Departmentation

Departmentation by enterprise function

means grouping of activities according to
the functions of an enterprise, such as
production , selling and financing
Departmentation is a means of dividing a
large organization into smaller , flexible
units

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Advantages
Increase the efficiency of the organization
as various activities are grouped together
Furnishes means of tight control at the top.
Simplifies training.
It provides for fixation of standards of
performance and ensures effective control
Creates opportunities for the departmental
heads to take initiative

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Disadvantages
Reduces coordination between functions
as the organization is divided into various
parts
Responsibilities for profits is at top only.
Slow adaptation to change in environment.
It increases the levels of management
which is expensive and thus increases the
gap between the top management and the
workers
Departmentation creates difficulties of
communication
among the various
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Factors affecting
Departmentation
To get the benefits of specialization
Control should be effective so as to ensure
clear authority and responsibility
Coordination should be taken into
consideration
Key activities need to be separated
Expenses involved in creating separate
departments

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Basis Of Departmentation
Functional Departmentation
Product wise Departmentation
Territorial or Geographical
Departmentation
Process wise Departmentation
Customer wise Departmentation
Time wise Departmentation
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Functional Departmentation
Grouping of common or homogeneous activities to
form an organization unit is known as functional
departmentation
Further functions in an organization are divided in
two categories basic and secondary functions
Basic functions are those which are necessary for
the smooth running of the business like
production ,marketing , finance
When span of management is too large then further
departments are created within the main
departments they take care of secondary functions
In this case like the basic function is marketing but
it may further be divided into advertisement ,
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sales , market research

Product wise Departmentation

Product departmentation involves the
grouping together of all the activities
necessary to manufacture a product or
product line
Eg In an automobile organization the
departmentation could be car division ,
truck division , bus division

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DEPARTMENTATION BY
TERRITORY OR GEOGRAPHY
Departmentation by territory or geography
means
Grouping of activities by area or territory is
common in enterprises operating over wide
geographic areas.
Organizations which are involved in banking ,
insurance , transportation
Eg India could be divided into north , south ,
east , west , central zones
Further North zone can be divided into
Chandigarh , new Delhi , Jalandhar , Ajmer
divisions
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Process Departmentation
In this processes involved in production or
various type of equipments used are taken as
basis of departmentation
The basic aim to do process departmentation
is to achieve economic benefit
Eg process departmentation in case of textile
organization can be by dividing the
production into spinning , dyeing , weaving ,
finishing departments

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Customer wise
Departmentation

Grouping of activities around marketing

channels involves making an organization
structure reflect the ways an organization
reaches the ultimate customer
Advantage of this type is that it focuses on
customer who are the ultimate suppliers of
money to the organization
Eg in pharmaceutical companies different
customers could be doctors , hospitals ,
government , retail stores
Further it could be wholesale , retail , export
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Time wise Departmentation

In some organizations where work is performed
through day and night , the work is divided into shifts
Thus when an organization may operates on three
shifts, three different departments may exist

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