Bangladesh Public Administration Training Centre

Savar, Dhaka.
Seal
EVALUATION DEPARTMENT

77th Foundation Training Course

IA/IR/IE/IRP/ICS/IIR/OOVR/SAR

NAME OF THE MODULE : MODULE NO:

DATE:

Code No. …………………

………………...………………………………………………………………………………
……………

Code No. …………………

Bangladesh Public Administration Training Centre

Savar, Dhaka.

EVALUATION DEPARTMENT Seal

77th Foundation Training Course

IA/IR/IE/IRP/ICS/IIR/OOVR/SAR

NAME OF THE MODULE : MODULE NO:

DATE:

Instruction to be followed
(Please read carefully)
1. Please write your Name, Roll No. etc. at the specified space otherwise may cause cancellation
of your answer script.
2. Put tick (✓) marks on Evaluation method.

Name …………………………………………………………………..
Roll No...…………………….
Bangladesh Public Administration Training Centre
Savar, Dhaka.
EVALUATION DEPARTMENT

IA/IR/IE/IRP/ICS/IIR/OOVR/SAR

NAME OF THE MODULE :

MODULE NO :

Table of Marks
Question Marks Allotted Marks Obtained
No
1
2
3
4
5
6
7
8
9
10
Total

Please fill in the table of marks properly.

Name & Signature of the Module

Director
Assignment on Describe the Scenario in Which Divisional Organizational Structure Is
Preferable to Functional Organizational Structure.

Introduction

Organizational structure, a blueprint showing how an organization’s personnel and functions

harmonize to achieve its goals, plays a pivotal role in defining an organization’s performance,
workflow, adaptability as well as communication. Of the various organizational structures,
functional and divisional models are two prominent paradigms that address distinct
organizational requirements. In a functional structure, tasks are categorized and grouped
based on their shared purpose, forming a hierarchical structure from the lowest to the highest
levels of the organization. A divisional structure is characterized by the grouping of
departments according to distinct organizational outputs, such as product lines or
geographical regions (Anand & Daft, 2007). This paper will analyse situations where a
divisional structure is more effective than a functional structure. It focuses on the divisional
structure's advantages in terms of flexibility, market orientation, and operational
independence. By comparing the two structures and providing real-world examples and
theoretical support, the paper aims to determine the best fit for different organizational
contexts.

Appreciation of Organizational structure

Organizational structure outlines the relationships between roles, systems, processes, and
people within an organization to achieve its goals (Minterzberg ,1972). While structure
doesn't directly coordinate activities, it shapes and impacts all organizational processes (Hold
& Antony,1991). Organization theorists primarily focus on two types of structures: physical
and social. Physical structure pertains to the arrangement of physical elements like buildings
and locations, while social structure concerns the relationships between people, roles, and
organizational units (Ahmady, Mehrpour & Nikooravesh,2016). There are different types of
social structure such as:

• Simple structure
• Functional structure
• Multidivisional structure
• Matrix structure
• Hybrid structure
 • Network structure
• Bureaucracy

Functional vs Divisional Structures: A Comparative Analysis

Functional structure

In a functional structure, employees are organized into departments based on their specific
functions, such as sales, marketing, or finance. This approach enhances efficiency by
allowing employees to specialize in their areas of expertise and promotes consistency in
processes and procedures. However, Weihrich & Koontz (2005) indicate some disadvantages
of the functional organisation thus:

• Weakens focus on overall company goals

• Overspecializes and limits perspectives
• Reduces coordination between departments
• Concentrates profit responsibility at the top
• Slow to adapt to environmental changes
• Limits development of general management skills

Chief Executive Officer

Various
Staff Functions

Vice President Vice President Vice President Vice President

Marketing Finance Operations Administration

Fig: Functional organizational structure

Divisional Structure

A divisional structure is characterized by the organization of operations into distinct units or

divisions, each focused on a specific product, customer segment, or geographical region. The
objective of every divisional structure is to decompose the organization into smaller, more
manageable business units, each endowed with sufficient autonomy and specialized expertise
to address the shortcomings inherent in a functional structure. To address the challenges
associated with rapid product line expansion within a functional structure, organizations often
adopt a product divisional structure. For organizations with relatively homogeneous product
lines, a single product division may be sufficient. However, for organizations offering a
diverse range of complex products and services or operating in multiple distinct business
areas, a multidivisional structure is typically more appropriate. (Gutterman,2023). The
divisional organizational structure enhances responsiveness and customer focus but may
involve higher costs because of resource duplication and complexity in coordination
(Mintzberg, 2005).

Fig: Divisional Organizational structure

Scenarios Where Divisional Structure is Preferable

1. Managing Diverse Product Lines

Organizations offering a broad spectrum of products or services can derive significant

benefits from a divisional structure. The establishment of product divisions, each with its own
hierarchical structure overseen by a dedicated division manager, enhances horizontal
differentiation within the overall organizational structure. Each division manager assumes
responsibility for the specific activities of their respective division and serves as the primary
point of contact for interactions with centralized support functions, ensuring the division
receives necessary resources and assistance in areas such as procurement, marketing, and
research and development. The introduction of division managers as an additional
hierarchical level further increases vertical differentiation within the organizational structure
(Gutterman,2023).

