Which of the following is NOT a demerit of divisional structure?

The correct answer is option 2- All functions related to a particular product are integrated in one department.

Option 2 is not a demerit but a result of the structure. Each division is self-contained as it develops expertise in all functions related to a product line.

The divisional structure has certain disadvantages. Some of them are as follows:

(a) 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.

(b) 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.

(c) It provides managers with the authority to supervise all activities related to a particular division. In course of time, such a manager may gain power and in a bid to assert his independence may ignore organisational interests