When the size of an organisation is large, has diversified activities…

When the size of an organisation is large, has diversified activities and high degree of specialisation is required, the most suitable structure is:

Answer & explanation

Correct answer: option 1

The correct answer is Option (1) → Functional

Option (1) Functional — Correct. In a functional structure the work is grouped by function, such as production, purchase, marketing, accounts and personnel. Each department is headed by a specialist, and all of them report to a coordinating head. This structure is most suitable when the organisation is large, has diversified activities and needs a high degree of specialisation. Keeping the same kind of work together lets each department build deep expertise.
Option (2) Divisional — Incorrect. A divisional structure groups the work by product line. Each division has its own production, marketing and finance and is run by a divisional head. It suits a firm that sells several distinct products.
Option (3) Centralised — Incorrect. Centralisation tells us where the authority to decide is kept, namely at the top. It is not a type of organisation structure.
Option (4) Informal — Incorrect. An informal organisation grows by itself out of personal contacts among employees. It is not a structure that management designs.

Note 1: The question takes its words from NCERT’s line on when the functional structure is suitable. The very next paragraph of the book says that many large organisations with diversified activities have moved to a divisional structure, and this can make Option (2) look right. But the full description in the question, a large organisation with diversified activities that needs a high degree of specialisation, is the book’s own description of the functional structure. Both paragraphs are given below.

NCERT (2026-27 Edition): “Functional Structure … 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. …”

Note 2: The same/similar question has been asked in different years by NTA as per the details given below:

2026	2025	2024	2023	2022
24-05 S2	–	–	13-06 S1 07-06 S3	–

When the size of an organisation is large, has diversified activities and high degree of specialisation is required, the most suitable structure is:

Answer & explanation

Correct answer: option 1

The correct answer is Option (1) → Functional

Option (1) Functional — Correct. In a functional structure the work is grouped by function, such as production, purchase, marketing, accounts and personnel. Each department is headed by a specialist, and all of them report to a coordinating head. This structure is most suitable when the organisation is large, has diversified activities and needs a high degree of specialisation. Keeping the same kind of work together lets each department build deep expertise.
Option (2) Divisional — Incorrect. A divisional structure groups the work by product line. Each division has its own production, marketing and finance and is run by a divisional head. It suits a firm that sells several distinct products.
Option (3) Centralised — Incorrect. Centralisation tells us where the authority to decide is kept, namely at the top. It is not a type of organisation structure.
Option (4) Informal — Incorrect. An informal organisation grows by itself out of personal contacts among employees. It is not a structure that management designs.

Note 2: The same/similar question has been asked in different years by NTA as per the details given below:

2026	2025	2024	2023	2022
24-05 S2	–	–	13-06 S1 07-06 S3	–