Traditional forms of organisation
Traditional forms of organisations were classified into five types based on the following differentiations.
- Functional differentiation: A functional form of organisation is divided into functional subunits such as finance, marketing, production, human resource, research and development. The subunits are integrated by rules, procedures and coordinated plans. If a problem involves several functional units, the managers of all the affected subunits coordinate to resolve the issue.
- Geographic differentiation: In this type organisations are subdivided according to location or region. This is done to cater to the needs of local customers, markets and so on. Functional differentiation is often retained within each geographic subunit. These sub units operate independently; integration between them is achieved through standardised accounting and reporting procedures.
- Product differentiation: Organisations that produce various goods and services use product-based differentiation for example Virgin group is split into major sub-divisions , each division designs, manufactures and markets its own product line . Every subdivision has functional, geographic, or other forms of break down.
- Customer differentiation: Organisations may also differentiate by customer type. For example, companies with large military sales often establish a separate division because federal requirements proposals, contracting and product specifications differ substantially from those for commercial customers. The level of integration between customer divisions depends on the degree of interdependency between their product lines.
- Process differentiation: In this form, the bases for differentiation are some logical process or sequence of steps. Since they are sequentially related and problem in one area has an impact on the other, a higher level of integration is required among process-differentiated subunits.