Divisional structure

Definition
A tipe of organization configuration that grups together those employess
responsible for a particular product or service.

This type of structure is also colled multidivisional structure or M-form

organiation.
Multinational organizations such as Unilever, Nestle have expanded their businesses
to cover all the regions in the world. They have production plants in a number of
countries to produce and sell in respective countries. Due to the high volume of
production, it is not practical to produce all products in a single location and distribute
to a number of countries. For such organizations, they have limited choice but to
adopt a divisional structure.

In this type of an organization structure, inefficiencies in one division do not affect the
other divisions unlike in a functional structure since the divisions remain separate.
Further, the divisional managers have significant autonomy to be responsive to
customer demand without much influence from top management from the parent
company. On the other hand, control issues are much likely to arise due to the scale
of the organizations and divisional managers acting upon their own personal
agendas without considering working towards a common corporate objective.
Divisional structures are very costly to operate since cost benefits available to
functional structures through shared services are not enjoyed. Tax implications and
additional regulations are also applicable to companies that operate in multiple
countries.

Advantages

1) Product specialization- each department focus on its own functions

- brings specialisation

2) Fast decision making – no dependency on another department

- it leeds to fast decisions

3) Accountable - responsible for its own accomplishments

4) Flexibility – fast decision making

- decision on one department does not affect on other department

5) Expansion and growth – new subdivisional department can be added without

disturbing other departments functions

Disadvantages

1) Resources – more resources required

- each department require all resources (research & development,
manufacturing, accounting/finance, marketing, costumer service)

2) Product focus – each department focus on develeping their product only

does not see themself part of same commpany

3) Conflict – departments can compete against each other for resources