Compare and contrast between the functional organizational structure and divisional structure.

Provide
suitable examples.
Working on analyzes the question
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Define
Apply
Analyses
Evaluate

L1 :
Define

L2 : Apply
L3 :
Analyses

1
Functional structure(FS)
Group task and activities
by business function,
such as operation,
marketing, finance&
accounting, research
and development
Divisional organization
structure(DS)
Group each
organizational function
into a division. These
division structures can
be organized in one of
four ways: by
geographic area, by
product or service, by
customer, or by process.

Compare
Both structures are
vertical stacking a
middle-and uppermanagement hierarchy
atop a base of employees
and having characteristic
such as a tendency
toward rigidity.
For DS , it is actually a
duplicate or multiple of
functional structure. When
one division is created, the
work is further subdivided
by function which is same as
the FS. Therefore, the
decision making in both
structures are rapid. It is

Contrast
(Main Difference)
FS: centralize for small organization
DS: decentralize for large organization
Example:
The business example of company using functional
structure is software company, the company is
small and still growing, and all of their sales
activities are in the same area. They do not expand
their business.
The business example of company using ds is
McDonald company. It is a large company which
there is based in US. They expand their business to
many areas or oversea.

(Sub Difference)
FS: this structure is the simplest and
least expensive

because the decision

making in FS is from the top
management to the staffs
which may only through few
stages. Even though the ds
is a large company, the
headquarter give
authorization to the division
head, so the decision
making is also quite fast in
ds too..
EXAMPLE:
The software company
groups its task and business
activity into business
function such as sales and
marketing department,
accounting and finance
department, research and
development and others
The McDonalds separate
their organization activity
into division. However, in
each division, their structure
design at the organizational
level is function.

DS: this structure is costly. Because it

requires an elaborate, head-quartersdriven control system.
Analyses: however, they have inadequate
planning for products and market. If the
organization grows, it has more difficulty
managing different products and services in
the market.
For the division structure, although the
manager need to be well qualified requires
high salary causing the cost of maintenance
increase, however, it provide local control of
local situation such as adding new products
which is suitable for that region.
Example:
Since the software company is small, they do
not have to spend too much cost of
maintaining the business compared to large
company. However, they have lack of planning
of product to the market due to not enough
capital.
McDonald is large company, it will be more
costly as they need to hired more staff for
each division. However, their product is more
stable as they have local control over the
product such as they can develop a new flavor
of ice-cream that is suitable for tat area only
but not to every area.
FS: force accountability to the top
DS: give authorization for division head
to make decision
Analyses: however, force accountability is not
fair for top management; staffs also have to
bear the responsibility for the mistake made.
Not only that, all the decision making is made
from the top management.
On the other hands, clear accountability only
to the division head but not to the central head
of company, therefore, the central cannot
control the decision made by the division head
whether is suitable for the group or not.
EXAMPLE:
The software companys top management has

to bear the responsibility when their staff done

mistake however, it is not fair. If the staff is
stealing money, the responsibility should be
the staff not the top management.
Since McDonald is a large company, they give
authorization to its division head to make any
necessary division in that area. After that, each
division head report directly to the CEO and
the board of director forms the reference point
to each division.
FS: minimize career opportunity.
DS: Create career opportunity
Analyses: however, since divisional structure
create career more opportunity to people, it
may means that they need to employ more
staff for each division and this will increase the
operating cost/expenses for the company. In
addition, company also has to employ
experienced people to be the division head in
an area with higher salary and thus increase
the cost of the company too.
Functional structure is for small company, they
do not create many career opportunity to the
society. However, this means that they do not
have to spend too much cost on salary and
wages and thus their cost is lower compared to
Division Structure.
EXAMPLE:
Since the software company is a small
company, they do not need to hire many
employees and even the department manager
can be held by the same person. Thus, the
career opportunity for society is minimize.
Because McDonald expand their business to
oversee and have to hire an experienced
people to be responsible for the each division
and staff in that division, thus it creates more
career opportunity to that area of division.
FS: low employees morale because the
employee only seldom communicate with
other department people. Thus, lead to
communication problems.

DS: employee morale is relatively high.

Because manager and employee can
easily see the result of their good or bad
performance.
Analyses: however, since the employees only
focus on their department, they have strong
communication within the department, and
thus capitalize on specialization of business
activities such as marketing and finance
department.
For division structure, the employee morale
within each division may be high, however,
competition between division may become
intense. For example, some
regions/product/customer may receive special
offers. This may lead to limited sharing of
ideas and resources for the common good of
the firm.
EXAMPLE:
In functional structure of software company,
the staffs may only communicate with people
in that department. Thus low employee morale
value among the organization. However, each
department is specialized in their work done.
McDonald company using the divisional
structure, the structure in each division is
relatively small than in functional structure, so,
the communication between staffs is good.

L4:
Evaluate

Functional structure and divisional structure have

both similarity and differences. However, small
company is suitable to apply functional structure
while large company is suitable to apply ds if the
business is having different product and at
different location.