Identify the correct combination of demerits of Divisional Structure.

(A) Promotes flexibility and facilitates expansion and growth of new divisions

(B) Product specialisation and managers become over powered

(C) Leads to increase in cost and conflict may arise among various divisions

(D) Conflict may arise as interest of two departments may not be compatible and inflexibility of people

(E) Less emphasis on overall objectives and costly

Choose the correct answer from the options given below :

(C) only

The correct answer is option (4)- (C) only.

(A) Promotes flexibility and facilitates expansion and growth of new divisions- This is an advantage of divisional structure as divisional structure facilitates expansion and growth as new divisions can be added without interrupting the existing operations by merely adding another divisional head and staff for the new product line.

(B) Product specialisation and managers become over powered- This is an advantage of divisional structure as Product specialisation helps in the development of varied skills in a divisional head and this prepares him for higher positions. This is because he gains experience in all functions related to a particular product.

(C) Leads to increase in cost and conflict may arise among various divisions- This is a disadvantage of divisional structure. Conflict may arise among different divisions with reference to allocation of funds and further a particular division may seek to maximise its profits at the cost of other divisions. It may lead to increase in costs since there may be a duplication of activities across products. Providing each division with separate set of similar functions increases expenditure.

(D) Conflict may arise as interest of two departments may not be compatible and inflexibility of people- This is a disadvantage of functional structure as the conflict of interests may arise when the interests of two or more departments are not compatible. For example, the sales department insisting on a customer friendly design may cause difficulties in production. Such dissension can prove to be harmful in terms of fulfillment of organisational interest. Inter-departmental conflicts can also arise in the absence of clear separation of responsibility.

(E) Less emphasis on overall objectives and costly-  This is a disadvantage of functional structure as it places less emphasis on overall enterprise objectives than the objectives pursued by a functional head. Such practices may lead to functional empires wherein the importance of a particular function may be overemphasised. Pursuing departmental interests at the cost of organisational interests can also hinder the interaction between two or more departments.