Question

‘Chaman Pharmaceuticals Ltd.’ is a company providing medicines all over the country. After establishing itself and making a name in the field of medicines, it decided to enter into the field of medical devices, baby care products and nutritional supplements. Each product category had a different head accountable for profits, revenues and costs. In case of poor performance of their product, the heads were held responsible. But as the heads of different product categories were different, conflict could arise among different heads with reference to allocation of funds. Also providing a separate set of similar functional heads for each product category increased expenditure.

(i) Identify and explain the type of organisation structure ‘Chaman Pharmaceuticals Ltd.’ had followed after entering into the field of medical devices, baby care products and nutritional supplements.

(ii) Also state any one advantage and any one disadvantage of the organizational structure discussed in the above para by quoting lines.

Hint:

The firm is grouped by product categories, so it follows a divisional structure. The advantage is clear accountability and the disadvantage is higher expense.

Answer 1

Step 1: Read the case:
Chaman Pharmaceuticals started with medicines and then added medical devices, baby care products and nutritional supplements. Each product category has its own head, who is held responsible for its profits, revenues and costs.

Step 2: Part (i) - Identify and explain the structure:
The company follows the divisional structure.
In this structure the organisation is divided into divisions on the basis of products. Each division has one manager and is run almost like a separate unit.
The head of each division looks after all the functions needed for that product and is answerable for its results.

Step 3: Part (ii) - One advantage:
The case says: Each product category had a different head accountable for profits, revenues and costs. In case of poor performance of their product, the heads were held responsible.
So the advantage is that the performance of each division can be measured and responsibility can be fixed easily.

Step 4: Part (ii) - One disadvantage:
The case says: Providing a separate set of similar functional heads for each product category increased expenditure.
So the disadvantage is higher cost because many functions are repeated in every division. Another line, conflict could arise among different heads with reference to allocation of funds, shows a second problem.

Final Answer:
The structure is divisional. Advantage: accountability of heads is fixed. Disadvantage: expenditure increases.