Further, each division of the organisation has its own essential resources and functions like production, marketing, purchase, human resource, etc. Every organization must have a well-defined organizational structure to The Advantages of Divisional Structure in Organizations. This type of structure makes it difficult to have a holistic view. The modular structure divides the business into small, tightly knit strategic business units ( SBUs ),which focus on specific elements of the organizational process. For example, a firm can switch between different providers and thus respond more quickly to different market needs. In this structure, managers coordinate and control relations that are both internal and external to the firm. 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An organization can also fill its own corporate needs internally by creating a new modular department, which can operate interdependently with the whole. Interdependence among the units is limited because the focus of many SBUs is more inward than outward and because loyalty within SBUs tends to be very strong. Another form of divisional org chart structure is the multi-divisional structure. Each division contains the necessary resources and functions needed to support the product line and geography. Divisional organizational structures divide the corporation into units based on factors such as geography or product line. For example, a cable-TV service provider that covers the entire state of Florida may divide its sales divisions by region: North, Central and South, for example. Divisional structure is a type of organizational structure where operations are grouped based on divisions or separate product categories. Some disadvantages of this structure include operational inefficiencies from separating specialized functions—for example, finance personnel in one division do not communicate with those in another division. Allows units to adapt quickly to differences in products, regions, customers. Geographic organisational structure suits mainly industries like retail and hospitality, transportation and other businesses that need to be near sources of supply and customers (eg for deliveries, production or on-site support). These teams can change and adapt to fulfill group and organizational objectives. Of course that is different than simply dividing the organizational structure but I think it was in response to the realization that the current organizational structure needed to delineate between the two divisions for the stockholders. Each division behaves like its own company, with its own top-level management and its own subdivided units. An advantage of a divisional structure is that each division can operate as a separate, self-sufficient unit without having to rely heavily on the parent company or top management of the organization. A disadvantage of this type of structure is that the different functional groups may not communicate with one another, potentially decreasing flexibility and innovation. Such integration allows for the authority and organization of a more concrete structure while at the same time capturing the cross-functional and projected-oriented advantages of teams. A network organization sounds complex, but it is at its core a simple concept. Although teams are characterized as less hierarchical, they typically still include a management structure (or management team). You have people of all different age groups there, but it’s a fact that Florida has become the hub for retiring baby boomers. What this does is it helps people to specialize in their product and market segment and be more effective at what they do in my opinion. Smaller companies that require more adaptability and creativity may feel confined by the communicative and creative silos functional structures tend to produce. Each different functions (e.g., HR, finance, marketing) is managed from the top down via functional heads (the CFO, the CIO, various VPs, etc.). Generally speaking, larger companies with a need for a great deal of cross-departmental communication benefit most from this model. For businesses with several product lines or divisions, the product-based organizational structure — in which employees are grouped based on the product they work on, rather than individual roles or other attributes — may be the most effective approach. As a result, some argue that the modularity of a firm should be limited to the extent the flexibility it affords results in gains. For example, marketing efforts to a consumer base is going to be completely different than that to a business base. Divisions can be defined based on the geographical basis, products/services basis, or any other measurement. The organization is classified into different autonomous units and Managers create a series of business units to produce a specific kind of product for a specific kind of customer 3. Critics argue that the use of the word “team” to describe modern organizational structures is a fad—that some teams are not really teams at all but merely groups of staff. It’s also known as M-form. Divisions are separated by product line. In this case -- a product-based divisional structure -- each division within the organization is dedicated to a particular product line.This type of structure is ideal for organizations with multiple products and can help shorten product development cycles. Now there are different ways to organize these divisions, one option would be to organize divisions around different products. This type of structure is well-suited to businesses like hospitality, retail and transportation that need to be near customers or sources of supply. Divisional Structure is defined as an organisational structure that clubs together various functions on the basis of product lines and regional divisions. The organization is divided into components based on their product focus. The divisional organizational structure organizes the activities of a business around geographical, market, or product and service groups. The firm can switch between different contract manufacturers that perform different functions; the contract manufacturer can similarly work for different firms. This increase in complexity can result in a higher manager-to-worker ratio, which can in turn increase costs or lead to conflicting employee loyalties. The network structure is a newer type of organizational structure often viewed as less hierarchical (i.e., more flat), more decentralized, and more flexible than other structures. For example, a car manufacturer may have a separate division for each class of vehicle it produces. Each division is equipped with its own resources in order to function independently. From a management perspective, the network structure is unique among other organizational structures that focus on the internal dynamics within the firm. Gap Inc. is a perfect example of this. So you would sell your services to senior citizens in that region. A divisional organizational structure usually consists of several parallel teams focusing on a single product or service line. A divisional organization structures its activities around a market, product, or specific group of consumers. They may be most effective within large corporations that produce relatively homogeneous goods. The Advantages of Divisional Structure in Organizations. This business structure is typically found in companies that operate worldwide—for example, Virgin Group is the parent company of Virgin Mobile and Virgin Records. Functional departments arguably permit greater operational efficiency because employees with shared skills and knowledge are grouped together by functions performed. As stated above, the organization structure is the system which describes the organizational hierarchy in terms of different functions, roles, responsibilities, supervision, etc. Product and geographic divisional structures may be characterized as follows: A common legal structure known as the multidivisional form (or “M-form”) also uses the divisional structure. The whole organization is ultimately controlled by central management; however, most decisions are left to autonomous divisions. Further, each division of the organisation has its own essential resources and functions like production, marketing, purchase, human resource, etc. The main adv… Market-Based Divisional Org Chart Example (Click on image to modify online) Product-based divisional org structure. Teams that include members from different functions are known as cross-functional teams. They still had the brand recognition in their regions, even though they may have changed their names. Companies employing the divisional organizational structure create divisions devoted to product lines, geographical location or a customer type such as government or women. For example, lines of accountability may be less clear, and reliance on external vendors can be quite high. On the other hand, more internalization and more tightly coupled structures can produce better communication and intellectual property gains. Take, for example, a T-shirt design company. For example some companies may have products that target teenagers as well as products that target older people. For example, a company that sells services to a group of consumers and a group of businesses may divide and organizes operations into a consumer market and a business market. I am just saying that the divisions can be a little more nuanced than market and geographic; sometimes they can be a combination of the two in my opinion. That said, team-building is now a frequent practice of many organizations and can include activities such as bonding exercises and even overnight retreats to foster team cohesion. Divisions typically have their own separate management structure that allows them to make decisions quickly, often without the need for approval from others. In this instance, the market refers to the audience or target market for the product or service. @Mammmood - In our area there was a big name company that was involved in both telecommunications and oil and gas. Functional departmentalization arguably allows for greater operational efficiency because employees with shared skills and knowledge are grouped together by function. Matrix. In the network structure, managers coordinate and control relationships with the firm that are both internal and external. Open communication and reliable partners (both internally and externally) are key components of social networks. This means that each function—e.g., research, production, sales, and finance—has separate internal divisions for each product. Thirdly, Divisional structure allows the firm to make different products for different regions, for example, many companies have different product ranges in different countries. Additional subcategories fall under each of the three primary divisions of the organizational structure. Teams are created by grouping employees in a way that generates a variety of expertise and addresses a specific operational component of an organization. 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