[The above diagram shows an organization structure headed by a Managing Director, with departments Cosmetics,

Question

Q. [The above diagram shows an organization structure headed by a Managing Director, with departments Cosmetics, Garments, Footwear and Skin care, each having functions Human Resources, Marketing, Research and Development, Purchasing.] Identify the type of organization structure depicted in the above diagram : (A) Divisional structure (B) Functional structure (C) Informal structure (D) Both Informal and Functional structure

CBSECBSE Class XII Board 2023MCQ· 1mImportance★★★★★

✓ Free question

Concept understanding — Organizational Structure Types

Let’s begin with something you already know. Think of a school. There is a principal, vice-principals, heads of departments, teachers, and students. If every teacher reported directly to the principal on every small matter, the principal would be overwhelmed and nothing would get done. So the school creates a chain: teachers report to their HOD, HODs to the vice-principal, and the vice-principal to the principal. That arrangement of who reports to whom, who takes decisions, and how work flows — that is an organisational structure.

In business, an organisational structure is the formal system of task and reporting relationships that coordinates and motivates employees so they work together to achieve company goals. It answers two basic questions: Who does what? and Who reports to whom?

Why does structure matter?

A good structure prevents confusion, duplication of work, and delays. It clarifies authority (the right to decide) and responsibility (the duty to perform). Without structure, a growing organisation becomes chaotic — people step on each other’s toes, decisions get stuck, and accountability vanishes.

Important

Organisational structure is the backbone of coordination. It determines how strategy is executed. NCERT emphasises that structure leads to stability and efficiency in operations.

The two fundamental types

Every organisational structure is a variation of two basic designs: functional and divisional. NCERT presents these as the primary types.

1. Functional Structure

Here, the organisation is divided into departments based on the functions or activities performed — marketing, finance, production, human resources, and so on. All marketing people sit together under one head; all finance people under another.

Advantages: Specialisation improves efficiency. Each department develops deep expertise. Supervision is easier because the manager knows the work. Economies of scale are possible (e.g., one central purchasing department for the whole company).
Disadvantages: Departments can become silos — they focus only on their own goals and lose sight of the overall company objective. Coordination across functions becomes slow. Decision-making gets centralised, which may delay responses to change.

Note

Functional structure works best when the organisation has a single product or a narrow product line and operates in a stable environment. Think of a small manufacturing firm making only one type of soap.

2. Divisional Structure

Here, the organisation is divided into semi-autonomous units or divisions, each responsible for a product, a geographic region, or a customer group. Each division contains its own set of functions (its own marketing, its own finance, its own production). A large company like Hindustan Unilever has separate divisions for soaps, detergents, foods, and personal care.

Advantages: Each division can focus completely on its product or market, leading to faster response to changes. It is easier to measure the performance of each division. Managers develop a broad, general management perspective.
Disadvantages: Duplication of resources — each division has its own HR, its own accounts, etc., which raises costs. There can be unhealthy competition between divisions for company resources. Coordination across divisions becomes a challenge for top management.

Important

NCERT states that divisional structure is suitable when an organisation has multiple products, diverse markets, or geographically spread operations. It promotes accountability because each division head is responsible for profit or loss.

A quick comparison

Feature	Functional Structure	Divisional Structure
Basis of grouping	Functions (marketing, finance, etc.)	Products, regions, or customers
Specialisation	Functional expertise	Product/market expertise
Coordination	Across functions (slower)	Within division (faster)
Cost	Lower (no duplication)	Higher (duplication of functions)
Best for	Single product, stable environment	Multiple products, dynamic environment

Beyond the basics: other types you may encounter

NCERT also mentions two other forms, though they are less common as primary structures:

Matrix Structure: A hybrid where employees report to two bosses — a functional manager and a project/product manager. It combines the strengths of functional and divisional forms but can create confusion over authority. Used in organisations like NASA or consulting firms.
Network Structure: A relatively modern form where the core firm outsources major functions (manufacturing, distribution, etc.) to separate organisations and coordinates them from a small headquarters. Common in the fashion and electronics industries.

A final thought

There is no “best” structure. The right structure depends on the organisation’s size, strategy, technology, and environment. A small startup may begin with a simple functional structure; as it grows and diversifies, it may shift to a divisional or matrix form. NCERT puts it clearly: structure follows strategy. The goal is always to align the way people work with what the organisation needs to achieve.

The diagram shows a Divisional structure, where the organization is split into self-contained product divisions (Cosmetics, Garments, Footwear, Skin care), each housing its own complete set of functions (HR, Marketing, R&D, Purchasing).

