Question

How is functional structure different from a divisional structure?

Answer 1

The following points highlight the difference between a functional structure and a divisional structure.

Basis of Difference	Functional structure	Divisional structure
Creation	These are created on the basis of functions.	These are created on the basis of product-lines along with the functions.
Costs	It is economical as duplication of work is minimised.	It is costly as there is higher rate of duplication of work and resources between various departments.
Decision Making	Decision making is centralised as the decisions are taken by the coordinating head for various departments.	Decision making is decentralised as each division of the product line have their own decision making authority.
Duplication of work	Due to functional specialisation overlapping of work is minimised.	Due to each product department having the same functions, overlapping of work is increased.
Suitability	More suitable for companies who focuses on 'operational specialisation'.	More suitable for multi-product companies focussing on 'differentiated products'.
Functional Hierarchy	Horizontal functional hierarchy is formed while the departments are devised on the basis of key operations.	Vertical functional hierarchy is formed while devising the departments on the basis of product-line categories.
Management	Management is difficult as each work has to report to a coordinating head at the top level of management.	Management is easier as different line of department is formed for each product.