structures - groupings of organisational activities Flashcards
what are the five different ways organisations group the activities they undertake?
- functional grouping
- product/service grouping
- customer grouping
- place/territory grouping
- technological grouping
what is functional grouping?
a functional grouping is an organizational structure in which the business is divided into smaller groups based on specialized functional areas, such as IT, finance, or marketing
what are the advantages of functional grouping?
- brings together employees with similar skills allowing expertise to develop
- it may be more efficient since there is less duplication of resources, eg, there is only one finance department, rather than each department having its own
- functional grouping often allows for greater operational efficiency because employees with shared skills and knowledge are grouped together
what are the disadvantages of functional grouping?
- different functional groups may not communicate with well with one another, leading to poor decision making.
- the business can become slow to respond to external changes in the market
what is product or service grouping?
product or service grouping is a framework in which a business is organised in separate divisions, each focusing on a different product or service
what are the advantages of product/service grouping?
- easier to focus on specific market segments
- easier to identify products that are poorly performing
- meets customer needs more effectively
- extends knowledge or expertise within specialised divisions
what are the disadvantages of product/service grouping?
- duplication of functions and resources, eg, a different sales team for each division
- more difficult to share expertise and resources across departments
- departments based on products may end up competing with each other, creating negative rivalries
- managers strive to achieve divisional goals rather than organisational goals
what is customer grouping?
customer grouping is when an organisation divides its operations by types of customer
what are the advantages of customer grouping?
- customer groups are more responsive to changing customer needs
- better organised to meet the needs of local markets, eg, different tastes or fashions in different towns or countries
- customer grouping encourages concentration on customer needs, which can lead to higher levels of customer satisfaction and loyalty
- develops knowledge and expertise in the customer area, eg what advertising works best in retail stores compared with online selling
what are the disadvantages of customer grouping?
- more likely to be duplication of resources, such as administration staff or IT equipment across each customer grouping
- more difficult to share expertise and resources across departments.
Departments may compete against each other – eg, retail division competing with the online sales team - departments based on products may end up competing with each other, creating negative rivalries
what is place/territory grouping?
place or territory grouping divides its operations by geographical area
what are the advantages of place/territory grouping?
- each department can meet the needs of local markets and can react quickly to external factors
- communication is better, for example with different languages or cultures
- failing departments can be easily identified
what are the disadvantages of place/terriotry grouping?
- naturally high cost due to duplication of effort and resources
- departments may begin to compete with each other
- new departments need to be created when the business wants to trade in a new area
what is technological grouping?
technological grouping divides its operation by the type of technology required
what are the advantages of technological grouping?
- specialists are all working together which may result in a higher quality product
- wastage and costs may be reduced due to specialist equipment and staff knowledge
