What is a divisional structure? Discuss its advantages and limitations.
A divisional structure comprises of separate business units or divisions. Each unit has a divisional manager responsible for performance and who has authority over the unit. Generally, manpower is grouped on the basis of different products manufactured.
Merits
(i) Skill Development Product specialisation helps in the development of varied skills in a divisional head and this prepares him for higher positions as he gains experience in all functions.
(ii) Accountability Divisional heads are accountable for profits, as revenues and costs related to different departments, can be easily identified and assigned to them. This provides proper basis for performance measurement.
(iii) Quick Decision Making It promotes flexibility and initiative because each division functions as an autonomous unit which leads to faster decision making.
(iv) Facilitates Expansion It facilitates growth as new divisions can be added without interrupting the existing operations, by merely adding another divisional head and staff for the new product line.
Demerits
The divisional structure has certain disadvantages
(i) Conflicts Conflicts may arise among different divisions with reference to allocation of funds.
(ii) Higher Cost Providing each division with separate set of similar functions increases expenditure.
(iii) Ignoring Organisational Goals It provides managers with the authority to supervise all activities related to a particular division. In course of time, such a manager may gain power and in a bid to assert his independence may ignore organisational interests.
Can a large sized organisation be totally centralised or decentralised? Give your opinion.
A manager enhances the production target from 500 units to 700 units per month, but the authority to draw raw material was not given by him. The production manager could not achieve the revised production target. Who is responsible and which principle was violated?
A company X limited manufacturing comsetics, 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 has no choice. But now the company is under pressure to reform.
Question 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.
The production manager asked the foreman to achieve a target production of 200 units per day, but he doesn’t give him the authority to requisition tools and materials from the stores department. Can the production manager blame the foreman if he is not able to achieve the desired target? Give reasons.
A company has its registered office in Delhi, manufacturing unit at Gurgaon and marketing and sales department at Faridabad. The company manufactures the consumer products. Which type of organisational structure should it adopt to achieve its target?
Decentralisation is an optional policy. Explain why an organisation would choose to be decentralised.
A company manufacturing sewing machines set up n 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.
Question You are to advise the company with regard to change it should bring about 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. In which sectors can the company diversify, keeping in mind the declining market for the product the company is manufacturing?
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?
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.
Question Prepare a report regarding organisation structure giving concrete reasons with regard to benefits the company will derive from the steps it should take.