An Exchange organization can contain thousands of recipients. If you compile all your recipients in the default address lists, those lists could become quite large. To prevent this, you can create custom address lists to help users in your organization find what they are looking for more easily.
For example, consider a company that has two large divisions and one Exchange organization. One division, named Fourth Coffee, imports and sells coffee beans. The other division, Contoso, Ltd, underwrites insurance policies. For most day-to-day activities, the employees at Fourth Coffee do not communicate with the employees at Contoso, Ltd. Therefore, to make it easier for employees to find recipients who exist only in their division, you can create two new custom address lists—one for Fourth Coffee and one for Contoso, Ltd. When searching for recipients in their division, these custom address lists allow employees to select only the address list that is specific to their division. However, if an employee is unsure about the division in which the recipient exists, the employee can search within the GAL, which contains all recipients in both divisions.
You can also create subcategories of address lists called hierarchical address lists. For example, you can create an address list that contains all recipients in Manchester and another that contains all recipients in Stuttgart. called Research and Development within the Manchester address list container that contains all employees who work in Manchester's Research and Development department.