Answer to Question 1
Although divisional structures offer large, complex organizations a number of coordination and motivational advantages over functional structures, they have certain disadvantages as well. The disadvantages can be overcome with good management, but some of them are simply the result of the way a divisional structure works.
First, because each division has its own set of functions, the costs of operating and managing an organization increases. Second, communication may suffer when a divisional structure is implemented. Communication can become more complex as various managers at various levels in various divisions attempt to exchange information with one another and coordinate their activities. Third, divisions may start to compete for organizational resources and pursue their own goals at the expense of organizational goals. These conflicts reduce cooperation and can sometimes result in friction between divisions.
Answer to Question 2
Organizations can choose from three kinds of divisional structure: product, market, and geographic structures. When an organization chooses to group people and functions so that it can produce a wide variety of different products, it moves to a product structure. Each product division contains the functions necessary to service the specific goods or products. When the most pressing problem facing an organization is to deliver products to customers in a way that best meets customer needs, an organization is likely to choose a market structure and group functions into divisions to respond to the needs of particular types of customers. In a geographic structure, divisions are broken down by location. If an organization adopts a global geographic structure, then it locates different divisions in each region of the world in which it operates.
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