Departmentation by territory

Question

Departmentation by territory

It is highly suitable for the enterprise whose activities are widely dispersed. For example, in the case of assembly plants or wholesaling, where identical activities are performed at different work centres, territorial division of activities may be undertaken.

Merits:

1.       It leads to economy in the terms of time and money. The enterprise can benefit from lower freight, lower rents and lower labour costs.

2.       It enables the enterprise to gain intimate knowledge about the customers in the local markets.

3.       It facilitates effective span of control.                           

Demerits:

1.       It requires employment of a number of managerial personnel.

2.       It dilutes control from the headquarters.

3.       It may lead to duplication of activities.