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Question:

A company, which manufactures a popular brand of toys, has been enjoying good market reputation. It has a functional organisational structure with separate departments for Production, Marketing, Finance, Human Resources and Research and Development. Lately to use its brand name and also to cash on to new business opportunities it is thinking to diversify into manufacture of new range of electronic toys for which a new market is emerging. Which organisation structure should be adopted in this situation? Give concrete reasons with regard to benefits the company will derive from the steps it should take.

Answer:

In the above situation, organisation should shift from functional structure to divisional structure as the company wants to diversify, by adding a new product line.

The reasons and benefits are:

  1. The performance of each unit can be easily assessed.
  2. New product lines can be easily added without disturbing the existing units.
  3. Decision making is faster.
  4. Divisional structure maintains a short line of communication with customers and provides better services to them.


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