Bharat Energy Ltd.
Bharat Energy Ltd. drills for oil at many sites across India. For many years, its work was run from the head office by the heads of separate activities such as drilling, finance and purchase. This old system had two difficulties. First, even a small repair at a drilling site had to be cleared by the head office, and site work often stood still for months. Second, the purchase head kept spare-part stocks low to show savings in his own budget, even when drilling stopped for want of parts.
A consultant advised forming a team around each oil field, with clearly defined duties. Each field manager was put in charge of all the service staff at his field and was even given the power to buy materials. Each team now has its own drilling, service and purchase staff and answers for the results of its field. A few common services are still run from the head office.
In the case, which type of structure is closest to the new system advised by the consultant, and which advantage does it offer?
Answer & explanation
Correct answer: option 1
The correct answer is Option (1) → Divisional structure; the head of each unit gains experience in all the activities of the unit, which prepares him for higher positions.
Option (1) Divisional structure; the head of each unit gains experience in all the activities of the unit, which prepares him for higher positions. — Correct. Each field team has its own drilling, service and purchase staff under one manager who answers for its results. Such self-contained units under their own heads make a divisional structure. The head handles every activity, so he gains experience in all functions.
Option (2) Functional structure; the head of each unit gains experience in all the activities of the unit, which prepares him for higher positions. — Incorrect. A functional structure groups work by activity across the whole firm, as in the old system. The advantage named is also reversed: a functional head works in one area only, so he does not get training for top positions. Experience in all activities belongs to a divisional head.
Option (3) Divisional structure; training of employees becomes easier as the focus is only on a limited range of skills. — Incorrect. Easier training on a limited range of skills is an advantage of the functional structure.
Option (4) Functional structure; training of employees becomes easier as the focus is only on a limited range of skills. — Incorrect. A true pair for the functional structure, but the new teams are self-contained units.
NCERT (2026-27 Edition): “Divisional Structure … 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. …”
“… him for higher positions. This is because he gains experience in all functions related to a particular product.” “Advantages: The functional structure has many advantages to offer. Important among them are as follows: |
