Question

Six Mark Question:
What is meant by 'Divisional Structure' of an organisation? Explain any two advantages and two limitations of this structure

Answer 1

Dividing the whole organisation according to the major products to be manufactured by them is known as Divisional Organizational Structure. For example Samsung, Reliance etc. This type of structure is devised by the business firms when they are dealing in different categories of products. It helps in coping with the emerging complexities due to diversification of products.

Following are the important advantages of divisional structure:

1. Development of Skills: Handling all aspects relating to a product line enhances various skills in a divisional head and thus makes him worthy of promotion to next higher level.

2. Accountability: Performance measurement of each division is easily possible since the divisional heads are accountable for profits. This further helps in fixing responsibilities and taking appropriate remedial action in case of poor performance.

Disadvantages of divisional structure are as under:

1. Duplication of Activities: Similar types of activities performed in all divisions leads to duplication of work and increased expenditure.

2. Conflict: There may be conflicts among different divisions over allocation of funds. Further, the divisions may also try to maximize their profits at the cost of other divisions.