Departmental by products

Departmental by products

Under this method, for the each product manufactured by the enterprise, there is a separate department to look after its production, sales and also finance and the personnel required for the purpose.

Advantages:

1.       The most important advantage of product Departmentation that it permits specialization of production facilities, technical skills and knowledge.

2.       It puts full responsibility for efficient and effective operations on the bead of the product division.

3.       It forces the development of the managers who are capable of taking full responsibility for operating semi autonomous product divisions.

4.       Product Departmentation is the way to overcome the diseconomies of size, and to make possible the functioning of giant engaged in the production and marketing of a wide variety of products.

5.       It permits effective coordination of unique activities related to a particular product. For example, it may provide better cooperation between production and marketing.

6.       It permits an organization greater flexibility and adaptability in responding to changes in environment.

7.       Product Departmentation functions on the basis of decentralized operations with centralized controls.    

Disadvantage:

1.       The general disadvantage is that it tends to create a tendency in the division staff to become overly division centred which may not conductive from the point of the view of the company as whole.

2.       Product Departmentation puts too much pressure on the need of high quality managerial resources.

3.       It tends to increase the over head costs if the product division is not sufficiently big to sustain the creation of staff department at the divisional level.

4.       It makes it difficult to coordinate and control the functioning of a number of divisions. 

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