5CO01 – Organisational Performance and Culture in Practice

Introduction

This report covers the role of organisational culture and structure in a firm’s performance. The discussion uses literature, examples, and hypothetical situations. Areas included in the discussion are different organisational structures, the importance of strategies, and external factors impacting companies.  

AC 1.1: Evaluate the advantages and disadvantages of different types of organisation structures, including the reasons underpinning them.

Definition of the Term

An organisational structure refers to how the flow of activities, resources, and decisions is organised (Nene and Pillay, 2019). It is also a highlight of how power flows between various organisational levels. There are several types of organisational structures, which include;

Divisional Organisational Structure

A divisional structure is one where business activities are distinguished based on various elements, including markets, services, products, and geographical locations. In every division, it function as a semi-autonomous aspect with its equipped functions and resources (Achcaoucaou et al., 2009). An example of a company that applies divisional structure is McDonald’s which is mainly founded on geographical regions, such as international markets. McDonald’s has focused on adapting its strategies and products to various markets and needs.

The advantages of a divisional structure include promoting adaptability and flexibility, fostering innovation, and ensuring products and services that are targeted to particular customers and their retention (Dubey and Singhal, 2016). The disadvantages include high probability of duplicating resources, potential unhealthy competition, and difficulty in maintaining a company culture that is consistent.

The reasons for choosing this structure include the need to ensure that there are products and services to meet particular regions, markets, and products; thus, fostering agility and efficiency and ensuring that the teams or divisions are autonomous.

Matrix Organisational Structure

In this type of a structure, it is characterised by combined divisional and functional structure. The implications of the two structures are that the workforce will report to at least two bosses or employees (Saunila et al., 2014). One of them will be the functional areas, such as finance and the other will be for the project or product. An example of a company with matrix structure is Caterpillar, Nike, and Philips.

The pros of a matrix structure include promoting cross-disciplinary collaboration, allowing for shared competencies and expertise throughout the firm, and enhancing innovation (Nannoolal, 2015). The cons include the need for clear working governance and being characterised by internal tensions and conflicts in priorities.

The reasons for choosing a matrix structure include ensuring that there is accountability at the workforce and that there is enhanced collaboration between various professionals.  

Judgement

The final judgement about organisational structures is that companies should select structures that suit their needs and those that enhance their performance.

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AC 1.2: Analyse connections between strategy, products, services, and customers.

An organisational strategy refers to a plan or roadmap that highlight how the firm will allocate and utilise its resources to meet its goals and objectives (Mousa et al., 2021). The significance of an organisational strategy is that it enhances the company’s ability to compete in the set industry, achieve a competitive advantage, and ensure long-term success.

The connection between a company’s strategy, products, and services begins with assessing the customer diverse needs regarding the products and services. Taking an example of the automotive company, such as Toyota or Volkswagen, the leadership and management is continuously investing in research and development and innovation to develop automobiles and services that will meet the clients’ needs and preferences (Farida and Setiawan, 2022). To understand these needs and expectations, it is essential to consider their insights, which can be sourced from surveys and interviews. As a result, the human capital resources, which mainly include the knowledge and skills of the employees are utilised to develop innovative ideas about the automobiles.

Part of the organisational strategy is to allocate millions of resources ($) to developing new products that are in line with the current trends and practices. This becomes crucial in ensuring that the customers’ needs and preferences are met (Tsou and Chen, 2023). For example, when making luxury vehicles, companies, such as Volkswagen and BMW invest in trials and simulations to determine the degree of safety and comfort for their vehicles. Part of the strategic plan is to ensure that customer get access to the manufactured products with ease, which is achieved through an enhanced logistical procedure (Trzeciak et al., 2022). To ensure that there is continuity and certainty in the products and service development, it is essential to continuously monitor the services and products to examine if they are meeting the customers’ needs and preferences. The importance of the monitoring and evaluation is to identify areas of improvement, which should be in line with the current trends and market needs.

The benefits of an effective connection between strategy, products, services, and customers are that clients get motivated and satisfied, which also results in their retention and improves the firm’s brand name and image (Mutambo et al., 2022). However, there are challenges, which include the costs of implementing the strategies and the time it takes to ensure an effective strategic plan that will meet customer needs.

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AC 1.3: Analyse external factors and trends impacting organisations.

There are several factors that impact companies and they can be categorised into internal and external. To understand the external factors, it is essential to consider various tools and frameworks, including PESTLE, which represents the political, economic, social, technological, legal, and environmental elements (Eierle et al., 2022). Three external elements include;

Interest Rates

These are the percentage of an interest that a borrower charges. The interest rates are relative to the principal amount (Mazikana, 2023). The assets that attract an interest rate include vehicles, houses, and consumer goods. The impacts of interest rates to organisations is that they determine the actual purchasing power of an investment. A high interest rate means that individuals will find it challenging to take the loans and even if they do, they will not have resources for other commodities. Companies in the automotive sector will find it challenging to attract and retain customers when the vehicles have a high interest rate.

The priority from interest rates is for a company to consider cost leadership strategies that will be aligned with the degree of interest rates (Kinowska and Sienkiewicz, 2023). Companies can consider having diverse products and services with different prices to meet different consumer needs and demands.

