Clarify the meaning of Functional organization and Divisional organization. State the difference between functional organization and divisional organization.

Clarify the meaning of Functional organization and Divisional organization. State the difference between functional organization and divisional organization.

Answer – A functional structure groups similar activities by function. A divisional structure groups activities around products or product lines, with functional departments within each division.

Basis

Functional structure

Divisional structure

Formation

Similar functions are grouped.

Activities are grouped by product.

Specialisation

Functional specialisation.

Product specialisation.

Responsibility

Product profit responsibility is less clear.

Divisional profit responsibility is clearer.

Manager development

Mainly functional expertise.

Broader experience across functions.

Cost

Less duplication, generally economical.

Duplication of functions can raise cost.

Coordination

Difficult across functions.

Easier within a product division; coordination between divisions remains necessary.

Suitability

Large enterprise with limited product diversity.

Large enterprise with diverse product lines.

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