Organizational Structure

Organizational Structure
Organizational structure refers to an established behavior within an
organization, which is defined by flow of authority, accountability, and
the relationship between the organization and its external environment
(Nagy, 2003). Organizational structure exceeds the organizational charts
in that it shows established pattern of jobs and groups of jobs
pertaining to operations and reporting relationships. The four
components that are mainly used to describe organizational structure
include organizational department, hierarchy of management, roles,
goals, and procedures, as well as temporary components such as task
forces and management committees. An appropriate organization structure
addresses both the business and human realities, which are the key
determinants of short-term and long-term success of the organization.
Different organizations design varying types of organizational structure
to address their own need and goals. Some organizations may design
centralized organizational structure while others may design a
decentralized one (Nagy, 2003). This paper will analyze the
organizational structure for Wal-Mart and compare it with organizational
structures of the Starbuck Coffee Company and Toyota Company and the
impact of organizational functions on the structure.
Wal-Mart organizational structure
Wal-Mart is a multinational retailer founded in America by Sam Walton in
1962. Currently, Wal-Mart is one of the leading private employers and
operates in 15 different countries with over 8,500 stores (Shreshtha,
2013). The main stores include the Wal-Mart stores U.S., Wal-Mart
discount stores, Wal-Mart neighborhood markets, and Wal-Mart
supercenters among others. Some of the key success factors for Wal-Mart
success include the selling of branded products at a lower price and
offering quality services to its customers in all outlets. Wal-Mart
utilizes two types of organizational structure, which include divisional
organizational structure and matrix organizational structure. The Key
divisions considered in the divisional structure include Wal-Mart
Realty, Wal-Mart International, Wal-Mart Specialty Stores, Sam’s Club,
and Super Centers. The company focuses on specialization where each
division is allocated with resources and given autonomy to manage
changes within the business environment it operates.
The management hierarchy is aligned with the divisional organizational
structure where the head office acts as the place for senior or
divisional vice president. The district managers have been replaced by
marketing managers per division, who manages about twelve to twenty
stores. The divisional structure has enabled the company to increase
its merchandising power in different market segments, which are located
more in economic landscapes than in physical geography. In addition, the
divisional organizational structure has allowed Wal-Mart to customize
its stores to meet the needs of local communities. The market segments
acts as the home for the market manager and merchandisers in the general
areas. All Wal-Mart stores have similar job descriptions, job
categories, and hierarchy. Each store is managed by the store manager
who is assisted by co-manager in case of large stores. The stores have
several assistant managers depending on size and head the management
trainees who are being prepared to take-up management assistant
positions. Below the management trainees are the hourly departmental
managers, hourly checkout supervisors, and Customer Service Managers.
Cashiers, stockers, and sales associates are at the lowest rank
(Shreshtha, 2013).
Matrix organizational structure is important for organizations that
focus on efficiency, innovation, and creativity as their key success
factors. Starbucks utilizes a matrix type of organizational structure to
manage its extensive market. The company does not operate with
departments or divisions, but focus on the hierarchy that is
accomplished by setting several levels of communication
responsibilities. This type of structure, which is operated in the four
divisions, assists Starbuck in maximizing its communication channels and
developing products that are more appealing to the target market. In
addition, the matrix type of organizational structure helps Starbuck in
ensuring a continuation of support functions, which facilitates sharing
of goals and vision in the international circuit.
The Toyota Company uses a flat organizational structure compared to
Wal-Mart, which uses a divisional type of organizational structure. The
flat type of organizational structure allows Toyota to pursue its
philosophy, which is to disperse responsibility to the lowest level.
Employees at Toyota are organized into groups and teams, which are
assigned three types of responsibilities support for operation,
promotion of the system, and leading change. The effectiveness of
leaders is based on key performance results including safety, quality,
productivity, and cost (Shreshtha, 2013).
Influence of organizational functions on Wal-Mart Organizational
Marketing, human resources, and operations are the major organizational
functions that influence the divisional type of organizational structure
adopted by Wal-Mart. Although functional structure is not the main focus
of Wal-Mart, the effect of organizational functions is inevitable
especially at divisional level. Wal-Mart operates in different regions,
which necessitates the use of marketing strategies that are suitable for
different market segments. This necessitates the appropriation of the
divisional organization structure so that each division can market
products and services using strategies that will enhance the competence
of the division. In addition, the use of varying marketing strategies
and autonomy of operations allows each division to assess customer
demands and monitor changes in their respective business environment.
Each of the Wal-Mart’s division acts as the home for the divisional
manager as well as other employees (Hiramalik, 2013). This selection of
human resource on the basis of their location necessitates the adoption
of divisional type of organizational structure because the workers
understand the business environment within their division.
Effect of organizational design on organizational structure
There are two key aspects of organizational design that affects
organizational structure. First, Wal-Mart operates as a multinational
company with departmental stores and warehouses (Hiramalik, 2013). This
organization of company into large stores that are further divided into
departments creates the need to manage the company using a divisional
type of organizational structure. The divisional structure makes it easy
to monitor the performance of each division and to succeed in
heterogeneous market segments by adapting to products and clients.
Secondly, the geographical structure of adopted by Wal-Mart necessitates
the utilization of the divisional type of organizational structure. This
is because Wal-Mart groups its employee’s in-terms of their
geographical location where each division is headed by divisional
manager, assisted by co-manager, assistant manager, trainee managers,
hourly staff, and cashiers (Shreshtha, 2013). Divisional organizational
structure facilitates high co-ordination between across functions and
decentralization of decision making.
Wal-Mart is one of the most successful retail firms in the world. The
divisional type of organizational structure has contributed to its
success as a result of increased customer satisfaction, decentralization
of decision making, and ability to adjust to changes in the business
environment. Organizational functions and organizational design of
Wal-Mart makes the divisional structure the most effective
organizational structure for the company. Divisional structure is more
appropriate to a multinational organization compared to flat type of
organizational structure (for case of Toyota) and matrix organizational
structure used by Starbuck. This is because divisional structure allows
the multinational company to exploit different market segment with
different needs and variations in the business environment.
Hiramalik, B. (2013). Wal-Mart. San Francisco: Scribd Incorporation.
Nagy, J. (2003). Organizational structure: What is right for your group?
Orono: The University of Maine.
Shreshtha, R. (2013). Wal-Mart Organizational structure and strategy.
San Francisco: Scribd Incorporation.

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