Question

Six Mark Question:
Shreyskar runs a locks manufacturing factory. He wants to expand his business. For this, he wants to enter into the manufacturing of locks for cars as an ancillary company. By doing this his company will be able to provide many products to car manufacturers.
Which type of organisational structure will he choose for his factory and why? State any five advantages of this organisational structure.

Answer 1

He will choose a 'Divisional Structure' for his factory as the factory is producing more than one product.

Advantages of divisional structure:

(i) Product specialization helps in the development of varied skills.

(ii) It helps in the fixation of responsibility as divisional heads who are accountable for profits, revenues and costs related to their departments.

(iii) It promotes flexibility, initiative and faster decision making as each division is an autonomous unit.

(iv) It facilitates expansion and growth as new divisions can be added without interrupting the existing operations.

(v) It reduces the problem of co-ordination between departments as all activities concerning a particular product line are integrated together.