What is a potential drawback of adopting a divisional structure for ABC's e-waste venture?

What is a potential drawback of adopting a divisional structure for ABC's e-waste venture?

• A. It might duplicate functions and increase costs.
• B. It could lead to better coordination and lower costs.
• C. It guarantees faster decision-making in all markets.
• D. It eliminates the need for cross-divisional coordination.

Answer: (A)

Divisional structures aim to make each product line or geographic area run like its own mini-business, which can boost responsiveness and accountability for the e-waste venture. However, a major downside is the duplication of functions across divisions. When HR, IT, finance, marketing, and procurement are set up separately in each division, the organization ends up with multiple layers of support staff and processes. That redundancy raises fixed costs and reduces overall efficiency, making it a real drawback of this structure for ABC’s venture. In contrast, the other options describe outcomes that are not typically assured with a divisional setup. It doesn’t guarantee better coordination and lower costs; coordination across divisions can actually become more complex and costly due to duplicated services. Faster decision-making in all markets isn’t guaranteed either, since some markets may still face bureaucratic delays or misalignment between divisions. And cross-divisional coordination doesn’t disappear—if anything, it becomes more important and, in many cases, more challenging.

Divisional structures aim to make each product line or geographic area run like its own mini-business, which can boost responsiveness and accountability for the e-waste venture. However, a major downside is the duplication of functions across divisions. When HR, IT, finance, marketing, and procurement are set up separately in each division, the organization ends up with multiple layers of support staff and processes. That redundancy raises fixed costs and reduces overall efficiency, making it a real drawback of this structure for ABC’s venture.

In contrast, the other options describe outcomes that are not typically assured with a divisional setup. It doesn’t guarantee better coordination and lower costs; coordination across divisions can actually become more complex and costly due to duplicated services. Faster decision-making in all markets isn’t guaranteed either, since some markets may still face bureaucratic delays or misalignment between divisions. And cross-divisional coordination doesn’t disappear—if anything, it becomes more important and, in many cases, more challenging.