Question

Long Answer Type Question:
What is divisional structure? Discuss its advantages and limitations.

Answer 1

A divisional organizational structure gives a larger business enterprise the ability to segregate large sections of the company's business into semi-autonomous groups. While generally better suited to larger organizations, in some circumstances a divisional organizational structure may also benefit a smaller business. In all cases, groups are mostly self-managed and focused upon a narrow aspect of the company's products or services. As with any organization structure, divisional structures have both strengths and weaknesses.

Advantages of Divisional Organizational Structure

Divisions work well because they allow a team to focus upon a single product or service, with a leadership structure that supports its major strategic objectives. Having its own president or vice president makes it more likely the division will receive the resources it needs from the company. Also, a division's focus allows it to build a common culture and esprit de corps that contributes both to higher morale and a better knowledge of the division's portfolio. This is far preferable to having its product or service dispersed among multiple departments through the organization.

Disadvantages of Divisional Organizational Structure

A divisional structure also has weaknesses. A company comprised of competing divisions may allow office politics instead of sound strategic thinking to affect its view on such matters as allocation of company resources. Thus, one division will sometimes act to undermine another. Also, divisions can bring compartmentalization that can lead to incompatibilities. For example, Microsoft's business-software division developed the Social Connector in Microsoft Office Outlook 2010. They were unable to integrate Microsoft SharePoint and Windows Live until months after Social Connector could interface with MySpace and LinkedIn. Some experts suggested that Microsoft's divisional structure contributed to a situation where its own products were incompatible across internal business units.