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Organizational structure reflects cultural and power relationships

Additionally, within this structure, divisions could also be created geographically, with a company having divisions in North America, Europe, East Asia, etc.

This type of structure offers greater flexibility to a large company with many divisions, allowing each one to operate as its own company with one or two people reporting to the parent company’s chief executive officer or upper management staff. Instead of having all programs approved at the very top levels, those questions can be answered at the divisional level.

A downside to this type of organizational structure is that by focusing on divisions, employees working in the same function in different divisions may be unable to communicate well between divisions. This structure also raises issues with accounting practices and may have tax implications.