Customer Departmentation

Grouping activities on the basis of common customers or types of customers. Jobs may be grouped
according to the type of customer served by the organization. The assumption is that customers in
each department have a common set of problems and needs that can best be met by specialists. The
sales activities in an office supply firm can be broken down into three departments that serve retail,
wholesale and government.

Customers are the key to the way activities are grouped when each of the different things an
enterprise does is managed by one department head. The industrial sales department of wholesaler
who also sells to retailers is a case in point. Business owners frequently arrange activities on this
basis to cater to the requirements of the defined customers, and educational institutions offer
regular courses to serve different groups of students.

There are difficult decisions to be made in separating some types of customer departments
from product departments. for example in the great central cash markets for agricultural products
,the loan officers of community banks frequently specialize in fruit,vegetables,or grin even to the
point an individual officer will make loans only on wheat or oranges. This is an example of customer
departmentation.

Advantages
Customer departmentation can address the special and widely varied customers for clearly defined
services. The manufacturer who sells to the whole sellers and industrial buyers frequently can meet
their special need for setting up separate departments.nonbusiness groups follow similar practices.
The extension service universities such as night schools divisions are arranged with respect to the
subject matter and sometimes instructor to appeal to an entirely different to the group of students
from those who attend the university on a full time day.

Disadvantages

Customer departmentation is not without certain drawbacks. There is, for instance the difficulty
of coordination between this type of department and those organized on other bases, with constant
pressure from the managers of customer departments for special treatment.

Another disadvantage is the possibility of underemployment of facilities and labor periods of labor-
specialised workers in customer groups’ n the periods of recession, some customer groups may al l
but disappear, for example, machine tool buyers, in period of expansion.the unequal development
of customer groups and demands in characteristic.
Process or equipment departmentation

 Grouping activities on the basis of product or service or customer flow. Because each
process requires different skills, process departmentalization allows homogenous
activities to be categorized. For example, the applicants might need to go through
several departments namely validation, licensing and treasury, before receiving the
driver’s license.

Owing to the complexity of tasks and the competitive environment in which organizations
operate, they often use a combination of the above-mentioned methods in departmentalization

Such a basis of departmentation can be found in paint or electroplating process grouping or by the
arrangement in one plant area of punch press and automatic screw machines .in this kind of
departmentation peoples and materials are brought together in order to carry out particular
operation

Departmentation by product.
Grouping activities by product line. Tasks can also be grouped according to a specific product or
service, thus placing all activities related to the product or the service under one manager. Each
major product area in the corporation is under the authority of a senior manager who is specialist in,
and is responsible for, everything related to the product line. LA Gear is an example of company that
uses product departmentalization. Its structure is based on its varied product lines which include
women’s footwear, children’s footwear and men’s footwear. Typically, companies and other
enterprises adopting this form were organized by enterprise functions. With growth of the
production managers, sales managers, and engineering executives, the problem encountered of size

The managerial job became complex, and the span of management limited their ability to increase
the number of immediate subordinate managers. At this point, reorganisation on a product division
became necessary. This structure permits top management to delegate to a division executive
authority over the manufacturing ,sales, service and engineering functions that relate to a given
product or product line and exact a considerable degree of profit responsibility from each of these
managers.

Advantages
Product or product line is an important basis for departmentation because it facilitates the use of
specialized capital (e.g. A press for molding car bodies).it facililitates a certain type of coordination,
and permits the maximum personal skills and specialized knowledge. For example the sales
effectiveness of a particular person may be most effective when confined to lubricants, conveyors,
or power plants, each of which is sold by an expert thoroughly familiar with product. If production of
an item or closely related item is sufficiently large to employ fully specialized facilities, strong
pressure may come for product departmentation in order to realize economic advantages in
manufacturing, assembly, or handling. Also this kind of departmentation permits growth and
diversity of products and services. Also profit responsibility can be exacted from the product
departmentation managers, where they supervise the sales,production,engineering,service and
other functions they may be held responsible for certain profit goals. They have responsibility for
producing a profit along with other similiar groups and this helps the top managers to evaluate more
intelligently the contribution of each product line to total profit, thi s provides a measurable training
ground for general managers

Disadvantages
The disadvantages includes the necessity of having more persons with managerial skills, the dangers
of increased costs through application of central service and staff activities, and maintaining top
management control enterprises that operate product divisions must take care, as the general
motors’ corporations has to place enough decision making and control at the headquarters level that
the entire enterprise does not disintegrate.

Recent trends in decentralization.

Two popular trends today in departmentalization are the increasing use of customer
departmentalization and the use of cross-functional teams. Customer departmentalization helps
manager’s better monitor customers' needs and respond to changes in those needs. For example,
L.L. Bean is organized around seven customer groups. Many other organizations are using this type
of structure as well, as it allows them to better understand their customers and to respond faster to
their needs. Secondly, managers are using cross-functional teams, which are work teams composed
of individuals from various functional specialties. For instance, at Ford's material planning and
logistics division, a cross-functional team with employees from the company's finance, purchasing,
engineering, and quality control areas and with representatives from the company's outside logistics
suppliers has made several work improvement in accounts