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Which of the following statements does NOT describe an advantage of product compartmentalization?
A. Decision making can be done at the top management levels
B. All similar activities within an organizational can be done simultaneously
C. Administrative costs are lower
D. Sales forecasting is easier
E. Performance of individual products lines is easy to access.
C. Administrative costs are lower.
Administrative costs are lower, is the correct answer. This is because product departmentalization requires more managers, which in turn leads to higher administrative costs.
Sales forecasting is easier because each product line has its own sales force that is familiar with the demand for that particular product.
The performance of individual product lines is easy to access because each product line has its own financial statement. This makes it easy to compare the performance of one product line to another.
What Is Product Departmentalization?
Product departmentalization is an organizational strategy in which a company divides its departments according to its products or services. This means that each department focuses on a different product or service. Each product line has its own individual department or team, and employees within each department specialize in different aspects of product development and distribution.
There are many advantages to functional departmentalization, such as:
- Creating more specialized employees who have expertise in a particular field. This can lead to increased production rates and overall output for the organization.
- Effective communication between departments can improve overall correspondence and efficiency within a company. Additionally, functional departments may be more cost-effective since a team of professionals is already dedicated to those specific operations.
By sharing the same area of expertise, department members can share their individual approaches or professional experience, helping all members of a team hone and develop their skills. Experienced professionals typically manage or lead functional departments, allowing them to teach and guide the employees they supervise. This allows for skill development in individuals as well as teams.