Comparison of Functional and Divisional Organizational Structure Essay

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1.1 Compare and contrast Gregg’s organisational structure and culture with another organisation of your choice

The two businesses’ which I will be comparing include; Greggs PLC (public limited company), which utilises the “divisional structure” (bakeryinfo.co.uk, 2008) and Tesco’s PLC (public limited company), which utilises the “functional structure”.
Functional – The functional structure is an organisational structure type which sees the business’s employees’ grouped depending on their hierarchical rank within the business, said employees will be managed via strict lines of authority, and everyone within the business will ultimately report to a single person, typically the CEO (chief executive officer). A business which uses the functional structure is set up as to allow each portion of the business to be grouped into departments according to their purpose, for example, with the functional structure; a business would have a department for production, human resources, and sales (businessdictionary.com, n.d).
Divisional – The divisional structure is an organisational structure type which organises business activity around geographical, market, or product and service groups; the aforementioned groups encompass the business’s employees whom are responsible and are specialised for such tasks, for example, with the divisional structure, a business would have an EU division as well as a US division. With the divisional structure, each group contains a set of functions, meaning both the EU and US divisions would handle their own marketing, sales, and production. The divisional structure is best suited for larger businesses as the divisional structure is specifically there for businesses which operate in many markets and in many different countries, the fact that each division handles its own affairs independently from the other divisions is beneficial since local conditions may change without warning (businessdictionary.com, n.d).
(Writing, n.d)

Greggs uses the divisional organisational structure, whereas Tesco’s uses the functional organisational structure; this means that Tesco’s is clearly the less responsive and significantly more rigid in the way in the daily operations of the business; this is because of the bureaucratic nature of the functional structure, more specifically, it’s because of the management hierarchy of the vertical structure, the vertical structure leads to an established, and often times, overpowering bureaucratic system, bureaucracy is present in each business structure, but it has the biggest presence within the functional structure (businessdictionary.com, n.d); bureaucracies in business prevent innovation, avert adaptability, and prevent responsiveness, the aforementioned lead to a significantly more rigid means of operating a business. Greggs avoids much of the bureaucracy associated with Tesco’s and the functional structure by organising their employees around an accepted market focus, as opposed to Tesco’s, which organises their employees around certain hierarchical rankings; this greatly increases the Greggs responsiveness. The management focus is another way in which these two organisational structures differ; Greggs and the divisional structure allows each division to operate with a significant degree of autonomy, with each division being referred to as SBUs (strategic business units (businessdictionary.com, n.d), the SBUs are managed by middle management at Greggs, with the upper management simply overseeing the overall running of the business; this differs greatly from Tesco’s approach which sees upper management in complete control. Interdepartmental coordination may be an issue which arises within a business, especially for businesses like Tesco’s which operate under the functional structure, this is because with the functional structure, the business’s employees are segregated based on hierarchal rank, meaning, the employees may not fully understand the issues affecting other departmental
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