Question

Tulip Ltd. is a famous brand in India Home Décor

segment. The company has now decided to diversify

into two segments i.e furniture and interior designing.

At the same time it is looking for capable incompetent

people who will be able to head these product line

departments independently.

(a)Name the organizational structure which was

followed by the company before diversification.

(b) Identify the type of organization structure that the

company is planning to set up after diversification.

Do you agree with the decision of the company to

set up such an organizational structure?

(c) Differentiate between the two structures identified

above on any four basis.​

Answer 1

Functional and Divisional Organizational Structure.

Explanation:

(a) Organizational structure followed by the company before diversification was Functional Structure.

(b) Organizational structure that the company is planning to set up after diversification is Divisional Structure.

Yes, I do agree with the decision of the company to set up such an organizational structure.

Difference between the two structures are as follows:

• Functional structure:

1. Based on functional specialization.
2. Economical as functions are not duplicated.
3. Difficult to manage a multi­product company.
4. Difficult to fix responsibility on a department.

• Divisional structure:

1. Based on product specialization.
2. Costly as there is duplication of resources in various departments.
3. Easy - all functions related to a particular product are integrated in one.
4. Easy to fix responsibility for performance.