Question

Explain the concept of divisional structure. Also explain any four advantages of Divisional structure.

Answer 1

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What Is Divisional Organizational Structure?

A divisional organizational structure usually consists of several parallel teams focusing on a single product or service line. Examples of a product line are the various car brands under General Motors or Microsoft's software platforms. One example of a service line is Bank of America's retail, commercial, investing and asset management arms.

Unlike departments, divisions are more autonomous, each with its own top executive – often a vice president – and typically manage their own hiring, budgeting and advertising. Though small businesses rarely use a divisional structure, it can work for such firms as advertising agencies which have dedicated staff and budgets that focus on major clients or industries.

Advantages of Divisional Organizational Structure

Divisions work well because they allow a team to focus upon a single product or service, with a leadership structure that supports its major strategic objectives. Having its own president or vice president makes it more likely the division will receive the resources it needs from the company. Also, a division's focus allows it to build a common culture and esprit de corps that contributes both to higher morale and a better knowledge of the division's portfolio. This is far preferable to having its product or service dispersed among multiple departments through the organization.

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