Question

'Deccan Motors Ltd.' is a renowned name in the automobile sector in India. It deals in both commercial vehicles like bus, truck and lorries, as well as passenger vehicles like cars, scooters, etc. It presently has a functional organisational structure. The Board of Directors have now decided to shift to divisional structure, with separate divisions for commercial vehicles and passenger vehicles. Identify the benefit the company will get as a result of shifting to divisional structure:

• A. It will promote flexibility and initiative because each division will function as an autonomous unit.
• B. It will lead to minimal duplication of effort, which will result in economies of scale.
• C. It will make training of employees easier as the focus will be on limited range of skills.
• D. It will lead to occupational specialisation since emphasis will be placed on specific functions.

Hint:

Remember: Functional Structure = Occupational Specialization. Divisional Structure = Product Specialization & Autonomy.

Answer 1

The Correct Option is A

Step 1: Understand the scenario.
Deccan Motors Ltd. is moving from a functional organisational structure (organised by functions like production, marketing, finance) to a divisional structure (organised by product lines: commercial vehicles and passenger vehicles).
Step 2: Recall the advantages of a divisional structure.
Key advantages of the divisional structure include: each division acts as an autonomous profit centre, divisional heads have flexibility and initiative, and it is easier to evaluate the performance of each division.
Step 3: Recall the advantages of a functional structure.
Key advantages of the functional structure include: specialisation, economies of scale, less duplication of effort, and easier training since employees focus on limited skills within their function.
Step 4: Evaluate each option against which structure it describes.
Option (B) says minimal duplication of effort and economies of scale. This is a benefit of the functional structure, not the divisional structure. Option (C) says training is easier because employees focus on a limited range of skills. This is again a benefit of the functional structure. Option (D) says occupational specialisation due to focus on specific functions. This too is a functional structure advantage. Option (A) says each division functions as an autonomous unit, promoting flexibility and initiative. This is the classic advantage of the divisional structure, where each division head can respond to their specific market independently.
Step 5: Confirm the answer.
Since the company is moving to the divisional structure, the benefit it will gain is from the divisional structure, which is the autonomy and flexibility each division gains by operating independently.
Step 6: Conclude.
The commercial vehicles division and the passenger vehicles division will each operate as independent units, enabling faster decision-making and more targeted responses to their respective markets.
\[ \boxed{ \text{(A) It will promote flexibility and initiative because each division will function as an autonomous unit.} } \]