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ACCA Applied Knowledge · Business and Technology · Business organisational structure

A manufacturer has grown from one product to four, each sold to different markets. The board decides to create four divisions, each with its own production, sales and finance staff and responsible for its own profit. Which of the following is the most likely benefit of the change, and the associated cost?

Product divisionalisation gives clearer accountability for each product's performance and market focus, but it risks duplicated resources across divisions and goal conflict, where divisions optimise their own results at the expense of the wider group.

  1. AClearer accountability for product performance, but possible duplication of resources and conflict between divisional and group goalsCorrect
  2. BGreater economies of scale in purchasing, but weaker accountability for each product's profit
  3. CSimpler communication through one chain of command, but reduced focus on individual product markets

Explanation

Divisionalisation by product gives clear profit responsibility and market focus, but each division repeats support functions and may pursue its own goals at the expense of the group. The other options reverse the effects: divisionalisation tends to reduce, not increase, economies of scale and does not simplify communication to one chain.

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