Advantages of Divisional Organizational Structures

Many major corporations employ a divisional organizational structure.

Divisional business structure, also known as product structure, divides a company into separate divisions, each with its own specific function. Each division, moreover, will be structured and have access to resources appropriate to its specific function within the company as a whole. The way divisions are comprised and organized can differ widely. Some companies might section out their divisions by geographic region (e.g. a European or North American division) while others will be based around the specific product or service they provide.

Specialized Managerial Structure

A major advantage of having a divisional business structure is the ability to tailor the organizational structure to match the function of the division. For instance, if a division is responsible for making a specific product, it can tailor its managerial structure to reflect the needs of producing that good (e.g. supply-chains, labor management, human resources). Overall, this allocates resources more efficiently than a single unified corporate system. Furthermore, the leaders of a division are able to concentrate on specific strategic goals for that division.

Specialized Corporate Culture

Depending on the amount of horizontal movement, it is not uncommon for each division to have its own particular corporate culture or esprit de corps. Software developers within a large parent corporation, for instance, may work more efficiently and happily within a relaxed work environment and be stifled under more regimented systems.

Compartmentalization

Whereas a corporation centered around a singular leadership plan may live or die on the success of one person's overall strategy, a divisional structure diffuses the decision-making process, making systemic failure less likely. Furthermore, when the head of each division is an expert on his particular field, there is a better chance that decisions being made reflect a strong understanding of the issues at hand.

Geographic Adaptability

If a corporation is structured such that its component divisions are organized by region, there is a better chance that they have adapted to the specific conditions of their location. Consequently, while head office may not know how to do business in Russia, the Russian division can combine local personnel with corporate staff and hybridize their practices.

References

• Practical Management: Functional vs. Divisional Structure
• Business Mate: What is a Divisional Organizational Structure