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'arm's length' transaction
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The advantages and disadvantages of divisionalisation may be summarised as follows. 
Advantages 
Disadvantages 
Focuses the attention of management below 'top 
level' on business performance 
In some businesses, it is impossible to identify 
completely independent products or markets for 
which separate divisions can be set up. 
Reduces the likelihood of unprofitable products 
and activities being continued 
Divisionalisation is only possible at a fairly senior 
management level, because there is a limit to how 
much discretion can be used in the division of 
work. For example, every product needs a 
manufacturing function and a selling function. 
Encourages a greater attention to efficiency, lower 
costs and higher profits 
There may be more resource problems. Many 
divisions get their resources from head office in 
competition with other divisions. 
Gives more authority to junior managers, and so 
grooms them for more senior positions in the 
future (planned managerial succession) 
Reduces the number of levels of management, 
meaning that the top executives in each division 
should be able to report directly to the chief 
executive of the holding company 
2.8 Hybrid structures 
Organisation structures are rarely composed of only one type of organisation. 'Hybrid' structures may 
involve a mix of functional departmentation, ensuring specialised attention to key functions, with 
elements of (for example): 
(a) 
Product organisation, to suit the requirements of brand marketing or production technologies 
(b) 
Customer organisation, particularly in marketing departments, to service key accounts 
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CHAPTER 5
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BUSINESS ORGANISATION, STRUCTURE AND STRATEGY