Kiran Rice Mills makes and sells only one product, packaged rice. Its work is grouped into production, purchase, marketing, finance and personnel departments, and each department head reports to the managing director. Which type of structure does the firm have, and which problem is it more likely to face?
Answer & explanation
Correct answer: option 3
The correct answer is Option (3) → Functional structure; a head may pursue his own department’s interests at the cost of overall enterprise objectives.
Option (1) Divisional structure; costs may rise because similar activities are duplicated across products. — Incorrect. The firm makes one product and groups its work by functions, so it has a functional structure. Duplication across products is a problem of a divisional structure; a one-product firm with one department for each function has no such duplication.
Option (2) Functional structure; costs may rise because similar activities are duplicated across products. — Incorrect. The structure is right, but the problem is not. A functional structure has one department for each function, so it leads to minimal duplication of effort.
Option (3) Functional structure; a head may pursue his own department’s interests at the cost of overall enterprise objectives. — Correct. Kiran Rice Mills groups similar jobs into production, purchase, marketing, finance and personnel departments under one head. This is a functional structure. In it, a functional head may pursue his own department’s objectives more than the objectives of the whole enterprise.
Option (4) Divisional structure; a head may pursue his own department’s interests at the cost of overall enterprise objectives. — Incorrect. The problem fits a functional structure, but the firm has no product divisions. Its departments are formed by functions.
NCERT (2026-27 Edition): “Functional structure … All departments report to a coordinating head. For example, in a manufacturing concern division of work into key functions will include production, purchase, marketing, accounts and personnel. These departments may be further divided into sections. Thus, a functional structure is an organisational design that groups similar or related jobs together.” “Functional structure … Advantages: The functional structure has many advantages to offer. Important among them are as follows: “Functional structure … Disadvantages: The functional structure has certain disadvantages which an organisation must take into consideration before it adopts it. Some of them are as follows: “Divisional Structure … Disadvantages: The divisional structure has certain disadvantages. Some of them are as follows: |