Divisional Strategies

Each division within this structure can correspond to either products or geographies of
the organization. Each division contains all the necessary resources and functions
within it to support that particular product line or geography (for example, its own
finance, IT, and marketing departments). Product and geographic divisional structures
may be characterized as follows:

 Product departmentalization : A divisional structure organized by product

departmentalization means that the various activities related to the product or
service are under the authority of one manager. If the division builds luxury
sedans or SUVs, for example, the SUV division will have its own sales,
engineering, and marketing departments distinct from those departments within
the luxury sedan division.
 Geographic departmentalization: Geographic departmentalization involves
grouping activities based on geography, such as an Asia/Pacific or Latin American
division. Geographic departmentalization is particularly important if tastes and
brand responses differ across regions, as it allows for flexibility in product offerings
and marketing strategies (an approach known as localization).

A common legal structure known as the multidivisional form (or “M-form”) also uses the
divisional structure. In this form, one parent company owns subsidiary companies, each
of which uses its brand and name. The whole organization is ultimately controlled by
central management; however, most decisions are left to autonomous divisions. This
business structure is typically found in companies that operate worldwide—for example,
Virgin Group is the parent company of Virgin Mobile and Virgin Records.

Advantages of a Divisional Structure

As with all organizational structure types, the divisional structure offers distinct
advantages and disadvantages. Generally speaking, divisions work best for companies
with wide variance in product offerings or regions of geographic operation. The
divisional structure can be useful because it affords the company greater operational
flexibility. In addition, the failure of one division does not directly threaten the other
divisions. In the multidivisional structure, subsidiaries benefit from the use of the brand
and capital of the parent company.

Disadvantages of a Divisional Structure

Some disadvantages of this structure include operational inefficiencies from separating

specialized functions—for example, finance personnel in one division do not
communicate with those in another division. Disadvantages of the multidivisional
structure can include increased accounting and tax implications.
DISTRIBUTORS
One of the most common types of business opportunity ventures, a distributor
or dealer is an independent agent who's entered into an agreement to offer
and sell the product of another company but isn't entitled to use the
manufacturer's name as part of its business name. Depending on the
agreement, the distributor may be limited to selling only that company's goods
or it may have the freedom to market several different product lines or
services from various firms.

Distributors: A distributor is a wholesaler who assumes extra responsibility. In addition to fulfilling

retailer orders, they actively sell products on behalf of the producers. From managing orders and returns
to acting as a sales representative, they go beyond being the middleman between retailers and
producers. They perform market analysis and are constantly searching for new opportunities to achieve
peak sales performance. A distributor focuses on a particular area and market which allows them to
cultivate strong relationships with manufacturers. Unlike a wholesaler, they most likely have a stronger
affiliation with particular companies. Distributors have a direct responsibility to making sure products
are flying off retail shelves.

What is Diversification?
Diversification occurs when a business develops a new product or expands into a new market.
Often, businesses diversify to manage risk by minimizing potential harm to the business during
economic downturns. The basic idea is to expand into a business activity that doesn't negatively
react to the same economic downturns as your current business activity. If one of your business
enterprises is taking a hit in the market, one of your other business enterprises will help offset the
losses and keep the company viable. A business may also use diversification as a growth strategy.

Strategies for Diversification

There are different diversification strategies a company may employ. We'll take a look at some of
the primary strategies.
Our first strategy is concentric diversification. A company may decide to diversify its activities by
expanding into markets or products that are related to its current business. For example, an auto
company may diversify by adding a new car model or by expanding into a related market like trucks.
An advantage to this approach is the synergy that can be created due to the complementary
products and markets. Additionally, expansion can be relatively easy because the skills and
knowledge to run the new business are similar to those the company already possesses.