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This is the simplest and most prevalent basis for departmentation. Under this all the functions of similar nature are divided in different units which are called departments. EXAMPLE: The functions of manufacturing concern can be divided into production department, marketing department, financial department and personnel department. Again sub departments can be established in each department.
Product departmentation involves the grouping together of all the activities necessary to manufacture a product or product line. EXAMPLE: In an automobile organization the departmentation could be car division, truck division, bus division.
* * Departmentation by territory or geography means, “Grouping of activities by area or territory is common in enterprises operating over wide geographic areas.” *Organizations which are involved in banking , insurance , transportation.*EXAMPLE: India could be divided into north , south , east , west , central zones. *Further North Zone can be divided into Chandigarh, New Delhi, Ludhiana.
*In this process involved in production or various types of equipments used are taken as basis of departmentation.*The basic aim to do process departmentation is to achieve economic benefit. *EXAMPLE: Process departmentation in case of textileorganization can be by dividing the production into spinning, dyeing, weaving, finishing departments.
*Grouping of activities around marketing channels involves making an organization structure reflect the ways an organization reaches the ultimate customer. *Advantage of this type is that it focuses on customer who are the ultimate suppliers of money to the organization.EXAMPLE: In pharmaceutical companies different customers could be doctors , hospitals , government , retail stores. *Further it could be wholesale , retail , export.
*In some organizations where work is performed through day and night , the work is divided into shifts. Thus when an organization may operates on three shifts, three different departments may exist.