ITPEC IP October 2021 Question 66

Business operations divided into expert functions, each configured as a unit — a functional organization groups people by specialty, such as production, sales, finance and personnel.

Each department concentrates one kind of expertise, which builds specialist skill and avoids duplicated work. The drawback is that coordination between functions depends on top management, and no single department is responsible for the profit of a product or region.

Answer (b)

Why not others:

• •(a) — a temporary organization assembled from the needed functions and dissolved once the problem is solved is a project organization
• •(c) — units that bear profit responsibility for a product or a region are a divisional organization
• •(d) — a structure combining a vertical and a horizontal axis, such as function and product, so that members report to two managers, is a matrix organization

Key rule: Functional organizations group by specialty, divisional ones by product or region with profit responsibility, matrix ones by both at once, and project organizations exist only until their goal is met.

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