Which type of organizational structure is the most suitable for an organization which is large, has diversified activities and manufacturing one product?
Answer & explanation
Correct answer: option 1
The correct answer is Option (1) → Functional
Option (1) Functional — Correct. The functional structure is most suitable when the size of the organisation is large, it has diversified activities and the operations need a high degree of specialisation. One product means the work can be grouped by functions like production, marketing and finance.
Option (2) Divisional — Incorrect. Divisional structure is for firms that make more than one category of products. This firm makes only one product.
Option (3) Functional and Divisional — Incorrect. A firm making one product does not need divisions. The functional structure alone is enough.
Option (4) Formal — Incorrect. Formal is a type of organisation, not a type of structure here. It does not tell how the jobs are grouped.
NCERT (2026-27 Edition): “Disadvantages: … (d) It may lead to inflexibility as people with same skills and knowledge base may develop a narrow perspective and thus, have difficulty in appreciating by other point of view. Functional heads do not get training for top management positions because they are unable to gather experience in diverse areas. Suitability: It is most suitable when the size of the organisation is large, has a diversified activities and operations require a high degree of specialisation.” “Divisional Structure Many large organisations with diversified activities have reorganised themselves away from the simpler and basic functional structure towards a divisional structure which is more suited to their activities. This is particularly true of those enterprises which have more than one category of products to offer. …” |