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Under the departmentation by process or equipment, activities are grouped on
the basis of various manufacturing process. Similar types of labour and equipment
are brought together. It permits intensive and economical usage of costly


Geographic departmentation, also known as the departmentation by territory,
facilitates adaption to territorial differences. Large companies that distribute
products on a massive scale nationally, often cannot coordinate all regions from
the headquarters. Each region of the country has district needs, tastes and
facilities that demand coordination. Geographic departmentation helps in
exploting the local advantages. Decisions regarding product design, pricing and
marketing maybe left to the discretion of the territorial managers who are close
to customers and know their needs better. Territorial departmentation reduces
transport costs and provides an excellent opportunity to build community


A formal organization is a group of people working together cooperatively, under
authority towards goals that mutually benefit the participants and the
organization. It is a system of well-defined jobs, each bearing a definite measure
of authority, responsibility and accountability. The manager describes
organizational relationships, in written and graphic form. He tells the participants
to do certain things in a specified manner, to obey orders from designated
individuals, and to work cooperatively with others. It is believed that stable and
consistent relationships promote order and facilitate planning and controlling
functions. The environment is specified as top place, time and resources available.
Rewards are available for those, who achieve the stated goals.
The official structure, however is only a portion of the
story. There emerges another structure consisting of informal relationships. The
interactions between participates arise spontaneously and are not prescribed by
the formal structure, nor can they be completely controlled by formal authority.
Unlike formal organizations, where the emphasis is on authority, responsibility
and accountability, the emphasis in informal organizations is on status, power and
politics. The informal organisationcan be
viewed as a shadow organization. It arises naturally, spontaneously from the
interactions of people. It refers to unofficial and unauthorized relationships that
inevitably occur between individuals and groups within the formal organsation. It
exists within the confines of the formal authority structure. However, the
interactions that occur informally are not prescribed by the formal structure nor
can they be completely controlled by the formal structure. It is a by-product of
human nature and is affected by the formal structure.