Question

Neha runs a factory wherein she manufactures shoes. The business has been doing well and she intends to expand by diversifying into leather bags as well as western formal wear thereby making her company a complete provider of corporate wear. This will enable her to market her business unit as the one stop for working women. Which type of structure would you recommend for her expanded organisation and why?

Answer 1

The type of organisation structure that Neha should follow is ‘divisional organisation structure’. Divisional structure refers to an arrangement where activities are separated on the basis of products. There are different units and divisions which deal with varied products. In the given situation different units can be for shoes, leather bags and western formal wear. Each division would have its own divisional manager who would supervise the whole unit and would have the authority for it. Each of the divisions can then have further functional departments such as, under shoes, there will be resource inputs, advertising, production, sales, etc. The same will be under leather bags and western formal wear division.

In the given situation, a divisional structure would be more suitable for the following reasons.

1. Under divisional structure each head is responsible for the profit and loss of his own division. This helps in clear identification of the performances by each department separately. Once the head is accountable for the revenues and costs of their own department, it becomes easier to gauge the actions of each. This also helps in taking corrective actions in case of poor performance.

2. As under divisional structure, each division functions independently, decision making becomes quick. Once the departments are divided, the heads have the authority to take their own decisions whenever needed.

3. Under divisional structure expansion of an organisation becomes easier as new divisions can be easily added without affecting the functioning of other divisions.