Inflation Rates

These are the changes in prices over time. Inflation rates also cover the economic element of the PESTLE analysis. The uses of inflation rates are determining the country’s cost of living and value of money (Belanova, 2023). In a high inflation rate, the implications are that the company will not have sufficient resources for luxury products and services. The downside are that inflation rates reduce the population’s purchasing power.

The priority stemming from inflation rates is that companies should consider a wide range of approaches to attract and retain customers (Markerink, 2023). An example is an automotive company having discount programs and purchasing plans for the vehicles.

Changing Demographics

This is a social and cultural element in PESTLE analysis and covers the different ages, gender, race, and ethnicities in the market (Amin et al., 2025). A dynamic environment with varying demographics is further defined by customers having different needs and expectations about the products and services. For example, in the automotive industry, there are those interested in luxury units and others are interested in family vehicles. The challenging side of changing demographics is the difficulty in ensuring that all customers and clients have their needs met.

The organisational priority is to ensure that customers have a wide range of products and services, which is accomplished through diverse products and services (Yeniaras and Kaya, 2022). Although this is costly, it will ensure that competitive advantage and attracting and retaining a wide range of customers.

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AC 1.4: Assess the scale of technology within organisations and how it impacts work.

AC 2.1: Explain theories and models which examine organisational culture and human behaviour.

AC 2.2: Assess how people practices impact on organisational culture and behaviour.

AC 2.3: Explain different approaches to managing change.

AC 2.4: Discuss models for how change is experienced.

AC 2.5: Assess the importance of well-being at work and the different factors which impact well-being.

AC 3.1: Discuss the links between the employee lifecycle and different people practice roles.

AC 3.2: Analyse how people practice connects with other areas of an organisation and supports wider people and organisational strategies.

AC 3.3: Discuss processes for consulting and engaging with internal customers to understand their needs.

References

Achcaoucaou, F., Bernardo, M., & Castan, J. M. (2009). Determinants of organisational structures: an empirical study. Review of International Comparative Management, 10(3), 566-577.

Amin, S. M., El‐Gazar, H. E., Zoromba, M. A., El‐Sayed, M. M., & Atta, M. H. R. (2025). Sentiment of nurses towards artificial intelligence and resistance to change in healthcare organisations: A mixed‐method study. Journal of Advanced Nursing, 81(4), 2087-2098.

Belanová, K. (2023). How increased inflation affects businesses. SAR Journal-Science and Research, 6(1), 3-8.

Dubey, A., & Singhal, A. K. (2016). Role of organisational structure in empolyee's empowerment. International Journal of Education and Management Studies, 6(1), 110.

Eierle, B., Hartlieb, S., Hay, D. C., Niemi, L., & Ojala, H. (2022). External factors and the pricing of audit services: A systematic review of the archival literature using a PESTLE analysis. Auditing: A Journal of Practice & Theory, 41(3), 95-119.

Farida, I., & Setiawan, D. (2022). Business strategies and competitive advantage: the role of performance and innovation. Journal of Open Innovation: Technology, Market, and Complexity, 8(3), 163.

Kinowska, H., & Sienkiewicz, Ł. J. (2023). Influence of algorithmic management practices on workplace well-being–evidence from European organisations. Information Technology & People, 36(8), 21-42.

Markerink, K. (2023). The benefits, antecedents, and the impact of inflation on preferred customer status: A case study at a tourism company and two of its key suppliers (Bachelor's thesis, University of Twente).

Mazikana, A. T. (2023). How inflation, GDP growth, unemployment, interest rates and exchange rates affect an organisation. GDP Growth, Unemployment, Interest Rates and Exchange Rates Affect An Organisation (March 4, 2023).

Mousa, M., Boyle, J., Skouteris, H., Mullins, A. K., Currie, G., Riach, K., & Teede, H. J. (2021). Advancing women in healthcare leadership: a systematic review and meta-synthesis of multi-sector evidence on organisational interventions. EClinicalMedicine, 39.

Mutambo, N., Mwange, A., Manda, R., Chiseyeng’i, J., Mashiri, G., & Bwalya, J. (2022). Principles and practices of strategy for effective and efficient performance of business organisations. European Journal of Business and Management, 14(14), 52-68.

Nannoolal, S. (2015). Impact of organisational structure on evidence-based decision making: The matrix versus hierarchical (Master's thesis, University of Pretoria (South Africa).

Nene, S. W., & Pillay, A. S. (2019). An investigation of the impact of organisational structure on organisational performance. Financial Risk and Management Reviews, 5(1), 10-24.

Saunila, M., Mäkimattila, M., & Salminen, J. (2014). Matrix structure for supporting organisational innovation capability. International Journal of Business Innovation and Research, 8(1), 20-35.

Trzeciak, M., Kopec, T. P., & Kwilinski, A. (2022). Constructs of project programme management supporting open innovation at the strategic level of the organisation. Journal of Open Innovation: Technology, Market, and Complexity, 8(1), 58.

Tsou, H. T., & Chen, J. S. (2023). How does digital technology usage benefit firm performance? Digital transformation strategy and organisational innovation as mediators. Technology Analysis & Strategic Management, 35(9), 1114-1127.

Yeniaras, V., & Kaya, I. (2022). Customer prioritization, product complexity and business ties: implications for job stress and customer service performance. Journal of Business & Industrial Marketing, 37(2), 417-432.

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