Centralization consolidates power at the top of a hierarchy to maintain control over policies and practices across many locations. Fast food chains like McDonald's use centralization to ensure consistent customer experiences. Centralization allows for common policies, coordination, and economies of scale but can lack flexibility and local responsiveness.
Decentralization distributes decision-making to include junior managers and business units. Grocery stores and hotels decentralize so local managers can handle customer issues. Decentralization enables quicker responses to local needs but makes consistency and financial control more difficult.
Centralization consolidates power at the top of a hierarchy to maintain control over policies and practices across many locations. Fast food chains like McDonald's use centralization to ensure consistent customer experiences. Centralization allows for common policies, coordination, and economies of scale but can lack flexibility and local responsiveness.
Decentralization distributes decision-making to include junior managers and business units. Grocery stores and hotels decentralize so local managers can handle customer issues. Decentralization enables quicker responses to local needs but makes consistency and financial control more difficult.
Original Description:
Comparison and contrast between centralization and decentralization.
Centralization consolidates power at the top of a hierarchy to maintain control over policies and practices across many locations. Fast food chains like McDonald's use centralization to ensure consistent customer experiences. Centralization allows for common policies, coordination, and economies of scale but can lack flexibility and local responsiveness.
Decentralization distributes decision-making to include junior managers and business units. Grocery stores and hotels decentralize so local managers can handle customer issues. Decentralization enables quicker responses to local needs but makes consistency and financial control more difficult.
Centralization consolidates power at the top of a hierarchy to maintain control over policies and practices across many locations. Fast food chains like McDonald's use centralization to ensure consistent customer experiences. Centralization allows for common policies, coordination, and economies of scale but can lack flexibility and local responsiveness.
Decentralization distributes decision-making to include junior managers and business units. Grocery stores and hotels decentralize so local managers can handle customer issues. Decentralization enables quicker responses to local needs but makes consistency and financial control more difficult.
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centralization - the act of consolidating power under a central control
Centralised structures Businesses that have a centralised structure keep decision-making firmly at the top of the hierarchy (amongst the most senior management). Fast-food businesses like Burger King, Pizza Hut and McDonalds use a predominantly centralised structure to ensure that control is maintained over their many thousands of outlets. The need to ensure consistency of customer experience and quality at every location is the main reason. The main advantages and disadvantages of centralisation are: Advantages Disadvantages
Easier to implement common policies and
practices for the business as a whole
More bureaucratic often extra layers in the
hierarchy
Prevents other parts of the business from
becoming too independent
Local or junior managers are likely to much closer
to customer needs
Easier to co-ordinate and control from the centre
e.g. with budgets
Lack of authority down the hierarchy may reduce
manager motivation
Economies of scale and overhead savings easier
to achieve
Customer service does not benefit from flexibility
and speed in local decision-making
Greater use of specialisation
Quicker decision-making (usually) easier to
show strong leadership
Decentralisation To distribute the administrative functions or powers of (a central authority) among several local authorities.
In a decentralised structure, decision-making is spread out to include more junior managers in
the hierarchy, as well as individual business units or trading locations. Good examples of businesses which use a decentralised structure include the major supermarket chains like WM Morrison and Tesco. Each supermarket has a store manager who can make certain decisions concerning areas like staffing, sales promotions. The store manager is responsible to a regional or area manager. Hotel chains are particularly keen on using decentralised structures so that local hotel managers are empowered to make on-the-spot decisions to handle customer problems or complaints. The main advantages and disadvantages of this approach are: Advantages Disadvantages
Decisions are made closer to the customer
Decision-making is not necessarily strategic
Better able to respond to local circumstances
More difficult to ensure consistent practices and
policies (customers might prefer consistency from location to location)
Q4. What Is Strategic Business Unit? What Are Conditions Required For Creating An Sbu? How Is Performance of Sbu Measured? What Are The Advantages and Disadvantages of Creating Sbus?
