Question

Discuss the demerits of divisional structure.

Answer 1

1. Physical facilities and services are duplicated. Because each product division keeps its own staff and facilities, operating expenses could be significant.
2. There are no benefits to centralising some processes, such as distribution, accounting, and financing.
3. When there is insufficient demand for a specific product, plant capacity may be underutilised.
4. Department managers may prioritise their own products over the organisation as a whole.
5. Divergent divisions may clash over how to divide up money and other resources.