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Kiran Industries is a company manufacturing office furniture. The company chose to diversify its operations to improve its growth potential and increase market share. As the project was important many alternatives were generated for the purpose and were thoroughly discussed amongst the members of the organisation. After evaluating the various alternatives Sukhvinder, the Managing Director of the company decided that they should add ‘Home Interiors and Furnishings’ as a new line of business activity. 

1. Name the framework, which the diversified organisation should adopt, to enable it to cope with the emerging complexity ? Give one reason in support of your answer. 

2. State any two limitations of this framework.

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(1) Divisional structure is the framework which the diversified organisation should adopt. 

One of the reason in support of divisional structure is that divisional structure facilitates growth and expansion as new divisions can be added without disrupting the existing operations by merely adding another divisional head and staff for the new product line. 

(2) Following are the limitations of the divisional structure : 

(i) Expensive – Each department is required to maintain all resources and types of services. This gives rise to duplication of efforts which results in high operating costs. 

(ii) Narrow focus – Managers of each department focus on their own product without thinking of the rest of the organisation.

(iii) Clash of interests – Divisional manager may have different approach from organisation’s approach. There may be clash of interests.

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