The divisional organizational structure is a sub-type of business structure whereby a business organization is divided into operating divisions. Such groups are usually division based where the organization is divided based on product, geographic area, or market. This divisional corporate structure enables higher flexibility and enables every unit to execute the efforts and interests that cater to the overall corporate organization’s strategies. For instance, a multinational firm may choose the geographical division of organizational structure under which the various business processes are segmented geographically. On the other hand, for instance, if a business has a wide array of products that it deals with, it may opt for the product-based divisional structure whereby the organization is divided depending on the product it deals with. These kinds of organizational structures have many benefits such as a high level of specialization, enhanced level of decentralization, and decentralized responsibility at every divisional level.
Divisional organizational structure refers to a business organization structure whereby an organization is divided into different divisions that independently own their resources and goals. These divisions in most cases are independent companies in their own right operating under the larger company name. These can be based on products that we refer to as product-based divisional structures, geographical locations (geographical organizational structures) or certain markets referred to as market-based divisional structures. Such a structure can be useful for big firms with large production portfolios or companies that organize their activities in different regions.
Divisional organizational structure is the practical aspect of organizing the work of an enterprise and is one of the most effective elements of its management. A divisional organizational structure can be defined as a business structure where the company’s employees and resources are divided into different units of specialization such as product divisions, geographical zones, or markets. This structure has a functional structure where the organization is divided into several units or divisions each of which bears specific responsibilities. When these divisions portend a product-based divisional structure, geographical organizational structure, or market-based divisional structure, these transmit clear roles and resultant focuses on the strategic direction. This divisional corporate structure enables the various operating groups to manage and operate distinct products, markets, or geographical locations. The structure thus allows flexibility, assertiveness, and responsibility in the organization of the company’s corporate structure.
The divisional organizational structure is a kind of corporate structure in which a firm is split into subgroups that operate independently, based on some criteria such as product or geographical. A product-based divisional structure aims to establish divisions about individual products or product categories. This makes it possible to provide a product-specific strategic direction and resources for the specific product. In a geographical organizational structure, all divisions are formed according to certain geographical regions which enable businesses to offer solutions meeting the needs of one particular area. A market-based structure on the other hand divides it on a divisional basis according to the type of customers obtaining, hence is simpler to design products and services for the specific segment.
Divisional organizational structures are typically classified into three types: They are product-based, geographical, and market-based. In product-based division of structure, the organization is divided according to the types of products or services that are provided. Various departments cope with manufacturing, promotion, and selling of various goods or a range of goods. In the geographical structure of the organization, the operations are categorized according to the geographical location of the areas of the operations. On the other hand, Market market-based division of operation structure divides the operations on the basis of the type of market or customers. In any case, these frameworks enable organizations to operate in a manner aligned with their strategic plan, product and service lines, or operating divisions.
A Product Divisional Structure falls under one of the many structural models that are most commonly adopted by companies. This kind of structure entails the grouping of the company based on products, including different divisional lines or operating groups for unique products. It realizes strategic resource allocation for each product line where a firm is able to direct vital resources on the strategic direction of a particular product. It too can undertake a geographically based or market-based structure in accordance with the organization’s necessity. In the geographical division of organizations, the divisions of the business unit are based on the geographical location, and the market division of organizations is based on markets. No matter what kind, the divisional corporate structure is rather flexible.
Geographical Organizational Structure is one of the favorite organizational structures since it forms the basis of most organizations. Placed under geographical attainment, the geographical organizational structure groups an organization depending on the geographical market. One classification of the divisional corporate structure is that does not resemble the product-based divisional structure or the market-based divisional structure. Such a structure enables businesses to meet the challenges posed by the various markets in the world. There are operating groups established according to the divisional structure and they all have an agreed strategic direction depending on the regions they cover. That is why this business structure has the advantage of focusing on local market features here.
Of all the possible organizational structures, a market divisional structure organizes the functions of a business along the lines of markets or customers. The main three are geographical organizational structure, product-based structure, and market-based structure. The geographical organizational structure of divisional bases its divisional lines with respect to regions or territories. The product-based divisional structure, on the other hand, organizes operations on the basis of products or services. Finally, a market-based divisional structure separates operating groups according to markets or customers so that the corporate organization can enhance its focus on its strategic management. All these have their own Pros and Cons Several business structures are available such as Sole traders, Partnership, Limited companies Limited liability partnerships, etc. A clearer understanding of these can thus help a company to accurately determine how it wants to structure itself in order to support a particular strategy.
There are several benefits that are inherent in the adoption of a divisional organizational structure. One is the possibility of having a highly specialized structure, particularly in situations where a product-based divisional structure is adopted. Every division works on its own, which is good for specialization; thus, quality in certain aspects can be improved. Another strength derives from the concept of being responsive to particular market shifts, which is found in the case of market-based divisional structure. Subsidiaries are not only able to quickly change their strategic focus to manage changes in their market environment but this does not affect the rest of the company. Geographical organizational structure on the other hand can respond better to region/area-specific issues/challenges/opportunities. Finally, the divisional corporate structure encourages competition for divisions as the divisions feel the ownership and responsibilities, which eventually create demands for change and growth.
