What Are The Advantages Of Product Departmentation?


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Nicole Manion answered
Before your question can be answered, you must first realize that there are four different types of departmentation, each with their own different advantages and disadvantages.

These four are: Functional departmentation, product departmentation, territory departmentation and customer departmentation.

  • Functional departmentation

This is the most straightforward of the four. Functional departmentation is when each department is created depending upon its function. For example, one department may be focused upon personnel whilst another deals with finance.

The advantage of this method is that it is a very simple, uncomplicated approach that is easy to control and manage.

  • Product departmentation

This form of departmentalization is used when there are a huge variety of products within a company; each department is based on the product that it deals with.

There are many different advantages to this system, the main being that it provides a higher level of customer service. It also ensures that products that are not very profitable to the company can be easily detected, and that new products can be added to the range easily. 

Another benefit of having this department is that it can take control of stock so that customers will never be disappointed with out of stock items, and less popular items can be discontinued quickly with incurring great losses.

  • Territory departmentation

This is to do with where an organization is based. For example some companies, a haulier, for example, may have depots in a variety of different places and while some of these will work independently of each other, others need to be linked with some form of territory departmentation.

  • Customer departmentation

This is a pretty obvious department in as much as it is responsible for the company's customers, without whom there would be no business.

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