B. Divisional Structure
An organization which is very large in size and is producing more than one product, they need to evolve a design to cope with the complexity. The activities related to one product are grouped under one division. The organizational structure consists of separate divisions, each such division has its own manager. Within each division, functions like production, marketing, finance etc. are performed.
In other words, each division tends to adopt a functional structure. However, functions may vary across divisions in accordance to their product line.
Advantages
1. Development of personnel: All activities related to one type of product are grouped under one department only. This helps in development of varied skills in the head and prepares him for a higher post.
2. Accountability: In this type of structure, the performance of each department can be easily assessed. It also helps in fixation of responsibility for poor performance so that appropriate remedial action can be taken.
3. Fast decision making: Each division functions independently and so decisions are much faster. This also promotes flexibility and initiative.
4. Expansion and growth: New departments can be easily added without disturbing the existing departments.
Disadvantages
1. There may be a conflict among different divisions on allocation of resources. A particular division may seek to maximize profits at the cost of others.
2. Each department requires all the resources to work as an independent unit. This increases cost as there may be duplication of activities across products.
3. The divisional heads focus only on their product. They may fail to identify themselves as a part of the common organization and develop divisional conflicts, ignoring organizational interests.
Suitability
Divisional structure is suitable where:
· The number of products is more than one.
· Different manufacturing technologies and marketing methods are used.
· The size of the concern is very large or is growing.
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