Divisional structure refers to an arrangement where activities are separated on the basis of products. There are different units and divisions which deal with varied products. Each division has its own divisional manager who supervises the whole unit and has the authority for it. Organisations that are large in size and deals in a diversified range of products or categories opt for this type of structure.
Advantages of divisional structure:
(i) Product specialisation: It leads to specialisation in a particular product as all activities related to one type of product are grouped under one department.
(ii) Greater accountability: In divisional structure, each product department is treated as a profit centre and is accountable for its profit and loss. This provides a base for measur-ing performance and helps in fixing the responsibility.
(iii) Flexibility: It promotes flexibility and initiative as each division functions as autonomous unit. It leads to faster decision making and greater flexibility.
(iv) Expansion and growth: It facilitates expansion, diversification and growth as new divisions can be added without interrupting the existing operations.