Groupings of activities
There are different ways organisations group the activities they undertake. They are:
Functional grouping
Functional grouping is a company structure with a board of directors overseeing a chief executive managing different departments
This is the traditional method of organising a firm into departments based on their core activities such as marketing or finance. This means that staff with similar expertise work together.
| Advantages | Characteristics 鈥 this will be the second title cell |
| Brings together employees with similar skills allowing expertise to develop. | Can lead to slow decision making and poor communication |
| Less duplication of resources | Can become unresponsive to external changes in the market |
| Advantages | Brings together employees with similar skills allowing expertise to develop. |
|---|---|
| Characteristics 鈥 this will be the second title cell | Can lead to slow decision making and poor communication |
| Advantages | Less duplication of resources |
|---|---|
| Characteristics 鈥 this will be the second title cell | Can become unresponsive to external changes in the market |
Product / service grouping
Product or service grouping is a company structure that is split into divisions.
This is when an organisation is divided into divisions based on a product they make or a product range.
| Advantages | Disadvantages |
| It encourages customer loyalty | There can be duplication of effort and resources |
| Easier to identify products that are poorly performing | Departments based on products may end up competing with each other |
| Departments can respond more quickly to change in their specialist area | Difficult to share expertise and resources across departments |
| Advantages | It encourages customer loyalty |
|---|---|
| Disadvantages | There can be duplication of effort and resources |
| Advantages | Easier to identify products that are poorly performing |
|---|---|
| Disadvantages | Departments based on products may end up competing with each other |
| Advantages | Departments can respond more quickly to change in their specialist area |
|---|---|
| Disadvantages | Difficult to share expertise and resources across departments |
Customer grouping
Customer grouping divides its operations by types of customer.
This is when an organisation divides its operations by types of customer. It may divide its customers into:
- retail (high street sales)
- online operations
| Advantages | Disadvantages |
| It encourages customer loyalty as customer needs are the main focus of the department | There can be duplication of effort and resources |
| Individual departments are more responsive to changes in customer needs | Competition between departments may occur |
| Difficult to share expertise and resources across departments |
| Advantages | It encourages customer loyalty as customer needs are the main focus of the department |
|---|---|
| Disadvantages | There can be duplication of effort and resources |
| Advantages | Individual departments are more responsive to changes in customer needs |
|---|---|
| Disadvantages | Competition between departments may occur |
| Advantages | |
|---|---|
| Disadvantages | Difficult to share expertise and resources across departments |
Place / territory grouping
Place or territory grouping divides its operations by geographical area
This is common among large multinationals. This is where the organisation divides its operations by geographical area.
| Advantages | Disadvantages |
| Each department can meet the needs of local markets and can react quickly to external factors | Naturally high cost due to duplication of effort and resources |
| Communication is better, for example with different languages or cultures | Departments may begin to compete with each other |
| Failing departments can be easily identified | New departments need to be created when the business wants to trade in a new area. |
| Advantages | Each department can meet the needs of local markets and can react quickly to external factors |
|---|---|
| Disadvantages | Naturally high cost due to duplication of effort and resources |
| Advantages | Communication is better, for example with different languages or cultures |
|---|---|
| Disadvantages | Departments may begin to compete with each other |
| Advantages | Failing departments can be easily identified |
|---|---|
| Disadvantages | New departments need to be created when the business wants to trade in a new area. |
Technological grouping
Technological grouping divides its operation by the type of technology required.
This is where the organisation divides its operation by the type of technology they require. It can often be used in the manufacturing industry where departments are created based on the stage in the production process such as design or welding
| Advantages | Disadvantages |
| Specialists are all working together which may result in a higher quality product | High cost of training |
| Wastage and costs may be reduced due to specialist equipment and staff knowledge | There can be duplication of effort and resources |
| Can only be used in very large organisations |
| Advantages | Specialists are all working together which may result in a higher quality product |
|---|---|
| Disadvantages | High cost of training |
| Advantages | Wastage and costs may be reduced due to specialist equipment and staff knowledge |
|---|---|
| Disadvantages | There can be duplication of effort and resources |
| Advantages | |
|---|---|
| Disadvantages | Can only be used in very large organisations |