structure

• This division structure raises the issue of whether any marketing functions should be
performed at the corporate staff level.
• A matrix structure cuts across departmental boundaries to get a job done.

• A team working on a job is comprised of a group of specialists, so the ability to work

together is very important.

• The figure illustrates how teamwork among production, marketing, and finance
specialists is required to complete projects.

• The key feature is that both the functional and product lines of authority overlap where
both product and functional managers share managerial authority over the people in
each cell.

Choice of an Organizational Structure

• Size of the Firm. A firm producing and selling in a restricted territory may find the
functional organization the best form for their purposes; whereas, a larger firm that
produces several products and sells to a wider market may opt for a regional form of
organization to maximize selling efforts.
• The Products. Consumer and industrial goods may require different types of services
from the producer. Some products require extensive after-sale servicing to customers and
the marketing organizational structure can take care of this task.

• The Market. Characteristics of the market like geographic dispersion, income class, and
buyer behavior need to be considered in organizing the marketing unit.

• Competition. A firm may find it necessary to organize its marketing efforts following the
requirements of competition.

• Philosophy of Management. A final factor that affects the structure of an organization is

the management philosophy prevailing in the company. In each case, the structure of the
business unit differs.
ORGANIZATIONAL COMPONENTS

• These are management, employees, facilities and equipment,

financial resources, and organizational culture.

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 • Management refers to the administrative supervision of an
organization. It includes leadership, the organization's visionmission,
business definition, goals, objectives, and strategies adopted to attain
organizational success.

• Leadership is foremost in the management of any business. A good

leader, regardless of whether he owns or works for the organization, is
someone who inspires his employees and stretches them to their
optimum productivity. He is the prime mover and is expected to lead
his employees in the attainment of the organization's set goals.

• Task of a Leader
 planning where he sets the objectives to be attained and the means to achieve them
 organizing where he identifies, divides, groups and coordinates various activities to
achieve set goals
 staffing where he recruits, selects, hires, and develops human resources
 directing where he leads and communicates with his employees to attain objectives
 controlling where he monitors processes and functions and institutes corrective
actions when needed

• Roles of a Leader
 a strategist, a facilitator, and an administrator
 a leader who inspires and motivates his employees
 an information man who understands critical facts, issues, problems, and other
concerns about the industry and the business environments
 a conceptualizer who concretizes the vision, mission, and plans
 a liaison officer who serves as conduit for the employees
 a mediator who settles concerns, issues, and other problems between labor and
management
 — a facilitator who negotiates the allocation of resources
 — a delegator who assigns responsibilities, empowers employees, and monitors
them periodically and efficiently

 a problem-solver who tackles organizational concerns and provides adequate

solutions
 a decision-maker who makes appropriate decisions, both qualitative and
quantitative, and as needed by the organization

• Skills of a Leader
 technical skills or being competent in one's respective field
 human relations skills or being adept in dealing with personal and interpersonal
employee relationships
 other skills that are required to attain organizational success

Employees
• Employees constitute a significant part of the organizational milieu. They are the very
people who work, support, and earn profits for the organization.

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 • Employee Satisfaction. This is an emotional state where the employee experiences a
feeling of content in the workplace. It is generally brought about by acceptable salary,
fringe benefits, and incentives, positive interpersonal relationships between and among
management and employees, and acceptable conditions in the workplace.

• Employee involvement. Satisfied with his work conditions, the employee becomes more
participative in company activities and essentially aims to contribute to the growth of the
company.

• Employee commitment. In this degree of employee relationship, the employee cultivates

within himself an attitude and a "sense of owning."

Facilities and Equipment

• Facilities include management of buildings and site maintenance, management of

machinery and facilities, and application of technology.
• Management of buildings or location sites need to be appropriate for the type of
business. Physical structures have to be maintained properly, secured for safety, and
optimized when it comes to layouts.
• Application of technology where information technology digitally and efficiently
integrates financial, inventory, purchasing, accounting, marketing, and other aspects of
an organization.
• Management of machinery means making sure that the right types of equipment or
machinery are in place, including the right quantities as needed by the organization. This
is another important aspect of facility management.

• Management of facilities means that washrooms and canteens need to be in good and
healthy working conditions as these amenities are important to the workforce.

Financial Resources
• The financial resources of the organization determine the direction the organization will
take, and affect its capability to realize its set business goals and objectives which include: 
spending on other promotional strategies;
 upgrading or purchasing new facilities and equipment;
 experimenting and developing new products;
 hiring additional manpower, increasing salaries and wages, and training
employees; and
 most significantly, ensuring continued existence of the organization.

Organizational Policies

• the lifeblood of an organization

• put organizational structure and system in place
• ensure order, hierarchy of authority, clear delineation of functions, efficiency,
productivity, and good interpersonal relationships
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 • make possible the smooth actualization of operations and functions and facilitate the
attainment of set goals and objectives, whether measurable or otherwise

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