Organizational structures arrange business activities by departmentalising company operations. Departmentalisation establishes individual departments that derive from a company's organizational structure. Organizational structures may establish company departments based on the business activities that a department performs, individual products or services, consumer groups or geographic regions. Additionally, some companies adopt hybrid organizational structures that combine two or more traditional organizational models.
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Companies use a functional organizational structure to establish distinct departments according to the function of that department. Each department is a unit that is responsible for specific business functions or contributing specialised expertise. For example, this organizational structure may establish departments in a company by assigning one of either accounting, marketing or administrative functions to each department.
Companies use product-oriented organizational structures to establish departments according to the product that a department is responsible for. For example, a multimedia company may apply this organizational structure with individual departments that perform video authoring, audio recording, product design or web design services.
Customer-oriented organizational structures help companies to establish departments according to the type of customer that the department deals with. For example, an event production company may apply this organizational structure with individual departments that deal with weddings and private individuals, small business clients and large corporate clients.
Companies use geographic organizational structures to establish divisions according to the geographic area that each division is responsible for. For example, a cinema franchise may apply this organizational structure with individual divisions that are responsible for specific regions within a country such as northeastern, northwestern, southwestern, Midwestern and southern parts of the United States.
A matrix structure combines the functional organizational structure with other organizational models and establishes a hybrid organizational structure. For example, a national bank may apply this organizational structure with individual divisions that are responsible for major regions in the country, and apply a structure that establishes departments based on the function that each department performs.
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