The question asks you to recognize the organizing principle at work. To do that, you need to understand what distinguishes a functional structure from a divisional one — and why the arrangement of departments and functions matters.

In a functional structure, the entire organization is carved up by function: all marketing people sit together in one Marketing department, all HR staff in one HR department, all R&D scientists in one R&D unit, and so on. Each function serves the whole company. Picture a single pyramid with the Managing Director at the top and broad functional silos beneath — Marketing handles promotion for every product, Purchasing buys for every line, and HR recruits for everyone. This works beautifully when the firm makes a narrow range of related products and coordination across functions is straightforward.

Now look at the diagram. The Managing Director oversees four divisions — Cosmetics, Garments, Footwear, and Skin care — and each division contains its own HR, Marketing, R&D, and Purchasing units. In other words, the Cosmetics division has its own marketing team (focused solely on cosmetics), its own R&D lab (developing new cosmetic formulations), its own purchasing department (sourcing cosmetic ingredients), and its own HR staff (recruiting for cosmetics roles). The same pattern repeats for Garments, Footwear, and Skin care. Each division is a mini-company, almost self-sufficient, organized around a distinct product line or market.

This is the hallmark of a divisional structure. The primary split is by product, geography, or customer segment — here, by product category. Within each division, all the functions needed to run that business are bundled together. The logic is accountability and focus: the head of the Cosmetics division can make decisions quickly without waiting for a central Marketing or R&D department to prioritize cosmetics over garments. Each division can tailor its strategy to its own market, and performance is easy to measure division by division.

Note

A divisional structure is sometimes called a "product structure" when divisions are organized by product line, as in this diagram. NCERT describes it as suitable for large, diversified firms where different products face different market conditions and require specialized attention.

Option (B), Functional structure, is ruled out because functions are not centralized — there is no single Marketing department serving all four product lines. Option (C), Informal structure, refers to the network of personal relationships and communication channels that exist outside the official chart; the diagram shows a formal, deliberate design, not an informal one. Option (D) tries to combine informal and functional, but neither label fits what we see.

Important

The key test: ask yourself, "What is the first level of division below the top?" If it is by function (Marketing, Finance, Production), you have a functional structure. If it is by product, region, or customer (Cosmetics, Garments, etc.), you have a divisional structure.

✓Final answer

The structure is (A) Divisional structure, because the organization is divided into product-based divisions (Cosmetics, Garments, Footwear, Skin care), each containing its own set of functional departments. This design promotes accountability, flexibility, and focused decision-making for each product line.

Same / Similar Concept — real previous-year questions on the same or a closely similar concept, not this exact question.

Showing the 12 most recent of 22 on this concept.

CBSE 2026Set 66/3/11 markMCQ
$Q. Which of the following is not an advantage of divisional structure of an organisation ? (A) It helps in development of varied skills in the divisional head which prepares him for higher positions. (B) It promotes flexibility and initiative, because each division functions as an autonomous unit, leading to faster decision making. (C) It facilitates expansion and growth as new divisions can be added without interrupting the existing operations. (D) It leads to minimal duplication of effort which results in economies of scale and lowers cost.$
›Reveal solutionSolution
The option describing minimal duplication of effort and economies of scale is not an advantage of a divisional structure; these are characteristic benefits of a functional structure.

Understanding how an organisation structures itself is fundamental to its efficiency and effectiveness. An organisational structure defines how job tasks are formally divided, grouped, and coordinated. Two common types of structures are functional and divisional, each suited to different organisational needs and bringing distinct advantages and disadvantages.

A functional structure groups jobs by common functions, such as production, marketing, finance, human resources, and research and development. In this setup, all activities related to a particular function are handled by one department across the entire organisation. For instance, all marketing efforts for all products would fall under a single marketing department. This structure is particularly effective for organisations that produce a single product line or have a limited range of products, where specialisation and operational efficiency are paramount.

The primary advantages of a functional structure include:

Specialisation: It promotes occupational specialisation, as employees focus on a narrow set of tasks within their function, leading to increased efficiency and expertise.

Economies of Scale: Centralising functions avoids duplication of effort and resources, leading to economies of scale and lower operational costs. For example, having one large marketing department is often more cost-effective than multiple smaller ones.

Improved Coordination: Within each function, coordination is easier due to shared expertise and common goals.

Enhanced Control: Top management maintains tight control over all functional areas.

However, a functional structure can also lead to difficulties in inter-departmental coordination, as each department might become too focused on its own goals, potentially neglecting overall organisational objectives. It can also make it harder to hold specific departments accountable for product-line performance.

