What is Departmentalization by Territory? Definition, and Pros/Cons

What is Departmentalization by Territory?

Departmentalization by territory or geography is when the creation of the departments of the organization is on the basis of territory or geographical or regional areas. The regional areas may be western, eastern, central, etc. Territory departmentalization is applied to provide a better quality of services all over the nation throughout the territories.

Departmentalization by territory method of departmentalization is appropriate for those organizations that involve in business activities in different geographical locations, like insurance company, bank, transport company, chain store, or a product that is distributed throughout the nation.

Here, on the basis of one territory, a particular department is created and other functional departments like production, marketing, finance, and personnel are also created under it.

In territory departmentalization, all activities of a specified territory are assigned to a particular department or regional manager. Activities are grouped into regions, zones, districts, branches, etc. In such departmentation, local customers are served by the divisional manager while the plans and policies are formulated at the head office.

Related: What is Customer Departmentalization? Definition, and Pros/Cons

A typical example of territory departmentation is,

structure of territory departmentalization

Advantages of Departmentalization by Territory

  • Regional departmentalization helps local operations.
  • It facilitates the expansion of the business into various regions throughout the nation.
  • There is better coordination of activities through the setting up of geographical divisions.
  • It helps to meet local demands more effectively.
  • There can be real and face-to-face communication with the local clients.
  • It helps to adapt to environmental change.

Disadvantages of Territory Departmentalization

  • In territory departmentation, there may be a problem with the integration of various regional offices.
  • There is the possibility of duplication of physical facilities.
  • It is more difficult to control regional departments.
  • There may be a lack of skilled and efficient persons to take charge of regional departments.
  • Similarly, there is a need for candidates who have more general abilities.
  • It is a costly method of departmentalization.

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