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The aim of organization theory is to explain the existence, the creation as well as the functioning of organizations (Harrison and Caron 2009). In doing this, the theory helps one to understand the structure of an organization and this includes things like differentiation, centralization, and formalization.

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The organizational structure adopted by a given company should enable the company to effectively achieve its strategies in order to gain a competitive edge (Harrison and Caron 2009). The organizational structure adopted will in turn provide a means through which the managers can coordinate activities of the divisions in the organization with the aim of fully exploiting their potential (Harrison and Caron 2009). Organizational strategies serve to determine the organizational structure adopted by a given organization.

This is because the structure adopted must help the organization to achieve its objectives and goals which are set after an evaluation of the market conditions. There are several organizational structures that are shaped by strategy and they include combinational structure, matrix organizational structure, and strategic business unit structure.

The combinational structure is suited for organizations whose strategy involves operating in different countries or continents as it enables the organizations to take advantage of both local and global efficiency (Harrison and Caron 2009). The strategic business unit structure is suited for organizations whose strategy is to operate different units which are autonomous in terms of their internal structure with the aim of encouraging creativity (Harrison and Caron 2009). On the other hand, matrix organizational structure is suited for organizations whose strategy is to utilize specialized staff as well as to reduce costs by sharing resources to avoid duplication of functions (Harrison and Caron 2009).

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