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When divisional structure is organized by product, the customer has their own advantages especially when only a few services or products are offered which differ greatly. When using divisional structures that are organized by either markets or geographic areas they generally have similar functions and are located in different regions or markets.
Multi-divisional forms became popular in the United States in the 1960s. Companies that did not use it tended to develop more slowly. [2] During the 19th and early 20th centuries, the unitary form (U-form) was the most common structure of the largest industrial companies.
Choosing a structure for a company is an important decision and must be strategically thought out because it could either aid or harm the making of business. The structure must also be a good fit for the type of activities, goals, and vision of the company. [3] The organizational structure is a reflection of how conveniently business is conducted.
Divisions are distinct parts of a business. If these divisions are all part of the same company, then that company is legally responsible for all of the obligations and debts of the divisions.
Departmentalization by process, on the other hand, seeks to benefit from the advantages that are found in high specialization, and tends to be very efficient in some instances. A high degree of specialization leads to the development of proficiency and professional competence, as well as it enables, and implies, the development of centralized ...
Organization design may involve strategic decisions, but is properly viewed as a path to effective strategy execution. The design process nearly always entails making trade-offs of one set of structural benefits for another. Many companies fall into the trap of making repeated changes in organization structure, with little benefit to the business.
As people implemented organizations over time, many researchers have experimented as to which organizational theory fits them best. The theories of organizations include bureaucracy, rationalization (scientific management), and the division of labor. Each theory provides distinct advantages and disadvantages when applied. [9]
A good organization structure is essential for expanding a business activities. Organization structure determines the input resources needed for expansion of a business activity; similarly organization is essential for product diversification such as establishing a new product line. it also stimulates creativity in managers by organizing.