Divisional Structure

The Divisional Structure is an organizational structure made up of separate business units or divisions. In this structure, each division has limited autonomy, with a division manager who has authority over one unit and is responsible for performance. Production, human resources, marketing, finance etc. are a few of the functions located under each division.

Failure or collapse of one division can have little impact on other divisions in this kind of organizational setup. So, it fits well for the large businesses that produce or provide multiple types of products or services.

The parent company’s brand and capital can benefit the subsidiaries greatly under this multidivisional structure. This structure can also assist a company's overall revenue growth. In general, the workforce is only categorized on the basis of items manufactured by the company.

The major disadvantage of such an organizational structure is that the expense of keeping such a large workforce and the resources required to function correctly is significantly higher than it is in other organizational systems. A company's taxes may rise as well as a result of its multidivisional structure.

Though the corporation is divided into many multifunctional sections, all of these divisions work together to achieve a common goal. Normally, these divisions are formed to work for the growth and profitability of the business.


Use of this Term in Sentences

  • A divisional structure is a kind of organizational structure in which each organizational function is divided into numerous divisions.
  • The divisional structure works effectively in a market where there is a lot of competition.
  • Though a divisional structure may increase the overall revenue of an organization in the long run, it also increases operating costs.


Share it:  Cite

More from this Section

  • Six sigma
    A continuous improvement program adopted by many companies in the last two decades that ...
  • Concentration
    Concentration refers to the extent to which industry sales are dominated by only a few ...
  • Risk manager
    Risk manager is a person hired to identify significant pure risks that a company faces ...
  • Organizational leadership
    The process and practice by key executives of guiding and shepherding people in an organization ...
  • Heuristics
    Heuristics is a rules of thumb that managers use to simplify decision making. ...