TABLE OF CONTENT

CONTENT

1.0

INTRODUCTION

2.0

FINDINGS

PAGE

2.1 FUNCTIONAL STUCTURE

2.2 PRODUCT STRUCTURE

2.3 GEOGRAPHIC STRUCTURE

2.4 MATRIX STRUCTURE

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3.0

CONCLUSION

13

4.0

REFERENCES

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1.0: INTRODUCTION

Organization structure defines how tasks are being allocated, areas of responsibility
and authority, who reports to whom and formal coordinating mechanisms and interactive
patterns that will be followed to accomplish organizational objectives. An organizational
structure is usually displayed in graphical form that is called an organization chart. It is a
framework, typically hierarchical, which an organization arranges its lines of authority and
communications and allocates duties and responsibilities. Organizational structures
determines the manner and extent to which roles, power and reasonability are delegated,
controlled and coordinated and how information flows between the level of management. In
designing the organizational structure, top management normally will group subordinates and
allocate responsibility for different functions and processes to different entities such as
departments, work groups and individuals. This aggregation process provides effective cost
management because similarity of the units is under a single managers control.

The advantages of an organizational structure are; the company can present an

incorporated front to customers and suppliers when a common marketing message is used
throughout the organization. An incorporated marketing message can help the company to
understand their marketing goals and work together to achieve them. When various
departments are involved in a single effort, an incorporated marketing message can be vital to
the projects success. A strong organizational structure is better able to prepare qualified
employees for management. When the company operates under a strong structure, an
inclusive management training plan is easier to create and perform to help maintain a strong
managerial core. All the departments can work together on a developmental plan to help
encourage the training of managerial candidates within any department.

Moreover, strong organization structure allows the company to focus better on a single
set of objectives instead of each group working towards its own objectives. It helps the
company to use resources wisely in the pursuit of company objectives. It also makes
employee training more easier to manage. When organizational structure regulates the flow of
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information, then changes within that information are easier to monitor and better adaptable
for a companywide training program. When a defined hierarchy is in place, the company will
be equipped to make important decisions and adjust practices to meet the demands of
customers. (Arnold Anderson, n.d)

The different types of structures will be reviewed in detail from different type of
organization to differentiate their functions, how they maintain and perform their tasks, and
how do they preserve their organizational structure.

2.0: FINDINGS
2.1: Functional Structure

BASF Petronas Chemicals Sdn Bhd is a joint venture between BASF SE of Germany;
one of the worlds largest chemical companies, and Malaysias state owned by Petroleum
Corporation Petroliam Nasional Berhad (PETRONAS). At BASF, they adopt the functional
organization structure, enabling specialists to focus on their respective areas. Below is the
organizational structure of BASF Petronas. (www.basf-petronas.com.my)

MANAGING DIRECTOR

BUSINESS
MANAGEMENT

1. Strategic
Marketing
2. Marketing
Operations
3. Logictics

CORPORATE
FUNCTIONS

HUMAN RESOURCE
MANAGEMENT

1. Finance &
Marketing
2. IT / IS
3. Procurement

1. HR Planning,
Recruitment,
Employee
Relations, Security
& Administration
2. HR Development
& Communication
3. Remuneration
Management

OPERATIONS

1. Acrylics Complex
2. BDO Complex
3. OXO Complex
4. Technical Competence
5. Port Tank Farm
6. Health, Safety &
Environment
7. Waste Water
Treatment
8. Quality Management

Source: http://www.basf-petronas.com.my/corporate/overview/index.asp

From the structure above, the employees are working in division and departments
based on what they are doing. BASF organizational structure is segmented by key functions
such as Business Management Division, Corporate Functions Division, Human Resource
Management and Operations Division which are controlled and coordinated from the top level
management which is the Managing Director. Within each division, activities are
departmentalized into sub departments. For example, Corporate Functions division comprise
Finance and Accounting, IT/IS and Procurement departments.
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Each department has their individual tasks and responsibilities. For example, under
Business Management Division, the Strategic Marketing department is involved in developing
and implementing of the companys regional strategies, marketing department is responsible
to project BASF PETRONAS Chemicals manufactured products to the world. On the other
function, Logistics department manages the incoming orders from customers, materials
management, order processing, and transport arrangement via sea or land as well as the
preparation of necessary documentations.

The cross functional bonds forge and strengthened between the respective departments
which have led to their effectiveness and success. Like inter connected emphases, all
departments works as a team, supporting each other, and shaping ahead together to achieve
the companys targets and objectives. For example, the Logistics department works very
closely with all the other divisions, particularly the Marketing Operations department to
realize their target in providing the best logistics solutions to their customers.

The structure that BASF uses has efficient specialization of labor and fairly easy for
employees to follow. For example, in Corporate Functions division, there are three separate
departments with the specialize personnel, for Finance and Accounting, the staff has
accounting background and will it will be easy for them to control their department because
they are specialize on that department. Each individual in that department has the same
working experiences or training, communication and coordination; thereby it reduces
problems for BASF management. In addition, their functional structure reduces duplication
of work because responsibilities are clearly defined on a company-wide basis.

