Introduction to Functional Areas of Management Unit 3

Questions and Answers

What is the primary reason for organizing a business into departments?

To create a hierarchical structure

To increase the number of managerial positions

To reduce the number of employees

To create specialists who can perform jobs efficiently (correct)

What type of organisational structure groups activities belonging to each management function together?

Customer-based structure

Functional structure (correct)

Product structure

Geographic structure

Which of the following is NOT a type of organisational structure?

Functional structure

Departmental structure (correct)

Geographic structure

Customer-based structure

What is the main purpose of structuring a company according to customers?

To adapt to customer needs, which is the essence of good marketing Signup and view all the answers

What is the result of a business growing and reaching a particular size?

The owner-manager creates a series of managerial positions Signup and view all the answers

What is a key benefit of customer departmentalisation?

Greater customer focus and understanding of customer needs Signup and view all the answers

Under the Marketing Function, which of the following activities is NOT typically grouped?

Human Resource Management Signup and view all the answers

What is the benefit of grouping activities into smaller units in an organisational structure?

To split the management process into smaller more manageable units Signup and view all the answers

What is a disadvantage of customer departmentalisation?

Fostering of politics in resource allocation Signup and view all the answers

What type of manager is developed through customer departmentalisation?

Customer advocates Signup and view all the answers

What is a limitation of customer departmentalisation in terms of problem solving?

It restricts problem solving to a single type of customer Signup and view all the answers

What is one of the advantages of a functional organisation structure?

Promotes high-quality technical problem-solving Signup and view all the answers

What is a disadvantage of functional departmentalisation?

Focuses on departmentalisation rather than organisational issues & goals Signup and view all the answers

What is the advantage of geographic departmentalisation?

Managers know customer’s problems Signup and view all the answers

What is a disadvantage of geographic departmentalisation?

All functions are duplicated at each location, very costly Signup and view all the answers

What is the advantage of product departmentalisation?

Develops managers who can think across functional lines Signup and view all the answers

What is a disadvantage of product departmentalisation?

Fosters politics in resource allocation Signup and view all the answers

What is departmentalism according to customers?

The organisation is divided based on its customers Signup and view all the answers

What is an example of a company that uses geographic departmentalisation?

Unilever Signup and view all the answers

Why is product departmentalisation suited to fast changes in a product?

Because it allows greater product viability Signup and view all the answers

What is the main advantage of functional departmentalisation in Toyota S.A?

It reduces duplication of resources Signup and view all the answers

Study Notes

Organising a Business into Departments

The purpose of departmentalisation is to create specialists who can perform tasks more efficiently than generalists.
As a business grows, it becomes impossible for the owner-manager to supervise all employees, leading to the creation of managerial positions and departmentalisation.

Types of Organisational Structures

Functional structures
Geographic structures
Product structures
Customer-based structures

Functional Organisational Structures

The most basic structure type, where activities belonging to each management function are grouped together (e.g. Marketing, Sales, Public Relations).
Advantages:
Promotes skill specialisation
Enhances career development and training within the department
Promotes high-quality technical problem-solving
Reduces duplication of resources and increases coordination within the functional area
Centralises decision-making
Disadvantages:
Emphasises routine tasks
May create conflict over product priorities
Focuses on departmentalisation rather than organisational issues and goals
Reduces communication between departments
May make interdepartmental scheduling difficult
Develops managers who are experts in narrow fields

Geographic Organisational Structures

Departmentalisation according to location, suitable for businesses operating in different geographic regions.
Advantages:
Equipment is located in one place, saving time and costs
Managers know customer problems
Managers develop expertise in solving problems unique to one location
Method is suited to multinational companies
Production can be located near suppliers/raw materials
Disadvantages:
All functions are duplicated at each location, which is costly
May cause conflicts between each location's goals and corporate goals
May require extensive rules and regulations to coordinate and ensure uniformity of quality among locations

Product Organisational Structures

Departmentalisation according to products, where all activities related to a product are grouped together.
Advantages:
Suited to fast changes in a product
Fosters a concern for customer demand
Develops managers who can think across functional lines
Allows greater product viability
Disadvantages:
May not use skills and resources effectively
Fosters politics in resource allocation
Limits career mobility for personnel outside their product line
Doesn't foster coordination of activities across product lines
Restricts problem-solving to a single product

Customer Departmentalisation Structures

Departmentalisation according to customers, where an organisation focuses on a special segment of the market.
Advantages:
Allows greater customer focus
Suited to understanding customer needs
Clearly identifies key customers
Develops managers who become customer advocates
Disadvantages:
Doesn't foster coordination between customers
Employees feel pressure from customers to give them privileges
Fosters politics in resource allocation
Restricts problem-solving to a single type of customer

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Description

Learn about the importance of departmentalisation in business organisations, creating specialists and its impact on efficiency. Understand how business growth leads to the creation of managerial positions.