Association of Chartered Certified Accountants (ACCA) Certification Practice Test

Which disadvantage is associated with product/brand departmentation?

1. Increased focus on customer needs

2. Higher profits

3. Managerial complexity

4. Enhanced coordination

The correct answer is: Managerial complexity

The disadvantage related to product or brand departmentation lies in the managerial complexity that arises when organizations structure their operations around different products or brands. This type of departmentalization can lead to the creation of silos within the organization, where each department becomes highly specialized and focused on their specific product or brand. While this focus can lead to increased expertise, it can also complicate the management process. Managers may have to oversee multiple departments with differing objectives, resources, and operational processes, which can create challenges in communication, coordination, and alignment of goals across the organization. As a result, the complexity can lead to inefficiencies, duplicated efforts, and potential conflicts among departments, making it harder to implement company-wide strategies and adhere to a unified corporate direction. This increased complexity can ultimately affect decision-making processes and impact overall organizational performance.