The advantages of the practicing the structure above are; the chain of command is
direct and comprehensive. The human resource abilities are constantly developed by
concentrated training, leadership and guidance. Moreover, it provides an easy path for the
employees to grow within the organization sideways as well as upwards in the organizational
tree.

2.2: Product Structure

UMW Corporation Sdn Bhd is a leading industrial enterprise with diverse and global
interests in the automotive, equipment, manufacturing and engineering, and oil and gas
industry. Their organization structure comprises of the four strategic business units above.
Under Automotive, they manufacture, assemble market and distribute Toyota vehicles, Lexus
cars, Hino and Daihatsu commercial vehicles. Equipment such as marine engine, material
handling and compressed air are being supplied by UMW. Under Manufacturing and
Engineering, they also manufacture high quality shock absorbers and hydraulic power
steering pumps and systems. UMW had established the Oil and Gas division which comprises
of manufacture of oil country tubular goods and line pipes, oil and gas exploration operations,
fabrication of oil and gas, provision of oilfield services, supply of oilfield products. Below is
the organizational structure by product wise of UMW. (www.umw.com.my)

UMW CEO

AUTOMOTIVE

EQUIPMENT

MANUFACTURING
& ENGINEERING

OIL & GAS

Source: http://www.umw.com.my/ourbusiness/productsandservices/Pages/default.aspx
UMWs employees are based on the product structure, by contrast, breaking the
organization down to semiautonomous departments based on the products. Each products
division has its own functional units such as operations, finance, and marketing departments
each with the responsibility of producing and marketing the products.

The purpose of UMW using the above product structure because; it allows the
managers and employees to develop their experience and expertise that are related to the
overall activity of the product. Active relationships between different specializations provide
UMW employees with opportunities to learn new skills outside their own area of proficiency.
It is easier to understand the dynamics of a product. Besides that, top management will be
able to evaluate the work performance of each work unit in the product department structure
and enables the management to incentivize the employees efforts.

UMW works together in their respective division to ensure that the automotive
vehicles and equipment they manufacture and assemble are being distributed to customers
around the world with unmatched quality and service. Different divisions concentrate on the
particular product and use their specialize knowledge of the products and customer needs to
support the sales and promotional efforts.

Furthermore, the structure above provides clear relationship between the expenses and
profit of the respective product division. UMW able to formulate their business objective of
each product division clearly and all the expectations can be better agreed. By combining
decision making for all functions within a single product division, UMW can coordinate
better with every department.

2.3: Geographic Structure

McDonald is the leading global food service retailer with more than 33,000 local
restaurants serving nearly 68 million of people in 119 countries every day
(www.McDonalds.com). Their most important strategic approach for maintaining their
leading position is to keep their major markets and expand their business into the other
emerging markets. McDonalds business structure is based on the geographic structure. The
structure is divided into five geographical divisions which comprise as below:

MCDONALD
UNITED
STATES

EUROPE

ASIA PACIFIC,
MIDDLE EAST,
AFRICA

LATIN
AMERICA

CANADA

Source: www.mcdonalds.com

The geographical structure above represents from each functional into units formed to
serve a specific region. The President of geographic division of McDonalds is required to
wholly response for producing and marketing their products in that region because different
customer groups in different regions may have different tastes or requirements. The
employees of McDonalds have the abilities to react with speed and efficiency to the
requirement of specific region within the scope of responsibilities of the department. Through
this regional structure, McDonalds must not only satisfy the local customers needs in
different geographical areas, but also had to pursue maximum local development (Jing Han,
2008).

Tracking the performance of each individual markets and work group is simplified
under this geographical structure. For example, revenues, profit margins, costing and
performance of every employee can be identified to specific geographical areas. The top

management of McDonald will be to view the performance of each region effectively.

Besides that, top management also have an invaluable strategic resources in their local
management talents where local managers from various departments can be consulted when
making decisions, such as which new product to be introduced to the market, where to
conduct research, and on which products to focus in different regions. McDonald groups their
employees by regional wise to encourage the structure to be strong, collaborative teams will
work well together to involve in planning and decision making together and understand each
others personalities and work styles. Through this, the employees will be able to adapt to
changes in divisional goals and process and can bring everyone on board with new strategic
initiatives (Jing Han, 2008)

Each region of McDonalds focuses all functions area which allows each department
to operate with correctness: product features can be improved to suit the local market, work
place policies can be improved to fit local workers, marketing can be personalized to the
specific market, sales practices can stay within traditionally acceptable borders, and pricing
scheme can fit local market. For example, by implementing the geographical structure above,
the customer service quality had enhanced so that it will be easy when they speck with the
local customers who fully understands their language and confident expressions.

