by Jesse Vorton

Created on: July 17, 2010

Departmentalization can be described as the system in place which firms group jobs into more provincial (narrow) units. Departmentalized firms can largely benefit from this division of their work activities. Often coordination and control our provincial, and made much easier, as those top managers can view the various activities of their employees, and how they are performing within this specified department. Departmentalization enables an organization to exploit each department as a profit center. A profit center can be described as a separate department in which is held accountable for its own profits as well costs. By making each department a profit center, this will enable the parent organization to determine exact sales, as well advertising costs more accurately. Once these jobs have been grouped logically, purpose oriented; departmentalization can then occur across these lines: customer, process, product, geographic, and functional.

Customer Departmentalization

This can be described as those departments that are grouped together in terms of customers and the likelihood of such customers to purchase a particular product. For instance, HMV music stores are sectioned off into departments i.e. classical, R&B, rock, and pop and so forth. Each department will attract a different consumer i.e. people who will have a different ear for different music.

Product Departmentalization

This is where an organization will group their products accordingly in terms of the product provided, and eventually sold. For example, banks will often handle business loans in one department, and personal loans in a different.

Process Departmentalization

Process departmentalization, can be described as the grouping of certain manufacturing processes, used to produce a good, or provide a service, together into one cohesive department. For example, the pickle maker Vlasic, has many different departments which works to transform cucumbers into fresh pickles, cured and brine and later relished. These cucumbers are then later to be sliced and coupled with a variety of other ingredients. Each process along these lines requires different knowledge and know-how as well processing equipment.

Geographic Departmentalization

Geographic departmentalization is where a firm will group its department in relevance to the proximity of the country in which they are supplying their goods or services. These firms, including the Canadian bank of Toronto Dominion, has divisions across four different regions of Canada, this includes Québec, the Atlantic, Central, and BC/Western.

Functional Departmentalization

This is where different jobs within the firm is grouped together pertaining to a specific function and/or job tasks. Many firms will have a production department, a marketing department, and HR department, which all work in their own specialized way.

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