Have you ever seen a company selling different kinds of products in different showrooms or divisions of a single showroom? Then, know that it is nothing but departmentalization by product. But, how can you define it? And, what are its merits & demerits? Let’s discuss all these things.
Departmentalization By Product –
In Product departmentalization, a company creates a separate department depending on the product’s nature or line, follows the policy, and organizes its employees based on products & not their functions. Each department is responsible for every facet of design or production for one or more merchandise.
If illustrated extensively, a company may be said to follow the policy of product departmentalization if its various departments, say A, B & C, are given the responsibility of designing or manufacturing different products.
Product Departmentalization – Example
For example, department A of the company manufactures mobile phones, department B, tablets & department C, laptops.
This kind of departmentalization suits the best large-scale production companies that involve various lines of goods & services. Suppose a company has various distinct departments based on its products. In that case, it will give each of the departments some independent responsibilities for the sake of improving & expanding its business performance.
The managers of the department are responsible to take care of the company’s expenses, profit, successes, revenues & failures. The company also assigns them the authority for controlling & supervising their department.
Objectives Of Departmentalization By Product:
- Focussing on a single commodity or service
- Increasing the marketability of a relevant commodity or service
- Increasing sales of the commodity or service
- Increasing profit of the company
Product Or Service Departmentalization – Merits
- This method is very much ideal for multi-product complex corporations.
- This method procures commodity/service specialization, thus resulting in optimum utilization of human resources.
- With the help of this method, it is possible to focus on the individual product’s productivity or profitability.
- With the help of this method, each & every activity correlated with each commodity can be effortlessly integrated & coordinated.
- It enhances the speed & cogency of one’s decision-making.
- It increases the potency of one’s monitoring & evaluation.
- The product or service managers brings a considerable profit to the organization. They bring profitability for each of the commodities & services.
- This method permits each specialized product’s or service’s maximum utilization.
Product Or Service Departmentalization – Demerits
- Due to the departmental managers’ more emphasis on their lines of products & less emphasis on the organization’s overall activities, coordination may become less influential.
- Since every department is independent of the perspective of its responsibilities, there are chances that conflict may occur between them.
- If there is less demand for the commodity or service, underutilization of plant facilities may happen.
- This method may lead to the problem of top management’s active control over the production departments.
- The upkeep of functional experts in each of the product divisions may raise the administrative expenditure & hence less profitability of the company.
- The product and service managers may neglect the company’s overall objectives.
Departmentalization by-product is suitable for large-scale production lines involving several lines of goods & services. However, it would help if you kept an eye on product/service managers whether they are working correctly according to the responsibility assigned or not.
Reasonable control over your company will bring a massive profit and it is only possible if the various departments’ managers & the workers work with great responsibility, sincerity & in coordination with each other.
So, ensure if the managers are the well-wishers of your company, in general, and doing their work accordingly & you will see that the tactic will work. I hope this article would have explained the concept behind the product departmentalization.