What is Departmentalization By Geography?
Departmentalization by geography or geographical departmentalization is a method of designing an organizational structure in which various departments are created based on geographic locations.
Jobs are grouped for different geographical territories.
Geographic areas can be districts, countries, provinces, continents, etc.
This method of departmentation is suitable for organizations whose operations are spread over different territories. Even, suitable for a company that seeks to establish a new branch in a new location.
In this method, for every separate location, a specific department is created and a regional or divisional manager is appointed with the necessary authority and responsibilities.
Under each such department, different functional departments (marketing, sales, customer service, etc.) are brought. The manager is independent but should be responsible for activities under him.
Through this territory departmentation, local customers are better served as the regional manager is independent in making decisions on products and ways to serve the customers.
However, he has to ultimately work following the plans and policies formulated by the top management.
Advantages of Departmentalization by Geography
Territory departmentalization comes with various advantages and disadvantages.
Some of its pros are mentioned below:
Local Customers Are Better Served
Geographical departmentalization is applied to focus on the needs and preferences of local customers.
The regional manager can easily understand the local people’s needs, tastes, and preferences and then create products that satisfy the local customer’s needs.
This increases the level of customer satisfaction also.
Useful For Large Organizations
This method is suitable for companies having wide networks or operations.
In addition, departmentalization by geography would be a better option for companies aiming to establish a new branch in a new location.
Face-to-face communication with Locals
This enables organizations to directly communicate with potential local customers.
As such organizations can better understand the local customers and create plans to serve them better.
Adaptable to Environmental Changes
It enables organizations to respond to environmental changes in various locations.
Disadvantages of Geographical Departmentalization
High Administrative Cost
As beneficial as geographical departmentation is, it is also a costly departmentation method. It requires a large number of administrative staff which increases administrative costs.
The Problem of Integration
There might be a problem with the integration of various regional offices.
Related: Departmentalization by Time
Requires Skilled Persons
To get satisfactory results from departmentalization by geography regional managers need to be skilled and efficient to take charge of regional offices.
The unavailability of such managers will not give satisfactory results from this departmentation.
When To Use Geographical Departmentalization?
The following are 4 suitable conditions for using geographical departmentalization in business.
When Operations Are Spread Across Different Regions
Geographical departmentalization is suitable for organizations with operations in multiple districts, countries, or continents.
By creating region-specific departments, the company can better manage local operations, cater to diverse cultural or regulatory requirements, and ensure the smooth functioning of its branches.
Read More: Mechanistic Vs. Organic Structures
When the Organization Needs to Serve Diverse Customer Preferences
In markets where customer preferences vary significantly based on location, this structure helps.
Regional managers can focus on understanding and meeting the unique needs, tastes, and expectations of local customers.
This enhances customer satisfaction and strengthens market presence in each territory.
When Direct Communication With Local Stakeholders Is Critical
Organizations that rely on face-to-face interaction with local customers, suppliers, or governments benefit from geographical departmentalization.
Regional managers can build better relationships, negotiate effectively, and respond swiftly to local demands or challenges, making the organization more adaptable and competitive.
When the Organization Faces Diverse Environmental Factors
Geographical departmentalization is effective when operating in areas with differing legal, economic, or environmental conditions.
Regional managers can develop tailored strategies to navigate local challenges, such as regulatory compliance, supply chain issues, or natural disasters, ensuring smoother operations across all territories.
Read Next: Product Departmentalization
Sajan Kushmi is a content writer with more than 4 years of experience. He holds BIM Degree. He write on the topics related to Management, Marketing, and Entrepreneurship.