The functionally-based operating model separates specialties such as marketing, product delivery and finance into divisions.

It operates well in a stable environment and is generally accompanied by centralised decision-making.

Advantages

• Encourages consistent standards and functional loyalty
• Complements centralised control
• Expedites vertical information flow
• Creates efficiencies through economies of scale
• Simplifies due to the clarity of roles and relationships

 

Disadvantages

• Responds slowly
• Lacks flexibility and common problem
• solving/goal focus
• Limits horizontal information flow
• Limits expertise made available to customers
• Suffers from coordination and control problems
• Tends to produce bottlenecks in business flows