Question

What are the advantages and disadvantages of a divisional organizational structure? Be very thorough in your responses

Answer 1

Organizations are divided on several groups based on different grounds such as regional, product and services. Organization that divides its resources into different groups based on regional and product differences and each group is made responsible and accountable for their respective actions are called to have a divisional structure.

For example, Samsung has different divisions. The smartphone division is completely responsible for their own production, marketing, accounting, administration and other works. Similarly, the electronics divisions are accountable for their own responsibilities.

The above picture shows the divisional organization structure of a firm. The organization structure is divided on basis of different products like X, Y and Z. Each division has their own R&D, marketing, finance among other functions required to run the process smoothly.

Advantages of divisional structure

The divisional organizational structure allows each divisions to be responsible and accountable. The successful and profit earning are encouraged by pumping more investment. Whereas the loss bearing division are analysed and improved.

Communication flows efficiently in divisional structure. The people in a single division can interact freely with higher motivation and work towards a common goal.

The structure helps the employee to focus just on its own product, service or region. This makes them focus better and act quickly on adverse external factors such as financial crisis, natural disaster and so on.

Organizational culture are better with more interaction and bonding.

In divisional structure, each division has its own leader. Divisional leaders are experts and made to work efficiently in their own work areas.

Disadvantages of divisional structure

Such structure is a hindrance in a small organization. Organization can not allocate huge resources to run so many different divisions and employees of same level in each division. This causes duplication of work and increases the organization cost.

This structure can sometime invite unhealthy competition between different divisions. The employees think themselves as a part of a certain division ignoring the larger interest of organization as a whole.

Divisional structure can hamper inter divisional communication. The lack of each other division objectives and goals results in loss of organizational resources.

Divisional structure prevents organizations from getting the most out of economies of scale.