Notify me of followup comments via e-mail, Loss Leader Pricing Advantages and Disadvantages. 5 Advantages and Disadvantages of the Matrix Organizational Structure November 23, 2020 When a business initiates a project, it can be crucial to have an organizational structure in place to define all the aspects of the project. Smaller organizations can work through major projects via dedicated departments or ad-hoc cross-functional work teams. Aug 24, 2018 Sep 10, 2018 by Brandon Gaille. For example, a beverage company may decentralise functions like marketing and finance. eval(ez_write_tag([[300,250],'letslearnfinance_com-leader-1','ezslot_2',110,'0','0']));As one can see from the above that divisional structure has benefits as well as limitations and that is the reason why any company thinking adopting this structure should carefully first read above points and then decide whether to adopt or implement this strategy in the company. Divisional structure offers many advantages over functioned structure especially in terms of autonomy for efficient management, management development, increasing organizational size up to any limit, and taking into account of specific problems related with each product or territory contributing to the overall objectives of the firm. The structure that I advise my students to use, will be sure to get you a band score of 7+. What Is the Difference Between a Strategic Manager & a Functional Manager. In this structure since each division is different from each other, it leads to duplication of activities which result in this system being expensive than the traditional system of managing the company. The advantage of this organizational structure is that it is more suitable for the facilitation of the distribution of knowledge, and complies with the requirements of increased information transmission and processing. When a matrix organizational structure is implemented, then everyone stays busier on any given day. Large organizations that want the focus of a division could instead spin off into a free-standing subsidiary. Examples of a product line are the various car brands under General Motors or Microsoft's software platforms. Disadvantages of Divisional Organizational Structure A divisional structure also has weaknesses. In an international context, a division structure is utilized to break down the organization into many divisions and each division is responsible for a combination of functions. Now that we have seen the advantages and disadvantages of the divisional structure, it is time that we evaluate whether to use it or not. What Are the Responsibilities of a Corporate Vice President? A company comprised of competing divisions may allow office politics instead of sound strategic thinking to affect its view on such matters as allocation of company resources. The first and foremost limitation of divisional structure is that it can create animosity between divisional head due to inappropriate allocation of funds to divisions or inappropriate allocation of resources between divisions by the company apart from divisions trying to take advantage of other divisions by snatching business from other divisions which we all know does not benefit the company as a whole as aim of the divisional heads should be to maximize profits of the company and not divisions. From a business standpoint, one of the key advantages is that with a product model, failure in one division doesn’t necessarily affect other company divisions. As with any organization structure, divisional structures have both strengths and weaknesses. Having a shared pool of centrally-managed resources like administrative support or office equipment can reduce costs and organizational complexity. Unlike departments, divisions are more autonomous, each with its own top executive – often a vice president – and typically manage their own hiring, budgeting and advertising. One example of a service line is Bank of America's retail, commercial, investing and asset management arms. In simple words just like in case of schools suppose there are no divisions and teacher is absent than whole class will be affected, however if there are divisions of same class then class teacher of one division is absent than it will affect that division only and not the whole class same is the case with the company also. Jason Gillikin is a copy editor and writer who specializes in health care, finance and consumer technology. An organization can be arranged acc… In case of this structure, divisional managers are given too many powers, if the divisional manager is good then there is no problem but if the divisional manager is biased and arrogant than he or she may use this power to harm not only his or her division but also the company as a whole. Advantages of a Divisional Structure A divisional structure provides some distinct advantages for large organizations. Thus, one division will sometimes act to undermine another. In other words, some marketing and finance mangers will work in the corporate office. Business Models & Organizational Structure. His various degrees in the liberal arts have helped him craft narratives within corporate white papers, novellas and even encyclopedias. Advantages, Disadvantages, and Contingencies of Divisional Structures Advantages. The matrix structure is a type of organizational structure in which individuals are … In case of school, there are many divisions of the same class, the primary reason for making a division in the school is to manage students in a better way same is the case with companies which uses divisional structure in their companies. The first and foremost advantage of divisional structure is that since each division acts as a profit center and division managers are given full autonomy over the operations of divisions, it is the divisional managers who are accountable as well as responsible for the performance of the division. A line organisation has only direct, vertical relationships between different levels in the firm. The advantages of divisional structure are explained below: Accountability: The divisional organizational structure makes it possible to account in isolation for each division of a company. Also, a division's focus allows it to build a common culture and esprit de corps that contributes both to higher morale and a better knowledge of the division's portfolio. Divisional organisations need to ensure that each division is allocated the resources it needs to achieve its objectives while finding way… A hierarchical organizational structure is a common way to organize a business. Should the company want to diversify further, it is easy to 'bolt on' another division. With the increasing profession­alism in the management function and global span of business, decentralization has become a need if an organization wants to grow. List of the Advantages of the Matrix Organizational Structure 1. Though small businesses rarely use a divisional structure, it can work for such firms as advertising agencies which have dedicated staff and budgets that focus on major clients or industries. The first and foremost advantage of divisional structure is that since each division acts as a profit center and division managers are given full autonomy over the operations of divisions, it is the divisional managers who are accountable as well as responsible for the performance of the division. A divisional structure can be extremely efficient and successful if practiced in a large organization. It creates a vertical structure where every person within the organization, except one, is a subordinate to another single individual or entity. Marketing managers in the corporate office may impl… Advantages of Divisional Organizational Structure Divisions work well because they allow a team to focus upon a single product or service, with a leadership structure … While generally better suited to larger organizations, in some circumstances this formal structure may also benefit a smaller business. Advantages. Having its own president or vice president makes it more likely the division will receive the resources it needs from the company. Advantages & disadvantages of divisional structures Advantages . Executive leadership is the single most important determinant of success for a company using a divisional structure. In the case of divisional structure, companies make separate divisions or business units headed by the division manager who is responsible and accountable for the performance of employees under his or her unit. It is a type of organizational structure that groups each organizational function into a division. The key difference between functional and divisional structure is that functional structure is an organizational structure in which the organization is divided into smaller groups based on specialized functional areas such as production, marketing and sales whereas divisional structure is a type of organizational structure where operations are grouped based on divisions or separate product categories. Disadvantages - A divisional structure also has a few weaknesses. Geographic divisions. Another promising organizational structure is the Matrix Structure, which combines a Functional Structure (often a traditional hierarchical organizational structure) and a Project Structure, where the organization is structured around the implementation of its various projects. ADVERTISEMENTS: Everything you need to know about the advantages and disadvantages of decentralization. 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