ADVERTISEMENTS: Organizational Structure: Functional Structure and Divisional Structure ! Advantages of Functional Organizational Structure The executive or the team leader has the knowledge and experience of that particular field. Flexibility. Multi-divisional structures can be costly. Potential advantages of divisional structures: More flexibility in responding to environmental changes Improved coordination across functional areas Clear points of responsibility Expertise focused on specific customers, products, and regions Greater ease in restructuring 7. Generally speaking, divisions work best for companies with wide variance in product offerings or regions of geographic operation. The advantages are: Accountability. What are the disadvantages of using a chart? In other words, it combines decentralized management with independent accounting and allocates responsibility and authority to each division to a maximum degree, thus enabling the top leaders to get rid of daily production operations to become a truly powerful decision-making body. Hybrid Organisational Structure: Exhibit 10.9 (a) illustrates the hybrid organisational structure. Advantages & disadvantages of divisional organizational structure Chris Joseph - Updated February 06, 2018 Large companies that serve a varied customer base or operate in a number of geographic regions may choose to operate with a divisional structure. As with all organizational structure types, the divisional structure offers distinct advantages and disadvantages. Advantages of the divisional approach are: - 1. The divisional organizational structure is characterized by centralized decision-making and decentralized management. Functional Structure is one in which the reporting relationships of the organization are bifurcated according to their functional area. Companies are divided into departments of specialization, and then within those units, they are separated further into projects and products. Advantages Committee Organization Structure :- • Pools up the organisational resources in terms of knowledge skills and experience • Coordinating plans as well as in facilitating their execution. The matrix structure can get a bit confusing. ADVANTAGE OF DIVISIONAL STRUCTURE Product specialisation. An organization is the result of the organizing process and can be defined as a structured grouping of people working together to achieve organizational objectives. Consequently, labour expenses can be higher. The key difference between functional and divisional structure is that functional structure is an organizational structure in which the organization is divided into smaller groups based on specialized functional areas such as production, ... “Advantages & Disadvantages of Divisional Organizational Structure.” Chron.com. While Gap is the organization, there are three unique retailers underneath the heading: Gap, Old Navy, and Banana Republic. Two common organizational structures are multi-divisional and matrix. Your business and its needs also impact whether one type of organizational structure is better suited for your business than the other, or whether you should consider a different organizational structure for your company. Hole Inc. is an ideal case of this. For example, the person heading the IT department will have the education and skill necessary to shoulder this responsibility and successfully run his team. There’s the more traditional functional structure, the divisional structure, the matrix structure and the flatarchy structure. The department which is effective in making earnings while bearing losses can be readily seen. The disadvantage includes higher costs associated with maintenance of such structures. Expansion and growth. We use your LinkedIn profile and activity data to personalize ads and to show you more relevant ads. Advantages: 1. There are three main types of organizational structure: functional structure, divisional structure and a blend of the two, called matrix structure. Advantages of a Divisional Structure. 5 Advantages and Disadvantages of the Matrix Organizational Structure November 23, 2020 When a business initiates a project, it can be crucial to have an organizational structure in place to define all the aspects of the project. ...Advantages & Disadvantages of Divisional Organizational Structure X Chris Joseph is a freelance writer residing in Pennsylvania. An organizational structure wherein the organizational functions are classified into divisions as per product or service lines, a market is called Divisional Structure. 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. The major disadvantage of using charts and graphs is that these aids may oversimplify data, which can provide a misleading view of the data. Pros or advantages of divisional structure: Each division can work as an independent unit. The divisional structure can be useful because it affords the company greater operational flexibility. You can change your ad preferences anytime. The main difference between functional and divisional structure is that in functional organization is described as an organizational structure wherein, the employees are classified on the basis of their area of specialization. Exhibit 10.9 (b) illustrates a combination structure. More advantages and disadvantages of divisional structures, as well as its contingencies, are cited below. Functional expertise and efficiency. They may also place multiple demands on people, thereby creating stress. Functional Structure 2. Divisional structures developed from the traditional functional structure, which features departments built on related work tasks, such as marketing. Each organizational structure comes with different advantages and disadvantages and may only work for companies or organizations in certain situations or at certain points in their life cycles. Functional Vs. Divisional Organizational Structure. Adaptability and flexibility in divisions. Functional Organizational Structure In a functional organization structure, the project manager and all the resources work in the same company division, such as the sales and marketing department. Advantages of the Divisional Organization Structure. Matrix Organizational Structure. The divisional structure is a type of organizational structure that groups each organizational function into a division. 2. Each division gets adequate freedom. After providing a brief introduction into the discipline, it identifies and discusses eight major characteristics of matrix organizations. Advantages, Disadvantages, and Contingencies of Divisional Structures Advantages The advantages of divisional structure include flexibility in terms of usage of product structure, geographical structure and market structure depending upon the need of the organization. The article is a review of the literature on the key advantages and disadvantages of matrix organizational structures. It is a type of organizational structure that groups each organizational function into a division. He has written hundreds of articles for newspapers and the Internet on a variety of topics, including several on golf for GolfLink.com. 1 Every organization must choose an overall structure that meets its needs best and allows interactions among individuals and departments to attain the its goals. Divisional Structure Functional Structure: This is the simplest & the most prevalent form of organizational structure. The organizational structure can be classified under following two types: ADVERTISEMENTS: 1. Chron.com, 03 June 2010. The matrix structure followed by Starbucks coffee is one of the best organizational structure examples. Each has its inherent advantages and disadvantages. Companies need to employ more managers and employees when using this type of organizational structure. DISADVANTAGE OF DIVISIONAL STRUCTURE Each … Functional Structure 7. Generally speaking, divisions work best for companies with wide variance in product offerings or regions of geographic operation. A divisional organizational structure breaks the company down into units that are self-contained and generally independent from one another. Also learn about its advantages and disadvantages! Often, organizations will divide the company into various product departments; however, since my company was in … Disadvantages Committee Organization Structure :- • It Is An … Different organizational structures that combine to form Starbuck’s matrix structure are divisional structure, functional structure, and team-based structure. Also, you can check out the advantages and disadvantages of organizational structure to know more about it. This approach makes it much easier to assign responsibility for actions and results. It simply states who works for who. Some of the advantages and disadvantages of a Divisional organizational structure are as follows. Organizations choose their organizational structure based on many factors like: size, its geographic location, the manner of delivering different products and services that they will offer. The divisional structure alludes to organizations that structure initiative as per diverse items or tasks. Divisional Structure. 3. Advantages of divisional organizational structure Easy to grow General manager with wide point of view. Functional Organization : All of the companies define its organizational structure to determine the reporting relationships that will exist in the company. The key points in favor of the divisional structure involve placing decision making as close to the customer as possible. One person, alone, can start and run a small business, but when two or more people come together to accomplish a business goal, an organization is formed. Let's take a look at the advantages and disadvantages of each so you know what you're up against when you join a new structure. Disadvantages: 1. The structures may promote allegiance to department rather than organization objectives. Divisions facilitate quick responses to external changes like natural disasters, financial crises or weather changes. Alignment of corporate and divisional goals. As with all organizational structure types, the divisional structure offers distinct advantages and disadvantages. Fast Decisional Making. An organizational structure, so designed that it is bifurcated into semi-autonomous divisions on the basis of product, service, market etc, is known as divisional structure. The primary reason for the firm’s success is its structure. Advantages and Disadvantages of Functional Organizational Structure In this type of organization, the emphasis is on managing some functions wherever the function may be performed in the enterprise. 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