1. Functions. Important enterprise functions provide the
usual basis for classifying activities into departments.
Manufacturing, marketing, finance, personnel, accounting and
engineering are the typical functions of an industrial enterprise,
and departments ma be established on the basis of such functions.
But all these functions are not alike in importance from the business
point of view. Marketing and manufacturing are the basic functions
of an industrial concern, and others are regarded as service
functions because they exist for supporting the main functions of the
business. Accordingly, basic and main functions must be given a
higher organizational status than the status enjoyed by service
functions. Further more, the size, nature and volume of business
have an important say in creating departments. A small business may
not require so many departments, and it may be put under the
manufacturing departments, viz. Marketing, manufacturing and
finance. Purchasing, engineering and accounting may be put under the
manufacturing department, and accounting under finance. Conversely,
large-sized enterprises may be required to create more units than
this classification of functions warrants. For example, marketing
department may be split into three separate ones like sales,
advertising, and market research & product design. This type of
departmentation is known by fictionalization.
Products. Products manufactured may be adopted for division as
well as for sub division purposes. When there are several product
lines an each product line consists of a variety of items, functional
classification fails to give balanced emphasis on each product.
Slow-moving and outdated products may be given greater attention at
the cost of growing ones. For the sake of expansion and development
of their products, many large enterprises have created more or less
autonomous, self-sufficient products divisions based on either one
single product or a group of related products. A gigantic structure
with separate product lines is usually laid on this pattern of
departmentation which is technically called divisionalization. With
favourable product and market characteristics, divisionalization
become the only choice available to large-sized enterprises. Apart
form this use, product or services may be made the basis of major
divisions by a departmental store, a banking concern and an insurance
company. Again, manufacturing an marketing departments may subdivide
their activities on the basis of products.
Territories. Like the products basis, geographical regions are
adopted for main division as well as for subdivision purposes.
Units that are located at physically dispersed areas are made so many
self-contained divisions of the organization. Apart form this
divisionalization, marketing activities are very often subdivided on
the basis of geographical areas.
It has almost the same
advantages and disadvantages as are to be found in the case of
departmentation by products. There are two special advantages of
this pattern of grouping activities. Being nearer to the market and
becoming familiar with local conditions, this classification help to
cater to the needs of local people more satisfactorily. In addition,
the economy in transport cost, the local supply of raw materials or
services and the convenience of supervision make a significant
contribution towards the lower cost of operation.
Customers. This basis of classification is widely followed in
subdividing activities of the marketing department. To give
individual attention to diverse groups of buyers in the market, sales
activities are often split into several parts. When the products are
offered to an extensive market through numerous channels and outlets,
it has the special merit of supplying goods in accordance with the
peculiar needs of customers. Sales being the exclusive field of its
application, co-ordination may appear difficult between sales
function and other enterprise functions. Specialized sales staff may
become idle with the downward movement of sales to any specified
group of customers.
5. Processes. The
manufacturing activities may be subdivided on the basis of their
processes of production. Similar machines are grouped into separate
sections that are utilized for a distinct operation of the job. For
example, lathe machine, drill machine, grinding machine and milling
machine are placed in each distinct unit. In office work also, this
basis of grouping activities has become common, e.g., filing
department, mail handling department and duplicating department.
Cost and economy considerations urge the use of electronic office
equipments and other costly machine on the basis of this subdivision.
It is, however, not a suitable basis to be utilized in any mass