What do you mean by 'Divisional Structure' of an organization ? State the advantages and disadvantages of Divisional organization structure.

Answer – A divisional structure groups activities around products or product lines. Each division normally has its own functional departments and responsibility for its results. It suits large enterprises offering diverse products that require different resources and markets.

Advantages: product specialisation develops broader managerial skills; revenue and cost responsibility makes performance measurable; divisions can respond quickly to their markets; expansion is easier because new divisions can be added without disturbing existing ones.

Limitations: duplicated functions and facilities increase costs; divisions may compete for resources; divisional managers may put their own results above organisational goals; excessive autonomy can make coordination difficult.

For example, an enterprise producing food products and electrical appliances may use separate divisions because their technologies and markets differ.