Class 12 Business Studies - Chapter Organising NCERT Solutions | What is a divisional structure? Discuss
What is a divisional structure? Discuss its advantages and limitations.
An organisation structure in which various departments are created on the basis of products, territory or region, is called divisional structure.
Each unit has a divisional manager, who is responsible for performance and has authority over their division. Each division is further divided into functional units like production, sales, finance, etc.
Advantages of divisional structure
Divisional structure has the following advantages:
- All the activities related to one type of product are grouped under one division, which brings integration and coordination in the activities.
- With more initiative and flexibility, decisions are taken much faster in divisional structure.
- Fixation of responsibility and accountability is easy, as divisional heads are responsible for the profits and losses of their division.
- It facilitates expansion and growth as new divisions can be added without interrupting the existing operations.
- It helps the managers to develop varied skills related to a product and facilitates managerial development.
Limitations of divisional structure
Divisional structure has the following limitations:
- There is a duplication of physical facilities and functions, which leads to increase in cost.
- Greater autonomy to divisional heads may lead to misuse of authority.
- Managers in each divisional focus on their own objectives, without thinking of the organisational goals.
- Conflict may arise between different divisions on allocation of funds and other resources.
More Questions From Class 12 Business Studies - Chapter Organising
- Q:-
A company X limited manufacturing cosmetics, which has enjoyed a pre-eminent position in business, has grown in size. Its business was very good till 1991. But after that, new liberalised environment has seen entry of many MNC’s in the sector. With the result the market share of X limited has declined. The company had followed a very centralised business model with Directors and divisional heads making even minor decisions. Before 1991 this business model had served the company very well as consumers had no choice. But now the company is under pressure to reform. What organisation structure changes should the company bring about in order to retain its market share? How will the changes suggested by you help the firm? Keep in mind that the sector in which the company is FMCG.
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Why delegation is considered essential for effective organising?
- Q:-
A company manufacturing sewing machines set up in 1945 by the British promoters follows formal organisation culture in totality. It is facing lot of problems in delays in decision making. As the result it is not able to adapt to changing business environment. The work force is also not motivated since they cannot vent their grievances except through formal channels, which involve red tape. Employee turnover is high. Its market share is also declining due to changed circumstances and business environment. You are to advise the company with regard to change it should bring about in its organisation structure to overcome the problems faced by it. Give reasons in terms of benefits it will derive from the changes suggested by you.
- Q:-
Neha runs a factory wherein she manufactures shoes. The business has been doing well and she intends to expand by diversifying into leather bags as well as western formal wear thereby making her company a complete provider of corporate wear. This will enable her to market her business unit as the one stop for working women. Which type of structure would you recommend for her expanded organisation and why?
- Q:-
Decentralisation is an optional policy. Explain why an organisation would choose to be decentralised.
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Decentralisation is extending delegation to the lowest level. Comment.
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Identify the network of social relationships which arises spontaneously due to interaction at work.
- Q:-
A company, which manufactures a popular brand of toys, has been enjoying good market reputation. It has a functional organisational structure with separate departments for Production, Marketing, Finance, Human Resources and Research and Development. Lately to use its brand name and also to cash on to new business opportunities it is thinking to diversify into manufacture of new range of electronic toys for which a new market is emerging. Which organisation structure should be adopted in this situation? Give concrete reasons with regard to benefits the company will derive from the steps it should take.
- Q:-
Can a large sized organisation be totally centralised of decentralised? Give your opinion.
- Q:-
Draw a diagram depicting a functional structure.
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