CBSE 2025, BS Set 1

Question

'Nurata Ltd.' is a leading manufacturer of clothing in India, known for good quality casual wear as well as formal wear for children. The company is earning good profits and now wants to expand its business by entering into the business of electronics and home appliances too. The management decided to create separate business units, where each unit head would be responsible for a specific product category and for its performance. All key functions, such as marketing, finance, production, etc. would be handled within each unit.

(a) Identify the organizational structure adopted by 'Nurata Ltd.' on expansion of its business.

(b) State any **two advantages and one disadvantage** of the organizational structure identified in (a) above.

Edvaya · Accepted Answer

The correct answer is Subjective. **(a) Organizational Structure: Divisional Structure** 'Nurata Ltd.' has adopted the **Divisional Structure** on expansion. In this structure, separate self-contained divisions are created for each product category (Clothing, Electronics, Home Appliances), with each division head responsible for the performance of their unit and all key functions (marketing, finance, production) handled within the division. **(b) Advantages and Disadvantage of Divisional Structure:** **Advantages (any two):** 1. **Product specialization:** All activities related to one product type are grouped under one division, developing varied and deep expertise in divisional heads and their teams. This leads to better product-focused decision-making. 2. **Fixation of accountability:** Since revenues and costs of each division (product) can be easily identified and assigned, it enables clear measurement of performance and strict accountability for profits or losses at the divisional level. **Disadvantage (any one):** 1. **Higher operating costs:** Each division maintains its own set of functional departments (marketing, finance, HR, etc.), leading to **duplication of resources and effort** across divisions, which significantly increases operating costs for the organisation.

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Business Studies > Principles And Functions Of Management > Organising

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