In contrast, a divisional structure organises activities around specific products, services, geographical regions, or customer groups. Each division operates as a semi-autonomous unit, often having its own functional departments like production, marketing, and finance. This structure is typically adopted by large organisations that deal with multiple product lines or operate in diverse markets, where product focus and responsiveness are critical.

The advantages of a divisional structure are quite distinct:

Product Specialisation and Accountability: Each division is responsible for its own product or market, making it easier to assign responsibility for performance and profit. This fosters a strong focus on the specific product or market segment.

Flexibility and Initiative: Since each division functions as a relatively autonomous unit, it can respond more quickly to changes in its specific market or product environment. This decentralisation promotes initiative and faster decision-making within the division.

Managerial Development: Divisional heads gain experience managing a wide range of functions (production, marketing, finance) within their division. This broad exposure helps develop varied skills, preparing them for higher general management positions.

Facilitates Expansion and Growth: New product lines or geographical areas can be added as new divisions without disrupting the operations of existing divisions. This modularity supports organisational growth and diversification.

Important

While a divisional structure offers significant benefits in terms of flexibility, accountability, and growth, it often comes at the cost of duplicating resources. Each division might have its own set of functional departments, leading to higher overall costs compared to a centralised functional structure.

Now, let's evaluate the given options in light of the divisional structure:

(A) It helps in development of varied skills in the divisional head which prepares him for higher positions. This is a clear advantage of a divisional structure. Divisional heads oversee all functions within their division, gaining comprehensive experience that grooms them for senior leadership roles.

(B) It promotes flexibility and initiative, because each division functions as an autonomous unit, leading to faster decision making. This is also a significant advantage. The decentralised nature of divisional structures allows divisions to be agile and make quick decisions tailored to their specific market needs.

(C) It facilitates expansion and growth as new divisions can be added without interrupting the existing operations. This is another key advantage. The modular design of a divisional structure allows for easy addition of new product lines or markets as separate divisions, supporting organisational growth without disrupting current operations.

(D) It leads to minimal duplication of effort which results in economies of scale and lowers cost. This statement describes an advantage of a functional structure, not a divisional one. In a divisional structure, functions like marketing, production, and human resources are often duplicated across different divisions. For example, each product division might have its own marketing team. This duplication of resources typically increases costs and reduces the economies of scale that a centralised functional structure would achieve. Therefore, this is not an advantage of a divisional structure; in fact, it is often cited as a disadvantage.

✓Final answer
$The statement that a divisional structure leads to minimal duplication of effort, resulting in economies of scale and lower costs, is incorrect. This is a characteristic advantage of a functional structure, whereas divisional structures often involve duplication of resources across divisions, potentially increasing overall costs.$
CBSE 2026Set ANNUAL1 markMCQ
$Q. "Wrong structure will seriously impair business performance and even destroy it". Whose statement is this? A) Peter Druker B) Louis Allen C) Chester Bernard D) Theo Haimman$
›Reveal solutionSolution

The quotation about a wrong structure impairing or destroying business performance is Peter Drucker's, so the answer is A) Peter Druker.

This statement is used in the organising chapter to underline how important it is to choose a suitable organisation structure. The widely cited author of the remark 'Wrong structure will seriously impair business performance and even destroy it' is Peter Drucker, a leading management thinker. The organisation structure (functional or divisional) must match the nature, size and strategy of the enterprise; a poorly chosen structure leads to confusion, poor coordination and failure.

✓Final answer
$A) Peter Druker$
CBSE 2026Set ANNUAL1 markMCQ
$Q. Which of the following organisational structure is created when the organisation has more than one category of products to offer ?$
(a) Functional
(b) Divisional
(c) Formal
(d) Informal
›Reveal solutionSolution
The structure described is Divisional.

Organisational structures can be of two main types:

Functional structure — activities grouped by function (production, marketing, finance, etc.), suitable for a single line of products/large-scale operations run from one location.

Divisional structure — the organisation is split into divisions on the basis of product lines; each division is largely self-contained with its own functional specialists (production, marketing, finance, personnel) and is headed by a divisional manager accountable for that product's performance. This structure is ideal exactly when a company has multiple categories of products, since it lets each division focus and be evaluated as a near-independent profit centre.

Formal and Informal are not alternative structures in this sense — formal organisation is the officially sanctioned structure (which may itself be functional or divisional), while informal organisation is the network of personal/social relations that arises spontaneously, not a structure created for multiple product lines.

✓Final answer
$Divisional organisational structure is correct.$
CBSE 2025Set ANNUAL1 markMCQ
$Q. There is no favourtism in ............ organisation. (A) Formal (B) Informal (C) Departmental (D) Functional$
›Reveal solutionSolution

There is no favouritism in a formal organisation — option (A), because it works on fixed rules, designations and official relationships, not on personal feelings.

