A divisional organizational structure occurs when a company divides its operations into three primary divisions. The three primary divisions of this type of organizational structure is product, market and geographic. Additional subcategories fall under each of the three primary divisions of the organizational structure.
When a company produces different products or services, the employees of the company may be grouped according to these product or service lines. For example, a company that produces hygiene products may have a line of deodorants, a line of toothpastes and a line of shampoos and conditioners. The company would organize employees so that each product line has a complete set of employees.
With this structure, the toothpaste division would include various employees. The toothpaste line would have its own set of operations people. It would also contain its own set of marketing employees, sales employees and finance professionals. This is a common practice in product-based companies that offer various lines or brands. A good example of a real-life company that operates in this manner is Proctor & Gamble.
In addition to product lines, a divisional organizational structure may also group employees according to the regions or areas where the company sells. This structure is most closely related to the sales portions of the organizations, it does trickle into other areas of the company. For example, a cable-TV service provider that covers the entire state of Florida may divide its sales divisions by region: North, Central and South, for example.
The final option for a divisional organizational structure is by market. In this instance, the market refers to the audience or target market for the product or service. This is the people who the company is trying to get to buy the product or service, or who is buying the product or service. For example, a company that sells services to a group of consumers and a group of businesses may divide and organizes operations into a consumer market and a business market.
Dividing into markets allows the company to focus all of its efforts. For example, marketing efforts to a consumer base is going to be completely different than that to a business base. The needs, wants, desires and more are also different depending on the difference in the markets. Setting up the company with this type of divisional organizational structure allows the company to meet the needs of each of its customers based on the market they fall into.