Divisional structure

Some companies arrange their staff into divisions devoted to a specific product or market. Each division is a self-sufficient team employing the personnel for the various functions within it.

How it works

Under the overall control of a CEO or president, several divisions work alongside one another to design, research, produce, and sell a particular product, or to service a specific market. Each division runs its own specialized functions, such as operations and production, sales and marketing, and finance. A company may arrange its divisions according to the types of product it makes, the regions in which it operates, or the customers to whom it sells. Large companies may adopt hybrid structures—by product and geography, for example.

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Division by geography

For businesses with products that need to be adapted to local markets, an organization can be structured according to each of the regional markets it serves. These may be domestic or international. Print technology and services company Xerox has successfully adopted this structure (see case study, right)

CEO

North America The company’s main market

Europe
The second-largest region for sales
Developing markets

Developing markets All other markets

Global services Additional division
consulting across regions

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Division by product

Businesses selling different types of products may pick a structure by which each division handles one category. Fast-food chain McDonald’s has been organized by product division.

CEO

FAST-FOOD PRODUCTS
Burgers and fries

RESTAURANT SUPPLIES Tableware

BEVERAGES Unbranded drinks mixes

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Division by customer type

Businesses with distinct customer markets may be organized by customer division. For example, the financial institution Bank of America Merrill Lynch caters to individuals, small businesses, and corporate and institutional clients.

CEO

CONSUMER Typically the
original market

BUSINESS Products adapted or favorably priced

INSTITUTIONAL Large-scale provision to a single client

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DIVISIONAL: PROS AND CONS

Pros

• ❯ If one division fails, there is no threat to the rest of the business
• ❯ Can respond quickly to changes in the market
• ❯ Focused on customer needs
• ❯ Performance of each division clearly measurable

Cons

• ❯ Duplicating resources—for example, each division employing finance personnel
• ❯ Lack of expertise-sharing between divisions
• ❯ Career path for staff restricted
• Heightened sense of competition among divisions

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CASE STUDY

Printer technology and services company Xerox has restructured several times to align the business with the main markets that buy its products. In 1992, Xerox’s highprofile change from a functional to a new divisional structure, with nine self-contained divisions each serving a particular customer type, hit the headlines. This also allowed the company to focus on its core business—digital publishing, color copying, and printing. Dividing the company by market
location is another strategy Xerox has used successfully. In 2006, each division was organized once again, geographically, to ensure that those making the decisions were closest to the customers in each market