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Functional structure requires grouping and organising activities that are of similar nature. Under functional organisation each group functions separately and specialise in their work. Financial structure is suitable for organisations that are large and which have various functions.
Here are two circumstances that under functional structure is appropriate
1. Large sized organisations need to have a functional structure in order to operate smoothly. There will be many departments within the organisation and making differentiation based on departments is very much helpful for a organisation. It helps in improving efficiency of the managers so that the work progresses smoothly.
2. A high degree of coordination is required for managing various functions. It is done to improve efficiency. If an organisation is having a clear division of work, a functional structure helps in promoting coordination between the various departments and thereby ensures all functions go on smoothly.