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ACCA Applied Knowledge · Business and Technology · Business organisational structure

A publishing group organises itself into separate divisions for Books, Magazines and Digital Media. Each division has its own marketing, production and finance staff and is run as a profit centre. Which basis of departmentation is this, and what is a likely disadvantage?

This is product departmentation, because the divisions are built around types of product or service. A likely disadvantage is duplication of functional resources, as each division has its own marketing, production and finance staff, which can raise costs and reduce economies of scale.

  1. AProduct; duplication of functional resources across divisionsCorrect
  2. BFunctional; lack of accountability for profit
  3. CGeographical; difficulty in adapting to local markets
  4. DCustomer; inability to measure divisional performance

Explanation

Grouping around goods or services, each with its own support functions, is product departmentation. Having separate marketing, production and finance in each division duplicates resources and may reduce economies of scale. Profit centres actually improve performance measurement.

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