What is meant by 'Functional organizational structure' ? State six differences between Functional Structure and Divisional Structure.
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. |