The main benefits that are associated with divisional structures which include; market-based divisional structure, product-based divisional structure, and geographical organizational structure are maneuverability in operation. These structures make the firms to be flexible, to be in a position to adapt to changes in the market and to the customers. In a divisional corporate structure, each division of the structure acts as an independent business unit and as such, innovation and quick decision making is achievable. This flexibility is rather advantageous if a company requires a business structure that prescribes strict separation of divisions and self-contained subdivisions. They not only allow for the definition of a strategy to be consistent with particular market needs as well as regional conditions but also to control resources in the diverse fields of a corporation’s organization.
The application of a good organizational structure that may include a divisional structure or product divisional structure may help in the improvement of customer satisfaction. Division of operations enables businesses to concentrate on specific market requirements because it depends on division heads, at the same time group organization is intact at the corporate level.
The geographical unit structure also helps companies to manage more effectively clients from different markets. This structure when combined with the market-based divisional structure can provide more focus towards the strategic direction of the company and thus better service delivery and ultimately increased customer satisfaction levels.
Please keep in mind the following things:
Implementing divisional corporate structures including the product-based divisional structure or the market-based divisional structure enables concentration on specific products or services. These structures subdivide the large-scale enterprises into operating subgroups according to the divisional form and operate in the strategic context of each product or market. On the same note, the geographical organizational structure is a type of geographic-based structure that major on location emphasis. Such a structure drives the strategies with regard to geographical markets to optimality. In other words, a business corporation with a well-developed product, market, or geographical specialization plays a role in business success.
Hence no matter if it is a product-based divisional structure a geographical organizational structure or a market-based divisional structure has some disadvantageous implications associated with it. While it fragments a massive organization into operating groups, thus simplifying management, this approach increases costs since distinct division undertakes the same or similar projects. Moreover, a group structure of such kind can contribute to clashes of divisional interests, which compromises interdivisional collaboration and a unified strategic plan. Last, a divisional structure of the corporate framework might lead to no information sharing and thus hold the synergy of any top-notch performance.
Viable structures of division for an organization may comprise structures developed on product line bases; market segment structure; and geographical structures in the organization could mean duplication of assets. This is so because these structures tend to compartmentalize an organization by division hence you find that new teams or operating groups are formed.
For instance, the divisional corporate structure could have the following subcategories; Division one could have its separate marketing sales, and operations departments. This can create a scenario whereby the various departments within the firm are utilizing similar tools in performing some duties and hence lead to inefficiency due to likely duplication. This risk can however be managed effectively through proper corporate governance structures and sound strategic management where the resources are well managed and passed on to the different divisions of the firm.
Inter-divisional conflict occurs when an organization has adopted a divisional structure with subdivisions based on a divisional corporate structure, geographic-based structure, and market-based structure. This often takes place when operating groups are struggling for the control of the operational assets, or they have different visions of the organizational strategies. Different divisions within a business may become blended thus resulting in conflict. For instance, a product-based divisional structure affords resources and corporate organization policies with the geographical organizational structure. In any way, the situation in which divisions of a corporation compete with each other can lead to major threats to the operation and efficiency of the business if not controlled.
Therefore, the agencies will be enabled to adopt divisional organizational structures which will lead to the enhancement of decision-making in specific operation areas. This structure is normally organized along divisions based on product, market, or geography; product-based divisional structure, market-based divisional structure, or geographical organizational structure. The use of these structures is therefore based on the strategy that a firm is undertaking. Division corporate structure in business enables fast decision-making since each division can be established to operate like a different company with operation groups. It also increases divisional competition and hence increases the spirit of innovations and efficiency. This kind of flexibility concerning the organizational structure may benefit the corporate organization’s performance and its market position.
Divisional structure, on the other hand, involves the division of the organizational structure into divisions that are self-contained and independent of one another and may cut across divisions founded on market, geographical, or product lines. Start by first checking which of the three divisional structures you are using; the product-based divisional structure, market-based divisional structure, or geographical organizational structure. Every division should support your strategic intent, including each one as being a resource or operating group. Lodging is useful for a transition to the divisional corporate structure by establishing clear lines of division within your business organization. It could therefore entail physical reorganisation and reallocation of tasks. It can therefore be concluded that the divisional structure places emphasis on accountability, flexibility, and depth of market knowledge in the corporate organization.
Applications such as Trello and Asana are uniquely appropriate for the organization of division structure. These platforms enable the various teams within the various structures of organizations such as product-based divisional structure, geographical organizational structure, or even a market-based divisional structure to work as a team effectively.
They assist in organizing work in terms of divisions and coordinate projects throughout the operating groups. For instance, Trello is good at tracking the progress of different projects while Asana is good at setting and monitoring personal and team objectives. Therefore, these tools could substantially help in setting out the strategic direction of a corporate organization. According to these applications, carrying out various management over different business structures is made easier and more efficient. Here are some more information about Trello and Asana which you may find useful:
An understanding of the types of structural designs and options including the divisional structure is the right step to making the right decisions for your agency. One cannot overemphasize the need to try different structures; structural structures such as product-based divisional structure, geographical organizational structure, or market-based divisional structure.
You have to decide where responsibility for your business is going to be split—by division and/or operating groups. Think about your business organization and then choose the best structure for your corporate organization.
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