All enterprises, regardless of their size (number of employees, sales volume, income) must be set up in a certain way. The structure is important for the management and supervision of activities in the enterprise, on the basis of which decisions are implemented. In contemporary business conditions, the selection of the organizational structure is becoming increasingly important due to everyday changes in the market that require changes in the company structure due to increased productivity and efficiency which are the primary objective of any company. Before starting business operations, management must make very important decisions on how the enterprise will function, therefore it is important to be addressed to all types of organisational structures and their advantages and disadvantages, taking into account that no type of organisation lasts forever, but needs to be coordinated with external and internal factors. The functional organizational structure is one of the organizational structures and represents one of the two classical and basic organizational structures existing in each enterprise. Companies with functional organizational structure are easier to achieve the expertise and specialization of their products or services. The functional organizational structure expresses the function of the product or service itself, which presents the development and forms of the functional organizational structure and the advantages and disadvantages of organizing this type. Practical part of the paper brings an analysis of the functional organizational structure on the example of Osijek-Koteks d.d. company. Osijek-Koteks d.d. applies functional organizational structure in its business structure in order to facilitate the process of management and quality control of processes.