One main thing a business needs to decide is where decison making power is located within the business structure.
The choice between centralised or decentralised is not an either/or choice. Most large businesses necessarily involve a degree of decentralisation when it starts to operate from several locations or it adds new business units and markets to enable easy decison making.
Centralised - The concentration of managment and decison making power is located at the top of a a businesse hierachy, and are handled strictly at the top or the executive level.
Advanatges to centralised businesses
- Easier to implement common policies and practices for the whole business - ensure the whole business is working towards the same goal and can save money by implementing standardised procedures for the whole bsuiness
- Prevents other parts of the business from becoming too independent - Work as a whole business
- Easier to co-ordinate and control from the centre - for example with budgets
- Much quicker usually - easier to show a strong leadership
- Experienced senior managers make decisons - more likely to be benerficial to the company as a whole
- Strong leadership can be important for smaller businesses and to ensure that everyone is working effectively and at a cost effective rate - management know exactly what is going on throughout the business
- Only a few people need to be trained to manage the business - reduces expensive training costs that are present when decion making is dispersed throughout the business.
- Can work well as a whole unit as opposed to individual segments.
Disadvanatges to centralised businesses
- Staff may be poorly motivated as they have no control over decions made within the business - dont feel valued within the business
- Local or junior managers may be much closer to customer needs and therefore might make more productive decisions
- Decions may not be correct for the entire business - certain parts of the business may be better off with other decisions
- Lack of authority down the hierachy may reduce…