Divisional structure is suitable for which of the following business enterprises?
Answer & explanation
Correct answer: option 4
The correct answer is Option (4) → Organization producing a large variety of products using different productive resources.
Option (1) A large-sized organization requiring functional specialization. — Incorrect. A large firm that needs specialists in each function suits the functional structure. There, work is grouped by function, such as production, marketing and finance.
Option (2) Organisation has diversified activities where emphasis is placed on specific functions. — Incorrect. The stress on specific functions points to the functional structure again. It does not fit a structure built around products.
Option (3) An organization where operations require a high degree of specialization. — Incorrect. A high degree of specialisation is also given as a reason to choose the functional structure.
Option (4) Organization producing a large variety of products using different productive resources. — Correct. In a divisional structure, the firm is split into units by product line. Each unit has its own production, marketing and finance. This suits a firm that makes many different products, each needing different resources. A firm also moves to it when it grows and adds more people, departments and levels.
NCERT (2026-27 Edition): “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 … Divisional structure is suitable for those business enterprises where a large variety of products are manufactured using different productive resources. When an organisation grows and needs to add more employees, create more departments and introduce new levels of management, it will decide to adopt a divisional structure. …” |