Decentralised and centralised businesses

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…