2.4: Matrix Structure

Bayer AG is a global enterprise with core competencies in the fields of health care,
nutrition and high-tech materials. The companys products and services are designed to
benefit customer and improve their quality of life. At the same time Bayer creates value
through innovation, growth and high earning power (www.bayer.com). Below is the
organization chart for Bayer AG:

BAYER AG

EXECUTIVE
COMMITTEE

HEALTHCARE

CROPSCIENCE

MATERIAL
SCIENCE

BUSSINESS
SERVICE

TECHNOLOGY
SERVICES

OPERATIONS
FINANCIAL OFFICER
HUMAN RESOURCE

MARKETING

Source: http://www.bayer.com/en/Profile-and-Organisation.aspx

The matrix structure above is combined of product and functional structures. Bayer
organizes part of the organization along product and part of it around functional lines to get
the advantages of both. Bayer had chosen matrix organization structure to achieve their
companys goal and objectives. They allocated all of their products into six groups which
comprises of healthcare, crop science, material science, business service, technology service
an currenta. Each of the administrative functions such as human resource, marketing, finance
was regroup based on the product wise (Dave Mote, n.d).

The teams are liquid and the specialists can be exchanged between products. By this, it
provides career growth and increase f specialization skills between the team members. Bayer
uses the above structure because it is flatter and more responsive than other types of structure
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CURRENTA

because they allow more efficient exchanges of information and knowledge. The staff from
different products departments are cooperating very closely, they are eager to share data that
will help them achieve the companys common goals. Thus, the entire organization becomes
an information web where the data is routed both vertically and horizontally as staffs
exchange their technical knowledge, marketing data, product ideas, functional information to
make proper decisions.

Furthermore, the usage of the above structure results in speed and flexibility. It may
result in more efficient use of the resources than other organization structure. This happens
because all the departments are sharing the highly skilled employees and equipment. For
example, if the finance officer is needed in another department, he or she can move to that
department to solve the problems.
In addition, Bayers staff will have better intra-team communication, because the
presence of dual chain of command results in better communication between both product and
functional groups across the same product and products groups within the same function. It
also improved motivation results from decision making within groups became more
democratic because the staff brings specialized knowledge to exchange with the other staffs.

Not only matrix structure allowed Bayer to move towards its primary goals, but it had
the added benefits of increasing its awareness to change and emerging opportunities and
helping Bayer to streamline plant administration and service division activities (Dave Mote,
n.d)

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3.0: CONCLUSION

An organization needs to be structured in the best possible way to promote efficiency

and effectiveness of activities. Each of the organizational structure has its advantages and
disadvantages. Whether a company is in the process of starting up or restructuring their
organizational structure, it is important to look at each type and determine what structure is
the best to suit the companys needs. A clear organizational structure is important in any
business; it will make sure that employees know what they are performing. Organizational
structure is very important in achieving the companys goals and results. Organizational
structure enables to the distribution of authority. For example, when a person starts a job, that
person will know to whom he should report to.

There are three major types of organizational structure used in business: functional
structure, divisional structure and matrix structure. For a functional structure, employees are
assigned to departments based on the function of their job. This structure highlights the
experiences of each area. For example, employees can exchange information and support each
other because they are working in the same department. (www.project-managementcourse.info)

For divisional structure type, there are three types of division which are products,
customers and geographical. Each of these divisions is responsible for handling tasks related
with products and resources used to support them. These divisions are in charge of
maintenance, supply chain management, marketing and finance. This type of structure is
flexible and has quick respond to the environmental changes. It encourages differential
strategies and innovation. The divisions functions like small companies.

Lastly is the matrix organizational structure which combines the other two
organizational structure types. Employers who are working under this kind of structure, they
have to report to two different managers. It is difficult to implement this structure because of
the intricacies involved with having two different authority personnel in charge. Anyhow, this
structure is helpful for companies that operate on a multinational level.
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4.0: REFERENCES

1. Rick Suttle. The Importance of Organizational Structure. (Online). Available:

http://smallbusiness.chron.com/importance-organizational-structure-2783.html
(2012,March 15)

2. Jing Han. The Business Strategy of McDonalds. International Journal of Business and
Management. (Online). Available: www.ccsenet.org/journal.html (2012,March 01)
3. BASF PETRONAS: http://www.basf-petronas.com.my/corporate/overview/index.asp
4. UMW Corporation Sdn Bhd:
http://www.umw.com.my/ourbusiness/productsandservices/Pages/default.aspx
5. McDonalds: www.mcdonalds.com
6. Bayer AG: http://www.bayer.com/en/Profile-and-Organisation.aspx
7. Arnold Anderson. The Advantages of an Organizational Structure. (Online).
Available: http://smallbusiness.chron.com/advantages-organizational-structure884.html (2012,March 15)
8. Hiriyappa B. (2009). Organization Behavior. New Age International. In Ebrary
Electronic Books. (OUM Digital Collection).

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