The divisional structure is considered as a viable structure for organizations and it is broken down into different areas. These areas are product, market and geographic structures.
Product Structure: The employees are grouped together in the product structure and this grouping is based upon the specific products that are produced by the company. For example a company produces three different products like product ‘a’, product ‘b’ and product ‘c’. Therefore, in this condition there would be three divisions for each product.
Market Structure: In the market structure the employees are based together and this division is related with the structure of the market. Like markets can be divided in the form of individual customers and business oriented customers (Gibson, 2008).
Advantages of divisional structure: In this structure the employees and the managers are attentive with respect to their products and customers. The divisional structure is quite flexible in nature and it is responsive to change. The coordination among the divisions is possible in this structure. The performance check is quite an easy task in this form and each and every strategic business unit is considered as a free standing unit and that is the reason why managers report directly to the CEO.
Disadvantages of divisional structure: One of the major disadvantages of divisional structure is the duplication of activities and certain resources. Sometimes extra costs are incurred and the marketing research department is maintained by every division on its own. The structure losses a great amount of efficiency and economies of scale and it might also result in lack of technical specialization and training. A sense of unwanted competition is developing in the organization and organizations believe that they are competition with each other.
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