Groupings Flashcards
What is a functional grouping?
This involves grouping an organisation into departments called functional areas, based on skills and expertise. The main functional areas are marketing, finance, operations and human resources.
What is a location grouping?
This is grouping an organisation into geographical divisions. Each division will operate to serve customers in a particular location.
What is a product/service grouping?
This is grouping an organisation into divisions that deal with different products or services e.g. Virgin has different groups for Virgin Money, Virgin Media, Virgin Atlantic etc.
What is a technology grouping?
This is similar to a product/service grouping but involves businesses organising their activities according to the technology or production processes used.
What is a customer grouping?
This involves grouping the organisation’s resources into divisions that each deal with a different type of customer e.g. a business might have a division for retail customers, wholesale customers and online customers.
What are the advantages of functional grouping?
Staff with similar skills and expertise are together, allowing for specialisation, i.e. each department becomes excellent at what it does.
Staff know who to report to and can get guidance from more experienced staff in their area of expertise.
Clear structure, lines of authority and career paths are mapped out for employees.
What are the disadvantages of functional grouping?
The organisation can become too large to manage if functional departments grow rapidly.
Functional departments can be more interested in their own objectives rather than the organisation’s objectives.
Functional grouping is often coupled with a centralised structure so communication can take a while to filter through to functional departments, causing slow reactions to external factors.
What are the advantages of location grouping?
Each division can meet the needs of its local market, e.g. different tastes or fashions in different areas or countries.
It is easy to identify a failing ‘area’ and hold regional managers accountable.
The business can react to changing external (PESTEC) factors quickly.
What are the disadvantages of location grouping?
Divisions may compete against each other and forget the overall objectives of the organisation as a whole.
Local knowledge and relationships with local customers are lost if staff leave.
Duplication of resources, such as administration staff or computer equipment, across each group is inefficient.
What are the advantages of product/service grouping?
The business can react to changing external (PESTEC) factors that affect each particular group’s market quickly.
It is easy for management to identify struggling products/services.
What are the disadvantages of product/service grouping?
Duplication of resources can occur.
A new group needs to be set up
every time the business launches a
new product – meaning more staff,
equipment and premises costs.
What are the advantages of technology grouping?
High degree of specialisation can occur in production.
Capital intensive – which can reduce wage costs.
Problems in the production process can be easily identified.
What are the disadvantages of technology grouping?
High degree of specialised training is required.
Capital intensive- which is expensive.
Only an option for very large businesses with different production processes.
What are the advantages of customer grouping?
Customer loyalty can build up due to the high level of personal service that can be achieved.
Each group can tailor its product or service to its own type of customer.
What are the disadvantages of customer grouping?
Duplication of resources can occur.
This is only suitable for large businesses, with many customer types/segments that are of sufficient size. It is inefficient to offer a group for a small customer segment.
