Divisional Structure

The divisional structure can be seen as a decentralized version of the functional structure. The

functions still exist in the organization, but they are based on product, geographic area or

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territory, or customer. Each division will then have its own functional

The divisional structure can work well because it focuses on individual geographic regions,

customers, or products. This focus will enable greater efficiencies of operation and the building

of “a common culture and esprit de corps that contributes both to higher morale and a better

knowledge of the division’s portfolio.” There are, of course, disadvantages to this structure.

Competing divisions may turn to office politics, rather than strategic thinking, to guide their

decision making, and divisions may become so compartmentalized as to lead to product

incompatibilities.

As a small business starts to grow in the diversity of its products, in the geographic reach of its

markets, or in its customer bases, there is an evolution away from the functional structure to the

divisional structure. However, significant growth would be needed before the divisional

structure should be put into place.

 

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