This document summarizes the key aspects of a divisional structure. A divisional structure groups jobs according to product categories or divisions, with each division having its own division head responsible for performance. Divisions function as autonomous profit centers. Key advantages include product specialization within divisions, clear responsibility and performance measurement for division heads, flexibility, and facilitating expansion. Potential disadvantages are conflicts between divisions, duplication of functions, and division heads prioritizing division interests over the overall organization. A comparison is also made between divisional and functional structures.

1. Organising
XII Business Studies
Divisional Structure
Session : 5 Vikash Residential School

2. Prepared by Pratap Naik
Divisional Structure
Learning Objectives
 Concept
 Suitability
 Advantages
 Product Specialisation
 Helps In Fixation of Responsibility
 Promotes Flexibility and Initiative
 Facilitates Expansion and Growth
 Disadvantages
 Conflicts among Different Divisions
 Duplicity of Functions
 Manager may Ignore Organisational Interests
 Comparative View: Functional Structure and Divisional Structure

3. Prepared by Pratap Naik
Divisional Structure
What is Divisional Structure?
Grouping of jobs according to product category or product divisions is called Divisional Structure.
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Product Divisions
CEO

4. Prepared by Pratap Naik
Divisional Structure
What is Divisional Structure?
Grouping of jobs according to product category or product divisions is called Divisional Structure.
 Each unit has a divisional head responsible for performance and has complete authority over the unit.
 Each division works as a profit center
 The divisional head is responsible for the profit or loss of his division.
 Each division is a multifunctional structure.
 Because within each division functions like production, marketing, finance, purchase etc, are performed
together to achieve a common goal.
• Production
• MarketingCosmetic
• Production
• MarketingTextile
• Finance
• Human Resources
• Finance
• Human Resources

5. Prepared by Pratap Naik
Divisional Structure
What is Divisional Structure?
Grouping of jobs according to product category or product divisions is called Divisional Structure.
 Each unit has a divisional head responsible for performance and has complete authority over the unit.
 Each division works as a profit center
 The divisional head is responsible for the profit or loss of his division.
 Each division is a multifunctional structure.
 Because within each division functions like production, marketing, finance, purchase etc, are performed
together to achieve a common goal.
Example
Créations of département according to Consumer Durables, FMCG, Textile, Electronics, Mobile divisions
Suitability
 Large organizations having different line of products. (Multi-Products)
 Growing organisations need to add more employees, departments and new levels of management.

6. Prepared by Pratap Naik
Advantages
1. Product Specialisation
 The manager in divisional structure gains experience in all functions related to a particular product,
 Thus it leads to product specialisation.
 This prepares him for higher position as the manager exposed to varied skill.
2. Helps In Fixation of Responsibility
 Each division treated as different profit center.
 The divisional heads are accountable for profits or loss.
 This provides a proper basis for performance measurement.
 Also helps in fixation of responsibility in cases of poor performance.
Divisional Structure

7. Prepared by Pratap Naik
Advantages
3. Promotes Flexibility and Initiative
 Each division functions as an autonomous unit
 This leads to faster decision making.
 Thus divisional structure promotes flexibility and initiative.
4. Facilitates Expansion and Growth
 New divisions can be added without interrupting the existing operations.
 This can be done by just by adding another divisional head and staff for the new product line.
 Thus divisional structure facilitates expansion and growth.
Divisional Structure

8. Prepared by Pratap Naik
Disadvantages
1. Conflicts among Different Divisions
 Inter-department conflict may arise with reference to allocation of funds and other resources.
 A particular division may seek to maximise its profits at the cost of other divisions.
2. Duplicity of Functions
 In divisional structure each division is multifunctional and has separate set of similar functions.
 It may leads to duplication of activities across products and increased in costs.
3. Manager may Ignore Organisational Interests
 Sometimes the autonomy and independency of a particular division over emphasized.
 Such situation may hamper organisational interest.
 This happens because, in the process of supervise all activities related to a particular division, a
manager may gain maximum authority.
Divisional Structure

9. Prepared by Pratap Naik
Comparative View:
Functional and Divisional Structure
Basis Functional Structure Divisional Structure
Formation Formation is based on functions
Formation is based on product lines and is
supported by functions.
Specialisation Functional specialisation. Product specialisation.
Responsibility Difficult to fix on a department. Easy to fix responsibility for performance.
Managerial
Development
Difficult, as each functional manager has to
report to the top management.
Easier, autonomy as well as the chance to
perform multiple functions helps in
managerial development.
Cost
Functions are not duplicated hence
economical.
Duplication of resources in various
departments, hence costly.
Coordination Difficult for a multi-product company.
Easy, because all functions related to a
particular product are integrated in one
department.

10. Prepared by Pratap Naik
Divisional Structure
 Suitability
 Advantages
 Product Specialisation
 Helps In Fixation of Responsibility
 Promotes Flexibility and Initiative
 Facilitates Expansion and Growth
 Comparative View:
Functional and Divisional Structure
 Disadvantages
 Conflicts among Different Divisions
 Duplicity of Functions
 Manager may Ignore Organisational Interests
Recap

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Session Complete Vikash Residential School
XII Business Studies