What is Departmentalization of Geography/Territory? Definition, and Pros/Cons

What is Departmentalization By Geography?

Departmentalization by geography/territory 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.

Related: Departmentalization by Time

Advantages and Disadvantages of Departmentalization by Geography

Territory departmentalization comes with various advantages and disadvantages. Some of its pros and cons are mentioned below:

Advantages:

• Local Customers Are Better Served – Since 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:

• 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.
• 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.

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