## Organisational Structures in Strategy Implementation

Structure must follow strategy. The right organisational structure is a key enabler of successful strategy execution.

---

## 1. Functional Structure

Groups employees by business function (Finance, Marketing, Operations, HR, etc.)
Suitable for small to medium firms with limited product lines and a single business domain.
Encourages specialisation and efficiency within each function.

Typical layout for a telecom firm:

```

CEO

├── Accounts / Finance

├── Administration

├── Marketing & Sales

│ ├── Customer Creation

│ ├── After-Sales Service

│ └── Vendor Coordination

└── Network Operations

```

---

## 2. Strategic Business Unit (SBU) Structure

Used by very large organisations with diverse products, services, or geographic markets.
Each SBU operates as a separate business with its own mission, objectives, competitors, and strategy.
The top corporate officer delegates day-to-day operations and business unit strategy to SBU CEOs.
Becomes imperative when an organisation increases in number, size, and diversity.

Key attributes:

1. Scientific method of grouping businesses for strategic planning — removes vagueness and confusion.

2. Products/businesses related by function are assembled into one SBU; unrelated ones are separated.

3. Each SBU has a distinct set of competitors and a distinct strategy.

4. The SBU CEO is responsible for strategic planning and profit performance.

5. Products within an SBU receive the same strategic planning priorities.

6. Improvement over simple territorial grouping of businesses.

---

## 3. Network Structure

A newer, more radical design where the company outsources major activities and focuses on core competencies.
Business functions are scattered worldwide; a small headquarters coordinates independent business units digitally.

When to use:

Unstable environment with high uncertainty.
Strong need for innovation and quick response.
Customer tastes changing very fast.
Dense competitive pressure requiring flexibility.

Key features:

Unbundling and disintegrating in-house business functions.
Relying on outside vendors for most activities.
HQ connected to independent units digitally (virtually).

Advantages: Flexibility, cost reduction, access to best-in-class external capabilities.

Disadvantages: Loss of direct control, coordination challenges across vendors, dependency risk, potential quality inconsistency.

Worked example

### Example 1

Manoj's Telecom Business (Functional Structure): Manoj started a telecom business in 2010 and hired 50 people across accounts, administration, sales, after-sales service, and vendor coordination. The appropriate structure is a Functional Structure because the business is a single-domain telecom company and activities naturally cluster by function. Each department (Finance, Admin, Marketing/Sales, Network Operations) specialises in its own area.

### Example 2

CDE Ltd. / PQR Ltd. (SBU Structure): CDE Ltd. split into four streams — FMCG, E-commerce, Retail, and R&D. Each stream operates as a separate business with delegated responsibility. This is the SBU structure because the four units are diverse enough to warrant separate missions, competitor sets, and strategies. The corporate officer retains oversight while SBU managers handle strategy and operations.

### Example 3

Samar Electronics / LMN Ltd. / MTS Ltd. (Network Structure): Samar Electronics, hit by pandemic, outsourced manufacturing, distribution, and after-sales service. Its small HQ now coordinates scattered independent business units digitally. MTS Ltd., facing unstable markets and fast-changing customer preferences, is moving toward outsourcing major activities and retaining only core competencies. Both represent transition to a Network Structure — appropriate when flexibility and speed outweigh the need for in-house control.

⚠️ Common exam mistakes

Confusing SBU structure with a simple divisional structure — SBU grouping is based on strategic similarity of products/markets, not just administrative convenience.
Saying SBU structure is suitable for small companies — it is specifically designed for very large, diverse organisations.
Forgetting that in an SBU structure, unrelated products must be put into separate SBUs, not bundled together.
Describing Network Structure as merely 'outsourcing' without mentioning the digital coordination of independent units by a small HQ.
Not linking the choice of structure to environmental conditions — Functional suits stable single-domain firms; SBU suits large diverse firms; Network suits volatile, fast-changing environments.

Reference:

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Organisational Structures: Functional, SBU, and Network

Worked example

⚠️ Common exam mistakes