Which is an advantage of the divisional structure?
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Large companies that serve a varied customer base or operate in a number of geographic regions may choose to operate with a divisional structure. This is a more decentralized type of operation where each division functions much like its own separate company. This type of operation format offers certain benefits as well as potential pitfalls. Show
Self-sufficiencyAn advantage of a divisional structure is that each division can operate as a separate, self-sufficient unit without having to rely heavily on the parent company or top management of the organization. Divisions typically have their own separate management structure that allows them to make decisions quickly, often without the need for approval from others. Divisions have their own equipment, supplies and resources, which allow for a more autonomous method of operation. SpecializationAnother advantage of a divisional structure is that it allows for a high degree of specialization. Workers with similar talents and abilities can work together and focus on specific projects that help the division meet its objectives. Because the division operates autonomously, management is more likely to be familiar with the needs of the workers, which ensures they will have access to the resources they need to complete their tasks. Like-minded individuals may also find it easier to develop a sense of teamwork. Too Much AutonomyOn the other hand, a divisional structure may result in too great of a sense of autonomy among each division. Each division may view itself as completely separate from the other divisions and become concerned only with meeting its own objectives instead of those of the organization as a whole. If the organization operates under weak leadership, this may result in the organization's failure to operate at peak levels of efficiency and the inability to meet its overall objectives. Increased CostsAnother potential disadvantage of a divisional organizational structure is that it may be more expensive to operate. Because each division operates as a separate entity, it also needs its own resources, as sharing resources among divisions may not always be practical. This can result in a duplication of resources that might not be present in a more centralized structure. Divisional organizations need to ensure that each division is allocated the resources it needs to achieve its objectives while finding ways to keep costs to a minimum. Article shared by : The following are the advantages of divisional organisation structure: (1) Development of Divisional Heads: The head of each division looks after all the functions connected with their product that is, purchase, sale, advertisement, production, finance, etc. It helps in the development of varied skills in a divisional head. Image Courtesy : 4.bp.blogspot.com/-YA0zAXLZK_8/Tj4EcFD6ykI/DSC01026comp.jpg (2) Divisional Results can be assessed: All the activities of each division are carried out independently. Hence, the divisional results (profit/loss) can be assessed easily. On this basis, an unprofitable division can be closed. (3) Quick Decision Making: Every division is independent in itself. The divisional manager can take any decision regarding his division independently without consulting other divisional managers. Hence, decisions are quick and effective. (4) Easy Expansion: For every product a separate division is opened. If a company wants to introduce a new product, it can be introduced easily without disturbing the existing division. Hence, it is easy to expand the concern. What is the Divisional Organizational Structure?The divisional organizational structure organizes the activities of a business around geographical, market, or product and service groups. Thus, a company organized on divisional lines could have operating groups for the United States or Europe, or for commercial customers, or for the green widget product line. Each such division contains a complete set of functions. Thus, the green widget division would handle its own accounting activities, sales and marketing, engineering, production, and so forth. This approach is useful when decision-making should be clustered at the division level to react more quickly to local conditions. The divisional structure is especially useful when a company has many regions, markets, and/or products. However, it can cause higher total costs, and can result in a number of small, quarreling fiefdoms within a company that do not necessarily work together for the good of the entire entity. Example of the Divisional Organization StructureABC International has just passed $250 million in sales, and its president decides to adopt a divisional organizational structure in order to better service its customers. Accordingly, he adopts the following structure:
Advantages of the Divisional Organization StructureThe key points in favor of the divisional structure involve placing decision making as close to the customer as possible. The advantages are noted below. AccountabilityThis approach makes it much easier to assign responsibility for actions and results. In particular, a division is run by its own management group, which looks out for the best interests of the division. CompetitionThe divisional structure works well in markets where there is a great deal of competition, where local managers can quickly shift the direction of their businesses to respond to changes in local conditions. CultureYou can use this structure to create a culture at the divisional level that most closely meets the needs of the local market. For example, a retail division could have a culture specifically designed to increase the level of service to customers. Local DecisionsThe divisional structure allows decision-making to be shifted downward in the organization, which may improve the company's ability to respond to local market conditions. Multiple OfferingsWhen a company has a large number of product offerings, or different markets that it services, and they are not similar, it makes more sense to adopt the divisional structure. SpeedThis approach tends to yield faster responses to local market conditions. Disadvantages of the Divisional Organization StructureThe key points against the divisional structure involve the cost of duplicating functions and a reduced focus on the overall direction of the company. The disadvantages are noted below. CostWhen you set up a complete set of functions within each division, there are likely to be more employees in total than would be the case if the business had instead been organized under a purely functional structure. Also, there must still be a corporate organization, which adds more overhead cost to the business. Economies of ScaleThe company as a whole may not be able to take advantage of economies of scale, unless purchases are integrated across the entire organization. InefficienciesWhen there are a number of functional areas spread among many divisions, no one functional area will be as efficient as would have been the case if there had instead been one central organization for each function. RivalriesThe various divisions may have no incentive to work together, and may even work at cross-purposes, as some managers undercut the actions of other divisions in order to gain localized advantages. SilosAll skills are compartmentalized by division, so it can be difficult to transfer skills or best practices across the organization. It is also more difficult to cross-sell products and services between the divisions. Strategic FocusEach division will tend to have its own strategic direction, which may differ from the strategic direction of the company as a whole. What are the advantage and disadvantage of divisional structure?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 this formal structure may also benefit a smaller business.
What is a divisional structure?Divisional. In a divisional structure, people are grouped together based on the product or service they provide, not the work they do. For example, a large corporation such as General Electric has divisions for electronics, transportation, and aviation, each with its own team of accountants, marketers, etc.
What are the strengths of a divisional organizational structure?Specialization. A divisional structure allows for a high degree of specialization. Because each division is typically responsible for producing one particular product or service, it develops expertise in that area.
What are the advantages of divisional structure Class 12?Advantages of divisional structure are:
Decisions are taken much faster in divisional structure. It facilitates expansion and growth as new divisions can be added without interrupting the existing operations. It leads to specialisation of physical facilities and human talent.
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