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Question:

What is a divisional structure? Discuss its advantages and limitations.

Answer:

An organisation structure in which various departments are created on the basis of products, territory or region, is called 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.

Advantages of divisional structure

Divisional structure has the following advantages:

  1. All the activities related to one type of product are grouped under one division, which brings integration and coordination in the activities.
  2. With more initiative and flexibility, decisions are taken much faster in divisional structure.
  3. Fixation of responsibility and accountability is easy, as divisional heads are responsible for the profits and losses of their division.
  4. It facilitates expansion and growth as new divisions can be added without interrupting the existing operations.
  5. It helps the managers to develop varied skills related to a product and facilitates managerial development.

Limitations of divisional structure

Divisional structure has the following limitations:

  1. There is a duplication of physical facilities and functions, which leads to increase in cost.
  2. Greater autonomy to divisional heads may lead to misuse of authority.
  3. Managers in each divisional focus on their own objectives, without thinking of the organisational goals.
  4. Conflict may arise between different divisions on allocation of funds and other resources.


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