Divisional Structure is based on __________.

Product Lines

The correct answer is option (1)- Product Lines.

Divisional Structure is based on Product Lines.

In a divisional structure, the organisation structure comprises of separate business units or divisions. Each unit has a divisional manager responsible for performance and who has authority over the unit.

Generally, manpower is grouped on the basis of different products manufactured. Each division is multifunctional because within each division functions like production, marketing, finance, purchase, etc., are performed together to achieve a common goal. Each division is self-contained as it develops expertise in all functions related to a product line. In other words, within each division, the functional structure tends to be adopted. However, functions may vary across divisions in accordance with a particular product line. Further, each division works as a profit center where the divisional head is responsible for the profit or loss of his division. For example, a large company may have divisions like cosmetics, clothing, etc.

Divisional structure is suitable for those business enterprises where a large variety of products are manufactured using different productive resources. When an organization grows and needs to add more employees, create more departments and introduce new levels of management, it will decide to adopt a divisional structure.