Departmental by the customer or service
If a company has distinctly different customer groups, it may create department on the basis of the customer differences. For example, railways have separate reservation and booking arrangements for 1 and 2 class passengers. A company producing power meters has electricity departments and private households as its major customers. Selling power meters to electricity houses needs lot of emphasis on liaison work, whereas, selling power meters to electricity houses needs lot of emphasis on liaison work, whereas selling it to private households needs a distribution network and service.
Merits:
1. It takes into account the needs of each class of customers.
2. It promotes specialization among the enterprise staff.
3. The enterprise can benefit from the intimate knowledge acquired by the departments regarding the needs of each class of customers.
Demerits:
1. It makes coordination difficult.
2. It may lead to under utilization of resources in some departments.
3. There may be a duplication of activities.