QS Study

Divisional Structure

The divisional structure is a type of organizational structure that groups each organizational function into a division.  Many large organizations with diversified activities have reorganized themselves away from the simpler and basic functional structure towards a divisional structure which is more suited to their activities.

In a divisional structure, the organization structure comprises of separate business units or divisions. Each unit has a divisional manager responsible for performance and who has authority over the unit. Generally, manpower is grouped on the basis of different products manufactured. Each division is multifunctional because within each division functions like production, marketing, finance, purchase etc, are performed together to achieve a common goal.

Advantages: The divisional structure offers many benefits. Prominent among these are as follows:

  • Product specialization helps in the development of varied skills in a divisional head and this prepares him for higher positions.
  • Divisional heads are accountable for profits, as revenues and costs related to different departments can be easily identified and assigned to them.
  • It promotes flexibility and initiative because each division functions as an autonomous unit which leads to faster decision making.
  • It facilitates expansion and growth as new divisions can be added without interrupting the existing operations by merely adding another divisional head and staff for the new product line.

Disadvantages: The divisional structure has certain disadvantages. Some of them are as follows:

  • Conflict may arise among different divisions with reference to allocation of funds and further a particular division may seek to maximize its profits at the cost of other divisions.
  • It may lead to increase in costs since there may be a duplication of activities across products.
  • It provides managers with the authority to supervise all activities related to a particular division.