In a formal organisation the structure is designed intentionally by top management. Every member's authority, responsibility and reporting relationship is laid down in advance through rules, job descriptions and the official hierarchy. Decisions and dealings are therefore based on one's position and the rules, not on who the manager personally likes or dislikes. This impersonal, rule-bound character is exactly why favouritism finds no place in a formal organisation.

An informal organisation, by contrast, grows naturally out of personal interaction and friendships, so it can be influenced by personal preferences. This is a standard one-mark idea in BSEB Inter (Bihar Class 12) Business Studies, and the BSEB syllabus here aligns with the NCERT/CBSE treatment of organising.

✓Final answer
$(A) Formal — a formal organisation runs on rules and official positions, leaving no room for favouritism.$
CBSE 2025Set ANNUAL1 mark
$Q. Why is a proper organisation structure needed?$
›Reveal solutionSolution
Organisation structure is the skeleton that defines reporting relationships and task allocation; without it, work gets duplicated, no one is clearly accountable, and the business cannot expand or change smoothly.

A sound organisation structure matters for several reasons:

Clarity of roles — it specifies who does what, so that every task required for achieving the goals is assigned to someone, and nothing falls through the cracks.

Avoids duplication of effort — by clearly dividing work, it prevents two people/departments from unknowingly performing the same task.

Facilitates administration — it establishes clear superior-subordinate relationships, which specify who can give instructions to whom, enabling smooth execution of plans.

Optimum use of resources — by matching jobs to the people and departments best suited for them, it ensures human and material resources are not wasted.

Facilitates growth and diversification — as a business expands or diversifies into new products/areas, a flexible, well-designed structure allows new positions/departments to be added without disrupting existing operations.

Encourages creativity and better decision-making — by establishing clear channels of communication and reducing confusion over authority, employees can perform without friction, and management can make quicker, more informed decisions.

✓Final answer
$A proper organisation structure is needed because it fixes authority-responsibility relationships, avoids duplication/overlapping of work, enables efficient use of resources, facilitates smooth administration and communication, and allows the organisation to grow and adapt without confusion.$
CBSE 2024Set 66/2/11 markMCQ
$Q. Read the following statements : Assertion (A) and Reason (R). Choose the correct alternative from those given below : Assertion (A) : Decentralization is an optional policy decision. Reason (R) : It is done at the discretion of the top management. Alternatives : (A) Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A). (B) Both Assertion (A) and Reason (R) are true, but Reason (R) is not the correct explanation of Assertion (A). (C) Assertion (A) is true, but Reason (R) is false. (D) Assertion (A) is false, but Reason (R) is true.$
›Reveal solutionSolution

Decentralization is indeed an optional policy choice made at the discretion of top management, making both statements true and causally linked.

Organizational structure is not a one-size-fits-all blueprint. Every enterprise must decide how authority and decision-making power flow through its hierarchy. At the heart of this choice lies the question of centralization versus decentralization—whether to concentrate power at the top or distribute it across various levels.

Decentralization refers to the systematic delegation of authority to the middle and lower levels of management. It is not something that happens automatically or by accident. Rather, it is a conscious, deliberate policy decision taken by top management after weighing the organization's size, complexity, geographical spread, and the capabilities of its managers. A small family business might operate comfortably with centralized control, while a multinational corporation often finds decentralization essential for agility and responsiveness.

The Assertion states that decentralization is an optional policy decision. This is accurate. No law or principle of management mandates that an organization must decentralize. The degree of decentralization varies widely—some firms push decision-making down to branch managers and department heads, others retain tight control at headquarters. The choice depends on factors like the nature of the business, the competence of subordinates, the cost of decisions, and the need for uniformity versus flexibility.

The Reason explains that decentralization is done at the discretion of top management. This too is correct. Top management evaluates the trade-offs: decentralization can speed up decisions, motivate lower-level managers, and reduce the burden on senior executives, but it also risks inconsistency and requires capable personnel at all levels. Ultimately, the decision to decentralize—and how much to decentralize—rests with those at the apex of the organization.

Important

The Reason directly explains why the Assertion is true. Because top management has discretion over the extent and nature of authority delegation, decentralization remains an optional policy rather than a compulsory feature of organizational design.

The causal link is clear: decentralization is optional precisely because it is a discretionary choice. If it were mandatory or automatic, it would not be optional. The Reason provides the mechanism—top management's discretion—that makes the Assertion valid.

✓Final answer
$Both Assertion (A) and Reason (R) are true, and Reason (R) is the correct explanation of Assertion (A). The correct alternative is (A) .$
CBSE 2024Set MARCH1 mark
$Q. Which organisation is called Army Organisation?$
›Reveal solutionSolution

Line (linear) organisation is called the army organisation.

