Suggest with reason which type of organisational structure will be suitable for 'Soal Footwear Ltd.'
Suggest with reason which type of organisational structure will be suitable for 'Soal Footwear Ltd.'
Divisional structure is suitable for 'Soal Footwear Ltd.'
- Since the company has diversified into multiple, distinct product lines (footwear, clothing, bags, and accessories), organising the business into separate product-based divisions will allow each division to be managed independently under a divisional head, promoting specialisation and better accountability for each product line's performance.
Marking Scheme
- 11 mark for correctly suggesting 'Divisional structure' with a valid reason linking it to product diversification.
Hint
Notice the keyword 'diversify its product range' in the case — this is the classic trigger for one specific type of structure.
Quick Oral Answer
Divisional structure is suitable, since Soal Footwear has diversified into multiple product lines — clothing, bags, and accessories — alongside footwear.
Analysis & Explanation
This case tests the ability to match a business scenario to the correct organisational structure.
Why divisional structure fits
- Soal Footwear Ltd. has diversified from a single product line (athletic shoes and sneakers) into multiple distinct product lines (clothing, bags, accessories) under the same brand.
- Divisional structure groups activities on the basis of product lines, with each division functioning as a quasi-autonomous profit centre headed by a divisional manager responsible for that product's performance.
Why functional structure would not fit as well
- A functional structure (based on departments like production, marketing, finance) works best for a single-product or narrow-product-range company; it becomes cumbersome and creates coordination difficulty once several very different product lines must be managed simultaneously, as in Soal Footwear Ltd.'s case after diversification.
Exam tip: The keyword 'diversification' or 'multiple/different product lines' in a case almost always signals divisional structure; a single product/homogeneous operation signals functional structure.
Common Mistakes
- 1Suggesting a functional structure without noticing that the company has diversified into multiple distinct product lines.
- 2Giving the correct structure but failing to justify it with the specific fact of diversification mentioned in the case, thereby losing the reasoning mark.
Interesting Facts
Divisional structure is also called a 'product structure' and is commonly used by large diversified companies such as Hindustan Unilever, which organises separate divisions for foods, home care, and personal care products.
A key feature of divisional structure is that each division can be evaluated as a separate profit centre, making it easier for top management to identify which product lines are performing well and which need attention.
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Frequently Asked Questions
When is divisional structure preferred over functional structure?
Divisional structure is preferred when a company has diversified into multiple, distinct product lines or operates in multiple markets, since it allows each division to be managed as a semi-independent unit focused on its specific product or market.
What is the basis of grouping activities in a divisional structure?
Activities are grouped on the basis of product lines (or sometimes geographic territories), with each division having its own functional departments like production, marketing, and finance.