Chief Executive Officer

Various
Staff Functions

Vice President Vice President

Product Groups Operations

Product Manager Product Manager Product Manager Product Manager

Product One Product Two Product Three Product Four

Sales

Marketing

Advertising

Fig: Product based Divisional Structure

For instance: Samsung, a global technology leader, employs a divisional structure organized
around product lines. The company's three main divisions are:

1. Consumer Electronics: Focuses on TVs, home appliances, and audio equipment.

2. Device Solutions: Specializes in semiconductor components like memory chips and
processors.
3. IT and Mobile Communications: Concentrates on smartphones, tablets, and other
mobile devices.

2. Operating in Geographically Diverse Markets

Diverse markets necessitate divisional structures that empower localized decision-making to

effectively address regional preferences, regulatory frameworks, and economic conditions.
Geographic structures balance centralization and decentralization. Core functions remain
centralized at headquarters, while operational functions are often decentralized to regional
offices. This approach allows for efficient management of global operations while adapting to
local market conditions (Gutterman,2023).
For instance: General Motors (GM) uses a geographical divisional structure to organize its
operations. This allows for localized decision-making and better adaptation to regional
markets. GM's primary divisions are North America, South America, Europe, and
International Operations.
McDonald's, a global fast-food chain, effectively utilizes a geographical divisional structure.
This allows them to tailor their menu offerings to local preferences. For instance, they offer
vegetarian options in India and unique items like teriyaki burgers in Japan, while maintaining
brand consistency worldwide. This geographical divisional approach ensures global brand
consistency while addressing regional market demands (Bartlett & Beamish, 2018).

Fig: Geography based Divisional Structure

3. Targeting Distinct Customer Group

Diverse customer-focused organizations often employ divisional structures. Banks, for

instance, divide their operations into retail, corporate, and investment banking to provide
specialized services and tailored solutions for distinct customer segments (Morgan, 2020).
Sales departments often use customer segmentation to tailor their offerings and terms to
different customer groups. For instance, they may offer volume discounts to large customers.
This customer-centric approach demonstrates a strong understanding of customer needs and
identifies high-potential segments. Customer segmentation helps organizations understand
revenue sources and better serve specific customer needs. Companies that prioritize customer
segments tend to be more sophisticated in meeting customer expectations.

Chief Executive Officer

Various
Staff Functions

General Manager General Manager General Manager Vice President

Industrial Consumer Retail Chains Administration

Operations

Marketing

Sales

Personnel

Fig: Customer Centric Divisional Structure

4. Adapting Rapid Growth:

• Managing Increased Complexity: Rapid company growth often brings heightened

complexity. A divisional structure helps address this by segmenting the organization
into smaller, more manageable units.
• Enhanced Decision-Making Speed: Decentralized decision-making within divisions
enables quicker responses to market shifts and emerging opportunities.

As Amazon expanded into diverse industries like cloud computing, e-commerce, and media
streaming, it shifted from a functional to a divisional structure. This allowed each division to
operate independently, driving growth in its specific sector and contributing to the company's
overall success (Hill, 2020).

5. Promoting Innovation and Entrepreneurship:

• Promotes Innovation: Divisional structures often nurture an entrepreneurial mindset,

allowing each division to function independently and prioritize innovation and
product development.
• Supports Risk-Taking: Divisions can test new ideas and take calculated risks without
jeopardizing the organization as a whole.
Advantages of Divisional Structure Over Functional Structure

Enhanced Market Responsiveness

Decentralized decision-making in divisional structures allows for rapid responses to customer

needs, market trends, and competitive pressures, which is essential for businesses in dynamic
markets (Mintzberg, 2005).

Accountability

Each division operates as a separate profit center, making it easier to measure performance
and hold division leaders accountable for results. This clear accountability fosters focus and
drives productivity (Daft, 2020).

Customer-centric Operation

Divisional structures can align resources and strategies with specific customer segments or
geographic markets, enhancing customer satisfaction and loyalty. This approach is especially
beneficial for organizations focused on customer-centric operations (Bartlett & Beamish,
2018)

Challenges of Divisional Structures

1. Increased cost: Duplication of function can lead to increased cost. On the other hand,
coordination activities across division can be complex and time consuming.

2. Potential for conflict: Divisions may have differing priorities and compete each other for
resources which lead to internal conflicts.

3. Difficult to maintain consistency: Different divisions may incorporate different strategies

which arise challenges to maintain consistency across the company.

4. Risk of dysfunctional competition: Excessive competition among the divisions prone to

narrow goals in exchange of company’s bigger goal.
5. Resource Duplication: Duplication of resources among the divisions is one of the major
pitfalls of divisional organizations. For instance, each division may have its own marketing,
HR, or IT team, which push to inefficiencies and increased costs (Hill, 2020).

Balancing Functional and Divisional Structures: The Hybrid Approach

Large, diversified organizations often use a hybrid structure that combines different
organizational forms (functional, product, or matrix) to suit the specific needs of each
division. For instance, one division might adopt a functional structure, while another might
opt for a product team structure based on product characteristics or customer requirements. A
hybrid structure can also be employed by single-industry organizations operating in multiple
market segments with diverse competitive conditions. For example, a retailer might establish
divisions for different customer groups, each using either a functional or geographic structure
to best meet the needs of its specific segment (Gutterman, 2020).