Kiran Industries is a company manufacturing office furniture. The company chose to diversify its operations to improve its growth potential and increase market share. As the project was important many alternatives were generated for the purpose and were thoroughly discussed amongst the members of the organisation. After evaluating the various alternatives Sukhvinder, the Managing Director of the company decided that they should add 'Home Interiors and Furnishings' as a new line of business activity.
(a) Name the framework, which the diversified organisation should adopt, to enable it to cope up with the emerging complexity? Give one reason in support of your answer.
(b) State any two limitations of this framework.

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Solution

(a) Divisional structure:
Reason in support of the answer (any two)
(A) Product Specialisation helps in the development of varied skills in a divisional head and this prepares him for higher position.
(B) Divisional heads are accountable foe profits, as revnues and costs related to different
(b) Limitations of the Divisional Structure: (Any two)

(A) It may lead to increase in costs since there may be a duplication of activities across products.
(B) Divisional interests may supersede organisational interests.

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