What is meant by divisional structure of an organisation? Explain any three of its advantages and disadvantages.
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What is a divisional structure? Discuss its advantages and limitations.
Divisional Structure
An organisation structure in which various departments are created on the basis of products, territory or region, is called a divisional structure.
Each unit has a divisional manager, who is responsible for performance and has authority over their division. Each division is further divided into functional units like production, sales, finance, etc.The divisional head is solely responsible for the profit or loss of their division.
Divisional structure has the following advantages:
(!) All the activities related to one type of product are grouped under one division, which brings integration and coordination in the activities.
(it) With more initiative and flexibility, decisions are taken much faster in divisional structure.
(iii) It facilitates expansion and growth as new division can be added without interrupting the existing operations.
(iv) Fixation of responsibility and accountability is easy, as divisional heads are responsible for the profits and losses of their
divisions.
(v) It helps the managers to develop varied skills related to a product and facilitates managerial development.
Divisional structure suffers from the following disadvantages:
(i) There is a duplication of physical facilities and functions, which leads to increase in cost.
(0) Greater autonomy to divisional heads may lead to misuse of authority.
(iii) Managers in each division focus on their own objectives, without thinking of the organisational goals.
(iv) Conflict may arise between different divisions on allocation of funds and other resources.