If the two are not on the same page, an employee may not know whose orders to follow. The divisional organizational structure allows people in a single division to interact with each other. Global Milk brands in 2020 – What makes them successful? If you think of divisions or departments as vertical towers, the matrix structure is horizontal, reaching across departments to bring people together. Each division would have its own advertising, sales, production, clerical, accounting, and development staff. The advantages of divisional structure in organizations are specialization and efficiency. Its Advantages and Disadvantages, Adaptation Level Phenomenon – understanding its importance, Risk Matrix – Factors of a risk matrix and how to implement it, Prioritization Matrix – Different types and how to use a prioritization matrix, Functional Organizational Structure: Advantages & Disadvantages, Horizontal Integration Examples to Help Drive Business Efficiencies, Types of Branding: Learn more about branding and its significance. The divisional organization always gives priority to overall success compared to functional organizations that are easy to create a leader specializing in one function, and the head of the division is all departments such as development, production, sales and accounting. What Are the Three Most Common Types of Organizational Structure? This approach makes it much … During the 19th and early 20th centuries, the unitary form (U-form) was the most popular firm structure. Upper management consists of the heads of the different functional divisions. The communication is much efficient, and everyone knows what the other person needs from them. The requirements and regulations are different, so it makes good sense to divide the customers among specialist departments. The leader sets goals along with his/her employees and works alongside them to achieve those goals. If you start to spread out across the globe, you create a division to manage each country's branch of your organization. Unity and Common Purpose. The Advantages of Divisional Structure in Organizations Future Executive Preparation. In the divisional product structure, the firm organizes itself … Flexibility. Healthy competition among divisions is good and bears good fruit for the entire organization, but when the competition becomes so severe that division heads start holding grudges against each other, it can be extremely harmful for the organization as a whole. Easier Management. (“Global Divisions- PepsiCo”, 2018). Advantages: The divisional structure offers many benefits. Divisions have their own equipment, supplies and resources, which allow for a more autonomous method of operation. Suppose you run a small publishing house. Flexibility. The picture above shows the model of a firm which is in the divisional structure. The downside is that separating functions this way invites "siloing," where different divisions focus inward and don't cooperate across department boundaries. The divisional structure allows this type of culture to persist in a division. Loss bearing divisions can be shut down completely while more investments can be made in profit earning divisions. Pro: Communication across departments improves. Con: Employees typically join project teams in addition to their regular department role. Another is that if you don't have sharply differentiated customer groups, there's no real gain from this approach. 4 Important Advantages of Divisional Organisation (1) Development of Divisional Heads: The head of each division looks after all the functions connected with their... (2) Divisional Results can be assessed: All the activities of each division are carried out independently. Then the company takes off. Competition is good until it becomes cruel. Product structure is the right choice for a company with multiple product lines that are substantially different in some way. Economies of scale are the cost savings when an organization produces goods or services in a large quantity. You create a chain of command with yourself at the top. The divisional structure has many advantages. Dividing up based on customer needs can make a company more responsive to patient needs. Pro: Employees work on a variety of projects that can extend and improve their skills. Now that we have seen the advantages and disadvantages of the divisional structure, it is time that we evaluate whether to use it or not. We often see organizations divided into several groups on different grounds such as regional, product or service. For example, a smart phone manufacturer that also manufactures accessories for smartphones might find it difficult for their mobile phones and accessories divisions to stay on the same ground and integrate on their future prospects. For example, a finance department would know how much money is needed for a division’s research and development. This also causes duplication of work. Fast Decisional Making. All the activities related to 1 type of product are grouped under 1 department only which brings integration and coordination in the activities. When using divisional structures that are organized by either markets or geographic areas they generally have similar functions and are located in different regions or markets. Con: Employees have to report to both a project manager and a division head. b. fast response, flexibility in an unstable environment. When divisional structure is organized by product, the customer has their own advantages especially when only a few services or products are offered which differ greatly. For example, the total work activities of an enterprise may be divided into various functions like purchases, production, marketing , finance, quality control. The divisional structure, also called product or self-contained-unit structure, was developed at about the same time by General Motors, Sears, Standard Oil of New Jersey (now ExxonMobil), and DuPont. It also helps create bonds between them. The matrix structure is one way to counter the siloing effects of organizational divisions. ADVANTAGE OF DIVISIONAL STRUCTURE Product specialisation. What Is the Difference Between Project Based & Non-Project Based Organizations? The advantages of divisional structure in organizations are specialization and efficiency. Advantages of the Divisional Organization Structure. Functional structure. There are several ways you can structure the organization as it expands. Creating customer-centric divisions is another way to organize your company. Advantages & disadvantages of divisional structures Advantages . Customer or market organizational structure works well if you cater to distinctly different types of customers, the Construction Marketing Association (CMA) says. The divisional organizational structure is characterized by centralized decision-making and decentralized management. Advantages of Divisional Structure Accountability. There are several possible divisional structures, and they all have pros and cons to keep in mind. c. emphasis on overall product and division goals. Divisions would want other divisions to perform badly, instead of performing better themselves, in order to get past them and get the reward. Divisional structure offers many advantages over functioned structure especially in terms of autonomy for efficient management, management development, increasing organizational size up to any limit, and taking into account of specific problems related with each product or territory contributing to the overall objectives of the firm. Divisional structure prevents organizations from getting the most out of economies of scale. Also, the divisional head of each division is responsible for the profit or loss of his division so that each division acts as a profit centre. Advantages of Divisional Structure • Each division can work as an independent unit • Each division gets adequate freedom • Division managers become experts in their area • Removes need for direct supervision of division by corporate managers • Divisional management improves the use of resources • Timely and effective decisions can be taken It gives rise to duplicity of efforts among divisions. But functions of each division are different, depending upon the nature of the product to be produced. In a small company with a half-dozen employees, there's often no need for structure. When in a divisional organizational structure, a division focuses just on its own product, service or region. Customer structure. If you run a small company without heavy siloing or with simple projects, it may not be necessary. With a product structure, you base your divisions on placing everyone who works with e-books in one department, while audiobooks, hardbacks and trade paperbacks get their own separate turf. Apart from the staff, each department has its own machinery, finance and all other resources required to run the process smoothly. The advantages of divisional structure are explained below: Accountability: The divisional organizational structure makes it possible to account in isolation for each division of a company. With a matrix, you make better use of your company's marketing pros. This helps them focus better on external factors that can affect their operations. Might have commercial customers, advantages of divisional structure as consumers, governments and businesses Tea Brands in the divisional structure organizations. Make decisions quickly, often without the need for approval from others the communication is much efficient, there... 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