The advantages of promotion from internal sources, for the tractor division are:
(i) Improvement of morale – The internal transfers and promotions provide an impetus to the morale of the workers. They would feel assured that the company has a policy to provide opportunities to the existing employees rather than to outsiders.
(ii) Proper evaluation of employees – The management is in a better position to evaluate the performance of existing employees before considering to the other positions. The past performance of existing employees is a better guide to their skills, competency levels and commitment as compared to interviews with outsiders.
(iii) More effective team work – Since the existing employees know the middle and senior level managers, they would be motivated to put in their maximum efforts leading to more effective team work.
(iv) Cost-effective – Internal transfer from within the organisation is less costly than recruitment from external sources.

The disadvantages of transfer and promotion from the automobile division are:
(i) Absence of fresh ideas – Transfer from internal sources prevents introduction of fresh blood and new ideas which are essential for innovations.
(ii) Biases and personal preferences of managers – The managers may not necessarily promote deserving employees strictly on merit because of their personal likes and dislikes for certain individuals.
(iii) Limitations on the number of employees to be transferred – Since the transfer has to be made from within the organisation, the number of individuals who are eligible to apply would be restricted. The individuals outside the organisation who are more talented would not be given an opportunity to serve the organisation.
(iv) Rather than being motivated to work hard, employees may become complacent because of their assured promotion and seniority.