Organisational Groupings Flashcards
What is functional groupings?
This involves groupings an organisation into departments called functional areas, based on skills and expertise.
What are advantages of functional groupings?
- Staff with similar skills are 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 disadvantages of functional groupings?
- The organisation can become too large to manage if functional departments grow rapidly.
- 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 (PESTEC) factors.
- Functional departments can be more interested in their own objectives rather than the organisation’s objectives as a whole.
What is location grouping?
This is grouping an organisation into geographic divisions. Each division will operate to serve customers in a particular location.
What are 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.
- The business can react to changing external (PESTEC) factors quickly.
- It is easy to identify a failing ‘area’ and hold regional managers accountable. -
What are disadvantages of location grouping?
- Duplications of resources, such as administration staff or computer equipment, across each group is inefficient.
- Divisions may compete against each other and forget the overall objectives of the organisation as a whole.
- Local knowledge and relationships will local customers are lost if staff leave.
What is product/service grouping?
This is grouping an organisation into divisions that deals with different products or services. This is suitable for conglomerate organisations.
What are 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 disadvantages of product/service grouping?
- Duplications 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 is technology grouping?
This is similar to product/service grouping but involves businesses organising their activities according to the technology or production process used.
What are advantages of technology grouping?
- A high degree of specialisation can occur in production.
- Problems in the production process can be easily identified.
- Capital intensive - which can reduce wage costs.
What are disadvantages of technology grouping?
- High degree of specialised training is required.
- Only an option for very large businesses with different production processes.
- Capital intensive - which is expensive.
What is customer grouping?
This involves grouping the organisation’s resources into divisions that each deal with a different type of customer.
What are advantages of customer grouping?
- Each group can tailor its product or service to its own type of customer.
- Customer loyalty can build up due to the high level of personal service that can be achieved.
What are 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.