Line organisation has a direct, straight-line flow of authority and responsibility from the top level down to the lowest level, with each subordinate receiving orders from only one superior. Because this rigid vertical chain of command resembles the discipline and structure of the armed forces, it is also known as the military or army organisation.

✓Final answer
$Line (linear) organisation is called army organisation.$
CBSE 2024Set MARCH1 mark
$Q. What is Matrix organisation?$
›Reveal solutionSolution

Matrix organisation combines functional and project authority in one structure.

Matrix organisation is a hybrid structure in which the vertical functional departments (production, finance, marketing, etc.) are combined with horizontal project teams. Each employee works under two superiors simultaneously — the functional manager and the project manager. It is suitable where complex projects need specialists from different functions to work together, giving flexibility and better use of expertise, though it can cause dual-authority confusion.

✓Final answer
$Matrix organisation is a structure combining functional authority with project authority, so employees report to both a functional head and a project manager.$
CBSE 2024Set ANNUAL1 markMCQ
$Q. The organizational structure which required product specilisation - A) Formal organisation B) Informal organisation C) Functional organisation D) Divisional organisation$
›Reveal solutionSolution
The answer is D) Divisional organisation, the structure based on product specialisation.

Organisational structures are mainly of two types:

Functional structure — activities are grouped by similar functions (production, marketing, finance, etc.); it promotes functional specialisation.

Divisional structure — activities are grouped on the basis of products; each division handles one product line with its own functions, giving product specialisation. It suits large organisations with multiple product lines.

Because the question asks for the structure requiring product specialisation, the answer is divisional organisation.

✓Final answer
$D) Divisional organisation.$
CBSE 2024Set ANNUAL1 markMCQ
$Q. In an enterprise organisation is established by$
(a) Top management
(b) Middle management
(c) Lower management
(d) Board of directors
›Reveal solutionSolution

The organisation structure is established by top management.

Designing the formal organisation structure — deciding the departments, authority relationships and overall framework — is a strategic decision taken by top management (board of directors / chief executives). Middle and lower management operate within and implement this structure but do not create it. Hence the organisation is established by top management.

✓Final answer
$Option (a) Top management is correct.$
CBSE 2024Set ANNUAL1 mark
$Q. Which organizational structure is suitable for a company manufacturing multiple products?$
›Reveal solutionSolution

A company manufacturing multiple products is best organised under a Divisional structure, where the whole organisation is split into product-wise divisions, each division working almost like a self-contained business for its own product line.

In a Divisional structure, each major product (or product group) is treated as a separate division, headed by a divisional manager who is accountable for that division's own performance. Within each division, all the necessary functional departments — production, marketing, finance, personnel — are set up to serve that specific product, so the division can operate with a good degree of autonomy. This is particularly suitable for large, multi-product companies because it allows top management to pinpoint which product line is performing well or poorly (fixing accountability clearly), lets divisional managers develop all-round managerial skills (since they handle every function for their product), and makes the structure flexible enough to add a new division (for a new product line) or shut one down without disturbing the rest of the organisation. A Functional structure, by contrast, groups the WHOLE organisation by function (one production department serving all products together) and tends to get unwieldy and harder to coordinate when the number of distinct products grows large — which is exactly why the divisional form is preferred for multi-product companies.

✓Final answer
$Divisional structure — each product line is organised as a separate self-contained division, with its own functional departments (production, marketing, finance, etc.) reporting to a divisional head.$
CBSE 2024Set ANNUAL1 markMCQ
$Q. Sharda Limited is pursuing diversified activities and operations which require a high degree of specialization. Identify the type of structure that should be followed by Sharda Limited.$
(a) Functional structure
(b) Divisional structure
(c) Decentralised structure
(d) Informal structure
›Reveal solutionSolution

A company with diversified operations needing a high degree of specialisation should adopt a Divisional structure.

A divisional structure groups together all activities connected with one product line (or one geographical area) under a single division, headed by a divisional manager. Each division is relatively self-contained and has its own production, sales, finance and personnel functions, allowing deep specialisation in that particular line of business. This is distinct from a functional structure, which is better suited to a single-product business where grouping by department (one production department, one marketing department, etc. serving the whole company) is more efficient. Because Sharda Limited pursues diversified activities requiring a high degree of specialisation in each line, the divisional structure fits best — it lets each product division build deep expertise in its own area, improves accountability for performance of each division, and makes it easy to add or close a division without disturbing the rest of the organisation.

✓Final answer
$Divisional structure.$

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