What is a divisional structure? Discuss its advantages and limitations.
Or
What is meant by divisional structure of an organisation ? Explain any three of its advantages and disadvantages.

Explanation

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.