Divisional organizational structure
April 17, 2019
Definition and Usage
The divisional organizational structure organizes the activities of a business around geographical, market,
or product and service groups. Thus, a company organized on divisional lines could have operating
groups for the United States or Europe, or for commercial customers, or for the green widget product
line. Each such division contains a complete set of functions. Thus, the green widget division would
handle its own accounting activities, sales and marketing, engineering, production, and so forth.
This approach is useful when decision-making should be clustered at the division level to react more
quickly to local conditions. The divisional structure is especially useful when a company has many
regions, markets, and/or products. However, it can cause higher total costs, and can result in a number
of small, quarreling fiefdoms within a company that do not necessarily work together for the good of the
entire entity.
Example of the Divisional Organization Structure
ABC International has just passed $250 million in sales, and its president decides to adopt a divisional
organizational structure in order to better service its customers. Accordingly, he adopts the following
