Companies today set up their organization structure based on their mission, goal and objectives. An organization can increase revenues and widen their profits margin if they select organization structures that match the needs of their operations. There many types of organization structures that exist today with the common ones been divisional, functional and matrix.
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Woolworth’s organization structure
Woolworths limited, founded by Percy Christmas in 1924, is a multinational retail store business with over 1000 stores worldwide. Woolworth’s main idea was to introduce retail stores operating on low based prices, selling quality products. Its business activities focus on refreshing their products and business operations (James and Allan, 2007). Woolworths is a public incorporated organization and currently has a matrix organization structure.
A matrix structure is defined as an organization design that divides employees of the organization by function and product or division (Alexis, 2009). This is a flat based model suitable for multinational companies that have more than one product and have many branches. Such a structure differentiates the functions of each division and sets how to accomplish the set goals. Under this structure each functional worker reports under the functional head, while the head reports to the overall manager. Woolworths operates within here levels of management; top, middle and supervisory (Alexis, 2009). The hierarchy begins with the CEO at the top level, followed by the store manager at the middle level then the store supervisor at the supervisory level. The structure was designed to suit Woolworth’s operations considering its broad and varying range of activities.
This type of structure is different from other structures because it is a hybrid of divisional and functional structure. Divisional structure is a type of organization design used by companies that operate separate smaller organizations within the umbrella group to cover different type of products in the market (Kimberly, 2006). This structure is efficient in such a scenario because it provides ease of communication eradicating any form of bureaucracy. Operating different business in a wide geographic area requires rapid response from each division. This structure has two levels of management where there is the overall CEO and the second level is the regional manager who run the business in different geographic areas.
The functional structure on the other hand is an organization design for small organizations (Alexis, 2009). Under this structure grouping is done based on department function. This design works very well for small business, because the worker’s talent and knowledge of its workers is self reliant. There are also two levels of management in this type of structure. The top level belongs to the executive officer, while the middle level goes to head of departments (Alexis, 2009).
Woolworths took into consideration a number of factors while choosing its organization structure. The right organization design has always been an important consideration for the organization, because Woolworths believes the right people system is the key to tremendous growth. The first was the size of the organization; Woolworths has more than 1000 retail stores worldwide which also attract a huge number of employees, department stores and output levels. Matrix structure would plays as a plus because it provides an opportunity for the retail stores to run independently because each store has functional workers reporting to functional heads (Alexis, 2009).
Function is another factor the chain stores had to put into consideration. Woolworths has various processes and each division has its role (Daft and Murphy, 2010). The marketing, finance, R&D and supply and procurement department each hold different functions. Each of these functions has to run to serve all the different stores, in different locations.
Woolworths adopted the matrix structure because of its geographical cover. Woolworths covers a wide location and would require such a design to have all stores run efficiently. Each sore has a store manager and supervisor in charge of the store (Daft and Murphy, 2010). Distribution of products, staffing and accounting was fully considered. The consumer needs were also put into account before making an optimal choice. Woolworth’s main target clients were people looking for quality low based price products. The structure covers function and division ensuring the needs of their customer are always met.
Woolworths picked a structure in line with their cost leadership strategy thanks to the good relationship with suppliers over the years. It is now possible for Woolworths to acquire supplies at a good price without compromising quality. This means the company is able to sell their products at a lower price attaining a competitive advantage (Kimberly, 2006). The matrix structure keeps a low budget when staffing and adopts an efficient production process. The matrix structure brings out the differentiation strategy that is although all stores are under Woolworth they carry an independent image. This allows the different stores to be competitors leading to increase in revenue. Woolworths gives the each store the freedom to come up with policies that improves its revenues and customer service.
The market segment target counts a lot when choosing an organization structure. Woolworths has many competitor which means they have to compete for a reasonable market share. The company structured a dual management to allow the functional and divisional team to come up with different strategies to ensure customer loyalty. The company depends on the management level to come up with policies that ensure customer satisfaction hence loyalty while the rest of the staff ensure they implement the set policies put in place to increase revenues.
As much as Woolworths selected an organization structure that suits their operation needs there are a few considerations that the company could think of to improve their services and increase revenues. The stores need to incorporate latest technologies to their structure to provide higher levels of reliability and performance (James and Allan, 2007). Woolworths runs an online store that allows buyers to order products online however their systems are not well defined in their structure, leaving a gap on network structure.
The introduction of new technology according to James and Allan (2007) requires the organization structure has to be altered to remain relevant. Employees for one have to go through training process to promote the new installed system and newly acquired positions. Sometimes the company has to go through a shuffle to ensure each functional worker is in line with the job allocated.
The modern matrix structure should always be refreshed and improved from the three levels of management. This should be carried out by professionals and consultants because it could impact greatly business operations and worker’s attitude (James and Allan, 2007). Woolworths needs to implement constant reviews in its structure to ensure that it plays an effective and efficient role in the organization.
The use of a matrix structure is feasible in organizations that operate in wide geographic areas and sell a range of products. A matrix structure is essential in a dynamic and uncertain environment that attracts a lot of competition. Woolworths is able to recognize best practices and sustainable approaches that drive an organization structure. Their chosen structure decentralizes decision making promoting profits both short and long term.
Alexis, W. (2009) Different types of organizational structure. Demand media. Retrieved on May 18, 2012 from
Daft, L. R and Murphy, H. V. (2010). Organization theory and design. New Jersey, Cengage learning EMEA.
James, L. R and Allan, P. J. (2007) Organizational structure: a review of structural dimensions and their conceptual relationships with individual attitudes and behavior. Organizational behavior and performance, 16: P. 74-77
Kimberly, J. R (2006) Organizational size and the structuralist perspective: a review critique and proposal. Administrative science quarterly, 21: 1448-1458