Which type of firm is likely to adopt a divisional form of organization structure? a. Small b. Medium c. Large
The correct answer and explanation is:
The correct answer is c. Large.
A large firm is most likely to adopt a divisional form of organization structure. This is because as a company grows, its operations become more complex, often involving multiple products, services, or geographical locations. The divisional structure is designed to address this complexity by dividing the company into semi-autonomous divisions that can each focus on a specific market or function.
In a divisional structure, each division operates like a small company with its own resources and leadership, which enables it to focus on its specific needs. Divisions can be organized by product lines, geographic regions, or even customer segments. For example, a large multinational corporation may have separate divisions for North America, Europe, and Asia, or it may divide its operations by product categories such as electronics, apparel, or food.
One of the main advantages of the divisional structure is that it allows each division to respond quickly to market changes and customer needs. With its own resources and decision-making authority, a division can adapt more efficiently than a functionally organized company, where decisions may require approval from higher levels of management.
Moreover, a divisional structure helps large firms with the coordination and management of different business units. It enables managers to focus on specific areas of the business without being bogged down by unrelated issues from other parts of the company. This results in clearer accountability and performance measurement.
However, it can also lead to some challenges, such as duplication of efforts and resources across divisions. Large firms must carefully balance the autonomy of each division with the need for centralized control in order to ensure that the overall goals of the organization are met efficiently.
In contrast, small and medium firms usually operate with more centralized, functional structures because their operations are less complex and their management teams are smaller.