What Is a Divisional Organizational Structure?
A divisional organizational structure occurs when a company divides its operations into three primary divisions. The three primary divisions of this type of organizational structure is product, market and geographic. Additional subcategories fall under each of the three primary divisions of the organizational structure.
When a company produces different products or services, the employees of the company may be grouped according to these product or service lines. For example, a company that produces hygiene products may have a line of deodorants, a line of toothpastes and a line of shampoos and conditioners. The company would organize employees so that each product line has a complete set of employees.
With this structure, the toothpaste division would include various employees. The toothpaste line would have its own set of operations people. It would also contain its own set of marketing employees, sales employees and finance professionals. This is a common practice in product-based companies that offer various lines or brands. A good example of a real-life company that operates in this manner is Proctor & Gamble.
In addition to product lines, a divisional organizational structure may also group employees according to the regions or areas where the company sells. This structure is most closely related to the sales portions of the organizations, it does trickle into other areas of the company. For example, a cable-TV service provider that covers the entire state of Florida may divide its sales divisions by region: North, Central and South, for example.
The final option for a divisional organizational structure is by market. In this instance, the market refers to the audience or target market for the product or service. This is the people who the company is trying to get to buy the product or service, or who is buying the product or service. For example, a company that sells services to a group of consumers and a group of businesses may divide and organizes operations into a consumer market and a business market.
Dividing into markets allows the company to focus all of its efforts. For example, marketing efforts to a consumer base is going to be completely different than that to a business base. The needs, wants, desires and more are also different depending on the difference in the markets. Setting up the company with this type of divisional organizational structure allows the company to meet the needs of each of its customers based on the market they fall into.
@Mammmood - In our area there was a big name company that was involved in both telecommunications and oil and gas. Eventually the telecommunications division got hit hard, so they spun it off as a completely separate company.
Of course that is different than simply dividing the organizational structure but I think it was in response to the realization that the current organizational structure needed to delineate between the two divisions for the stockholders.
The oil and gas was doing well while the telecommunications part wasn’t. Obviously you don’t want your stock to sink because one part of your company is doing poorly while the other part isn’t.
@Charred - How does demographic breakout fit into this multi divisional organizational structure? For example some companies may have products that target teenagers as well as products that target older people.
My guess is that demographics falls under target market but it may be impacted by geography too. Take a look at Florida for instance. You have people of all different age groups there, but it’s a fact that Florida has become the hub for retiring baby boomers.
So you would sell your services to senior citizens in that region. I am just saying that the divisions can be a little more nuanced than market and geographic; sometimes they can be a combination of the two in my opinion.
@MrMoody - Actually I think this kind of multi divisional organizational structure gives some companies an unfair competitive advantage if they have to break up as a result of an antitrust suit.
I used to work in the telecommunications industry, and well remember the breakup of the Bells. These companies used to be national. When they broke up, they became regional – but guess what?
They still had the brand recognition in their regions, even though they may have changed their names. Thus, they were still able to outcompete the new guys in telecom and a lot of smaller telecommunications companies had to fold eventually.
This type of organization structure makes sense for companies that offer a wide variety of products and services. As a matter of fact, I would argue that it’s almost necessary for the company to operate in a streamlined manner.
Right now I work for a wholesale manufacturing distributor and we have markets segmented by regions and also by product lines. We sell a wide range of products in the industrial sector so it doesn’t make sense to have employees who work on selling industrial tools to also work on selling safety equipment.
We partition people out. What this does is it helps people to specialize in their product and market segment and be more effective at what they do in my opinion.
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