What is meant by Divisional Organisation Structure? How is it beneficial for multi-product companies?

Solution

Dividing the whole enterprise according to the major products to be manufactured is known as divisional organisation structure. This type of organisation structure is most suitable for multi-product companies as it provides equal importance to all products. Except this, it is beneficial for multi-product companies in the following ways:

(i) Development of Divisional Heads: The head of each division looks after all the functions connected with their product, that is, purchase, sale, advertisement, production, finance, etc. This thing helps in the development of varied skill in a divisional head.

(ii) Divisional results can be Assessed: All the activities of each division are carried out independently. Hence, the divisional results (profit/loss) can be assessed easily. On this basis, an unprofitable division can be closed.

(iii) Quick Decision-making: Every division is independent in itself. The divisional manager can take any decision regarding his division independently without consulting other divisional managers. Hence, decisions are quick and effective.

(iv) Easy Expansion: For every product a separate division is opened. If a company wants to introduce a new product, it can be introduced easily without disturbing the existing divisions. Hence, it is easy to expand the concern.