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Chapter 7

MGMT 1000 Chapter Notes - Chapter 7: Hierarchical Organization, Departmentalization, Profit Center

Course Code
MGMT 1000
Kathleen Rodenburg

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Centralization vs Decentralization:
- Centralized Structure: decision-making authority is concentrated at the top of the
organizational hierarchy
- Decentralization Structure: Decision making authority is pushed down to lower levels
in the hierarchy
Geographic vs Product Departmentalization:
- Geographic Departmentalization: organizing on the basis of geographic regions
- Product Departmentalization: organizing on the basis of products that are sold
- Both can cause issues if taken to extreme
- If company organizes by Product:
- it can standardize manufacturing
- Introduce new products worldwide faster
- Eliminate overlapping activities
- Local decision-making is slowed and products are not tailored to a
specific country’s customers
What is Organizational Structure:
Organizational Structure: Specification of the jobs to be done within a business and how those
jobs relate to one another
Chain of Command:
- Organization chart: Physical depiction of the company’s structure showing employee
titles and their relationship to one another
Building Blocks of Organizational Structure:
Job Specialization: is the process of identifying the specific jobs that need to be done and
designating the people who will perform
Departmentalization: process of grouping jobs into logical units
-Allow firms to treat a department as a profit centre
(a separate unit responsible for its
own costs and profits)
- Functional Departmentalization:
-Organizing departments according to the function they perform marketing,
finance, production, human resources, etc
- Customer Departmentalization:
- Involves setting up departments or divisions that focus on meeting the needs of
specific customers
- Product Departmentalization:
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