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CA Intermediate · Financial Management and Strategic Management · Strategy Implementation and Evaluation

Kaveri Foods Ltd. uses a divisional structure for its packaged snacks, beverages and dairy businesses, each headed by a manager with profit responsibility. Corporate headquarters sets overall goals and allocates capital but does not manage day-to-day operations. Which main advantage is most directly linked to this structure?

The key advantage is clear accountability for each product business. Under a divisional structure, each division head is responsible for profit, so performance can be traced and judged separately. It tends to duplicate functions and raise costs, and decisions are decentralised rather than centralised.

  1. AElimination of duplicated functions across businesses
  2. BClear accountability for performance of each product businessCorrect
  3. CMinimum cost of managerial staff
  4. DComplete centralisation of all decisions

Explanation

A divisional structure gives each business a manager responsible for its profit, which makes accountability clear. It usually duplicates functions, so the first option is wrong (that is a drawback). It does not minimise staff costs, and decision-making is decentralised, not centralised.

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