A business is normally organised by its functions, e.g. marketing
department, accounts department and so on. This is because being grouped
together allows the functions to benefit from specialisation and division of
labour. This leads to lower unit costs and a greater efficiency. However it
can mean that there is departmental rivalry

Larger businesses might have a number of businesses within the whole
company. This would be coordinated by a Head Office, where all the major
decisions are made.

Other ways of organising the business could be more appropriate for
different types of businesses:

Product - the functions are organised around the product - so at a business
like ICI, who are the UK's leading chemical manufacturer, a product manager
would have a team of functions who would answer to them, like accounting,
marketing and production

Geographical - a hierarchy might be split according to different places that
the product is sold into - for instance a business may have a Far Eastern
division of its business, which would take into account the different
cultural and supply differences of the region

Market - the organisation is based on market segments - so an airline
business like British Airways could concentrate on long haul, short haul,
holiday makers, business clients and freight

A business whose decision-making comes from one place only is known as a
centralised organisation. Normally Head Office will decide on the major
elements of strategy, no matter where the manufacturing plants and sales
teams are positioned around the country or globe. This means that there are
good opportunities for economies of scale.

Other businesses, especially multinationals (see below) will opt for a more
decentralised organisation - where the individual businesses within the
whole company group, make decisions for themselves. This means that there is
more opportunity to react to the changing marketplace (one of the advantages
of a small firm). However there is a possibility that these businesses (who
may well be in different parts of the world) might be duplicating research
or not bargaining in such as strong position as a bigger overall company.

When a business reaches a certain size then it might split into different
departments. These departments will specialise, employing people with
expertise in these areas.

The main departments in a business might be:

Department
Role

Accounts
Provides a detailed record of the money coming in and going out of the
business and prepares accounts as a basis for financial decisions

Human Resources or Personnel
Deals with all the recruitment, training, health and safety and pay
negotiations with unions/workers

Production
Makes sure that the production plans are met on time and products of the
right quality are produced

Purchasing
Buys all the raw materials and goods required for production

Sales and marketing
Sales function deals with all aspects of selling to customers; the
marketing function carries out marketing research, organises advertising and
product promotion