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Chapter: Principles of Management : Organizing

Bases of departmentation

Grouping activites accorgint ot the function of the management is known as functional departmentation. The basic organizational fucntions are finance, accounting, purchasing, production and marketing

            Bases of departmentation


            Departmentation by Function


Grouping  activites  accorgint  ot  the  function  of  the  management  is  known  as functional departmentation. The basic organizational fucntions are finance, accounting, purchasing, production and marketing




Functional departmentation reduces communication and co-ordination problems


                        It promotes high quality decision making


                        It increases job satisfaction of employees


Authority and responsibilty are clearly defined in functional departmentation




Co-ordination between functions of different departments is very difficult


                        Results in inadequate communication between departments


Departmentation by Teritory or Geography


Grouping all the functions within a specific geographic area is known as geograpic departmentaion. Geographic departmentations is very much suitable for large organizations whose activites are geographically dispersed, Territorial departmentation is suitable for automobile manufacturing, automobile assembly, wholesaling and oil refining




                         Production cost and sales prices are lower


                         Transportaiton cast can be reduced to a greater extent




                        It is very difficult to co-ordinate across departments


                        Top management contorl over departments is very difficult



Departmentation by Customer

In customer departmentaion, separate departments or divisions are made to serve the needs of particular customers. Customer departmentaion is employed in large ad complex orgaization.




1.Customer departmention aims to satisfy the needs of the customers in abetter and effective way


2.Managers can become experts in customers area


3.This enables to identify the key customers


4.It enables to understand customers needs.




                        It is very difficult to achieve co-ordination across departments


                        It requires experts to solve customers problems


                        Grouping of customers into department is a difficult problem


            Departmentation by Product


Product departmentation is suitable for large organizations of products or product lines


5.  Departmentation by Process


Activities are grouped according to the process involved. This suitable for manufacturing enterprises.


For eg: the  processes are drilling process, paintin process, etc..


6.  Departmentation by Time


Grouping of activites on time basis is more common in many organization. In organization there may be first shift, second shift and night shift. The tasks performed by employees in each shift are similar. This type of departmentaion is generally found in public utility services such as Railways, Hospitals, Call centers and in Manufacturing Orgainzations.


7.  Departmentation by Number


Grouping of activities on the basis of number prescribed for each unit is known as departmention by numbers


Eg: In armysoldiers are grouped in Battalion, regiments, brigades, so on…


8.  Matrix Departmention


A hybrid structure in which two or more forms of departmentaion are used together is known as matrix departmentaion. In matrix organization there are dual lines of authority. The matrix departmentaion is applicable in cinstructuion of bridges, in aerospace projects, etc..


Martix Organiation is otherwuise known as Project Organization

9.  Strategic Business Unit


It is a Division of an organization that provides a distinct product or service and has its own mission and goals


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