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Answer» The following points highlight the difference between a functional structure and a divisional structure. | Basis of Difference | Functional structure | Divisional structure | | Creation | These are created on the basis of functions. | These are created on the basis of product-lines along with the functions. | | Costs | It is economical as duplication of work is minimised. | It is costly as there is higher rate of duplication of work and resources between various departments. | | Decision Making | Decision making is centralised as the decisions are taken by the coordinating head for various departments. | Decision making is decentralised as each division of the product line have their own decision making authority. | | Duplication of work | Due to functional specialisation overlapping of work is minimised. | Due to each product department having the same functions, overlapping of work is increased. | | Suitability | More suitable for companies who focuses on ‘operational specialisation’. | More suitable for multi-product companies focussing on ‘differentiated products’. | | Functional Hierarchy | Horizontal functional hierarchy is formed while the departments are devised on the basis of key operations. | Vertical functional hierarchy is formed while devising the departments on the basis of product-line categories. | | Management | Management is difficult as each work has to report to a coordinating head at the top level of management. | Management is easier as different line of department is formed for each product. |
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