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hybrid 
structures.
Functional organisation 
involves grouping together people who do similar tasks. Primary functions in a 
manufacturing company might be production, sales, finance and general administration. Sub-
departments of marketing might be market research, advertising, PR, and so on. 
Advantages
include: 
(a) 
Expertise is pooled 
thanks to the division of work into specialist areas. 
(b) It 
avoids duplication
(eg one management accounts department rather than several) and enables 
economies of scale. 
(c) It 
facilitates 
the recruitment, management and development of functional specialists. 
(d) It 
suits 
centralised
businesses. 
Disadvantages
include: 
(a) 
It focuses on internal 
processes 
and 
inputs
, rather than the 
customer 
and 
outputs
, which are 
what ultimately drive a business. Inward-looking businesses are less able to adapt to changing 
demands. 
(b) 
Communication problems 
may arise between different functions, which each have their own 
jargon. 
 EXAM FOCUS POINT 
There is an articles on the ACCA website entitled “Mintzberg’s theory on organisations” and 
“Organisations” that are relevant to material in this section. 
BPP Tutor Toolkit Copy

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CHAPTER 5
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BUSINESS ORGANISATION, STRUCTURE AND STRATEGY 
 
129 
(c)
 Poor 
co-ordination
, especially if rooted in a tall organisation structure. Decisions by one 
function/department involving another might have to be referred upwards, and dealt with at a 
higher level, thereby increasing the burdens on senior management. 
(d) Functional 
structures 
create