Divisional Structure

Definition

A divisional structure is an organizational structure where the company is divided into semi-autonomous divisions, each with its own functional departments and resources. These divisions are typically based on product lines, geographic regions, or customer segments, allowing the organization to be more responsive to the unique needs of each market or product.

5 Must Know Facts For Your Next Test

1. Divisional structures are often used by large, diversified organizations to better respond to the unique needs of different markets or product lines.
2. Each division within a divisional structure has its own functional departments, such as marketing, finance, and operations, allowing for greater autonomy and decision-making at the division level.
3. Divisional structures can improve coordination and communication within a specific division, but may lead to silos and a lack of coordination between divisions.
4. The success of a divisional structure depends on the ability of the organization to effectively manage the trade-offs between local responsiveness and global efficiency.
5. Divisional structures are often used in conjunction with other organizational design elements, such as strategic business units (SBUs) and matrix structures, to create a more flexible and adaptive organizational model.

Review Questions

• Explain how a divisional structure differs from a functional structure in terms of organizational design and decision-making.
  • In a divisional structure, the organization is divided into semi-autonomous divisions, each with its own functional departments and resources, allowing for greater local responsiveness to the unique needs of each market or product line. This contrasts with a functional structure, where the company is divided into departments based on specialized functions, such as marketing, finance, and operations, with decision-making and resource allocation happening at the corporate level. The divisional structure empowers division-level managers to make more independent decisions, while the functional structure centralizes decision-making and coordination at the top of the organization.
• Analyze the potential advantages and disadvantages of a divisional structure in the context of organizational design considerations.
  • The key advantages of a divisional structure include increased local responsiveness, improved coordination and communication within each division, and the ability to better tailor products and services to the unique needs of different markets or customer segments. However, the divisional structure can also lead to the creation of organizational silos, where divisions operate independently and fail to coordinate effectively, resulting in duplication of effort and a lack of global efficiency. Additionally, the divisional structure can make it more challenging to leverage economies of scale and share resources across the organization. Effective organizational design requires carefully managing the trade-offs between local responsiveness and global efficiency when implementing a divisional structure.
• Evaluate how a divisional structure might be used in conjunction with other organizational design elements, such as strategic business units (SBUs) and matrix structures, to create a more flexible and adaptive organizational model.
  • Divisional structures are often used in combination with other organizational design elements to create a more flexible and responsive organizational model. For example, the use of strategic business units (SBUs) within a divisional structure can allow the organization to further specialize and tailor its offerings to specific markets or product lines. Additionally, a matrix structure, which combines elements of both functional and divisional structures, can help bridge the gaps between divisions and improve coordination and communication across the organization. By leveraging a combination of organizational design elements, including divisional structures, SBUs, and matrix structures, companies can create a more adaptable and resilient organizational model that is better equipped to respond to changing market conditions and customer needs.

Related terms

Functional Structure:

An organizational structure where the company is divided into departments based on specialized functions, such as marketing, finance, and operations.

Matrix Structure:

An organizational structure that combines elements of both functional and divisional structures, where employees report to both a functional manager and a product or project manager.

Strategic Business Unit (SBU): A semi-autonomous division within a larger organization, typically responsible for a specific product line, market, or geographic region.