An organisation structure in which various departments are created on the basis of products, territory or region, is called a divisional structure. Each unit has a divisional manager, who is responsible for performance and has authority over their division. Each division is further divided into functional units like production, sales, finance, etc.
The divisional head is soley responsible for the profit or loss of their division.
Advantages of Divisional Structure
Divisional structure has the following advantages:
(i) It helps the managers to develop varied skills related to a product and fcilitates managerial development.
(ii) Fixation of responsibility and accountability is easy, as divisional heads are responsible for the profits and losses of their divisions.
(iii) With more initiative and flexibility, decisions are taken much faster in divisional structure.
(iv) It facilitates expansion and growth as new division can be added without interrupting the existing operations.
Disadvantages of Divisional Structure
Divisional structure suffers from the following disadvantages:
(i) Conflict may arise between different divisions on allocation of funds and other resources.
(ii) There is a duplication of physical facilities and functions, which leads to increase in cost.
(iii) Greater autonomy to divisional heads may lead to misuse of authority.
(iv) Managers in each division focus on their own objective, without thinking of the organisational goals.
