Product grouping-definition

Product/Service Grouping

Product or service grouping is an organisational structure that divides a company into distinct divisions, each centred around a specific product or product range. This structure is commonly used by large, diversified organisations to manage their diverse product portfolios.

Key Characteristics of Product/Service Grouping

Division-Based Structure:

• In product or service grouping, the organisation is divided into separate divisions, each dedicated to a particular product or product category.
• Each division operates as a self-contained unit with its own set of functional activities and resources.
• A large multinational corporation, such as Procter & Gamble (P&G), may have divisions for different product categories, such as beauty and grooming, healthcare, and household care.

Focus on Specific Products or Services:

• The grouping of activities is centred around specific products or services that the organisation produces or offers.
• Organisations using this structure often have a wide range of products or services catering to various markets or customer segments.
• A technology company like Apple may have divisions for its various product lines, including iPhone, Mac, and iPad.

Functional Activities Within Divisions:

• Each division includes various functional activities such as marketing, finance, operations, administration, research and development, and human resources specific to the product or service it handles.
• These divisions may have cross-functional teams responsible for all aspects of the product's lifecycle.
• Within an automotive company's product grouping structure, the division responsible for electric vehicles would have its own marketing team, finance team, and research and development team dedicated to electric vehicle products.

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Product grouping-definition

Decentralisation

• Large organisations employing product grouping structures often operate in a decentralized manner, allowing divisions a degree of autonomy.
• Divisions may have authority over their own strategic decisions, including product development, marketing strategies, and resource allocation.
• A multinational media conglomerate like Time Warner Inc. may have divisions for various media properties, including magazines, television channels, and book publishing, each with its decision-making autonomy.

Advantages of Product/Service Grouping

• Efficient management of diverse product portfolios.
• Divisions can focus on specific markets, customer segments, or product categories.
• Tailored strategies for each product or service.
• Enhanced accountability within divisions.

Disadvantages of Product/Service Grouping

• Potential for duplication of functions across divisions.
• Challenges in coordinating activities and sharing resources.
• This may lead to internal competition between divisions.
• Requires effective communication and collaboration among divisions to ensure overall organisational goals are met.

In summary, product or service grouping is an organisational structure that divides a company into divisions centred around specific products or services. It is commonly used by large and diversified organisations to efficiently manage their diverse product portfolios. Each division operates as a self-contained unit with its own set of functional activities, making it well-suited for organisations with a wide range of products or services.