Business – 7.1 Organisational structure – Objectives and structure | e-Consult
7.1 Organisational structure – Objectives and structure (1 questions)
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The pursuit of cost efficiency influences the two structures in distinct ways, as shown below:
| Aspect | Functional Structure | Divisional Structure |
| Specialisation | High – economies of scale in specialised departments. | Lower – each division repeats similar functions, reducing scale benefits. |
| Control of Costs | Centralised budgeting enables tighter cost control. | Decentralised budgets may lead to cost duplication. |
| Flexibility | Less flexible – changes affect the whole function. | More flexible – divisions can adapt to market changes independently. |
| Coordination Costs | Lower – fewer inter‑divisional interfaces. | Higher – need for coordination between divisions. |
Thus, a functional structure generally supports cost‑minimisation through economies of scale and central control, whereas a divisional structure may increase costs due to duplication but offers greater market responsiveness.