Meaning: To divide the whole enterprise according to the major products (such as metal products, plastic products, etc.) manufactured by it, is known as divisional organisation structure.

Advantages of Divisional Organisation: The following are the advantages of divisional organisation structure:

(i) Development of Divisional Heads: The head of each division looks after all the functions connected with their product, that is, purchase, sale, advertisement, production, finance, etc. This thing helps in the development of varied skill in a divisional head.

(ii) Divisional results can be Assessed: All the activities of each division are carried out independently. Hence, the divisional results (profit/loss) can be assessed easily. On this basis, an unprofitable division can be closed.

Limitations: The following are the limitations of divisional organisation structure:

(i) Conflicts between Divisional Heads: Every divisional head wants to become a divisional empire. To satisfy their ego, each demands maximum resources for their division. This situation leads to conflicts among the various divisional heads.

(ii) Duplicity of Functions: The entire set of functions (e.g., production, marketing, finance, personnel, etc.) is required for all divisions. It gives rise to duplicity of efforts among divisions. Hence, resources are misused and cost of operations is unnecessarily increased.