1. Functions. Important enterprise functions provide the usual basis for classifying activities into departments. Manufacturing, marketing, finance, personnel, accounting and engineering are the typical functions of an industrial enterprise, and departments ma be established on the basis of such functions. But all these functions are not alike in importance from the business point of view. Marketing and manufacturing are the basic functions of an industrial concern, and others are regarded as service functions because they exist for supporting the main functions of the business. Accordingly, basic and main functions must be given a higher organizational status than the status enjoyed by service functions. Further more, the size, nature and volume of business have an important say in creating departments. A small business may not require so many departments, and it may be put under the manufacturing departments, viz. Marketing, manufacturing and finance. Purchasing, engineering and accounting may be put under the manufacturing department, and accounting under finance. Conversely, large-sized enterprises may be required to create more units than this classification of functions warrants. For example, marketing department may be split into three separate ones like sales, advertising, and market research & product design. This type of departmentation is known by fictionalization.
2. Products. Products manufactured may be adopted for division as well as for sub division purposes. When there are several product lines an each product line consists of a variety of items, functional classification fails to give balanced emphasis on each product. Slow-moving and outdated products may be given greater attention at the cost of growing ones. For the sake of expansion and development of their products, many large enterprises have created more or less autonomous, self-sufficient products divisions based on either one single product or a group of... [continues]
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