question_answer

Neha and Rekha entered into a partnership business for manufacturing leather bags. Their products have been enjoying good market reputation. Separate departments have been created for production, marketing, finance, human resource and research. The brand name was well established in the market and the product market grew enormously. As the business flourished, they decided to produce leather jackets and leather shoes.

(i) Suggest an organisational structure to them.

(ii) Also discuss the advantages and limitations of such an organisational structure.

Answer:

(i) Divisional structure will be suitable for them. It is an organisation structure in which various departments are created on the basis of products, territory or region. (ii) Divisional structure has the following advantages: [a] All the activities related to one type of product are grouped under one division, which brings integration and coordination in the activities. [b] With more initiative and flexibility, decisions are taken much faster in divisional structure. [c] It facilitates expansion and growth as new divisions can be added without interrupting the existing operations. [d] Fixation of responsibility and accountability is easy, as divisional heads are responsible for the profits and losses of their divisions. Divisional structure suffers from the following limitations: [a] There is a duplication of physical facilities and functions, which leads to increase in cost. [b] Greater autonomy to divisional heads may lead to misuse of authority. [c] Managers in each division focus on their own objectives, without thinking of the organisational goals. [d] Conflict may arise between different divisions on allocation of funds and other resources.