Using the concept of Centralized and Decentralized Operation (Provide detail and

Question

Using the concept of Centralized and Decentralized Operation (Provide detail and examples):

1. Comment on businesses you have worked for and characterized them as either centralized or decentralized.

2. Explain the concept of Decentralized operation.

a) Discuss your thought on whether or not there can be a link between decentralized operations and increased profitability. Explain how.

3. What are the advantages of operating a centralized operation? Discuss 3 advantages, explain in detail and provide specific examples.

You are analyzing two companies – relate your answers to the following questions to these two companies:

A CPA, Accounting Firm

A Walmart Store

4. Refer to question 2a – Is it more likely for the CPA firm to feel that effect or the Walmart store? Support you answer with details, insight and examples.

5. Why would the management feel that operating a centralized company would be more desirable?

a) Is it more likely for the Accounting Firm to pursue this type of operation or a Walmart store? Why?

6. What are the steps that the higher level management would take to ensure that the financial objectives of the company are met through decisions that the lower level management makes on daily basis in regards to cost, profit and investment accountability,?

a) Is it more likely for the Accounting Firm or the Walmart to have to implement these control steps?

Explanation / Answer

1) The businesses can be centralised or decentralised. Businesses i worked for is Information technology where entire operations are done using decentralisation. The Business of the business was to sell software and provide information technology (IT) services to the world. The business started with centralised concept where some men had direct control over the firms operations but with time as the size of the firm grew the concept of decentralisation took its hold. As it was very difficult for a single person to control the entire firm there were made divisional leaders and heads that can take charge of their respective divisions.

2) The decentralised operation means a organisation is broken into a large number of divisional units and these respective divisions work independently and report to the centralised control authority. Yes decentralised operation enables the independent unit to work freely and to concentrate belter at what they are good at while not being disturbed from operations of other divisions; this could improve efficiency and throughput which could result in improved profitability. Decentralised firm provides budgets to the divisions based on the performance whichever unit is earning more with least risk is provided the maximum and others in the same way are provided budget for their operations. This creates a healthy competitive spirit in which each division wants to leave behind other division and in this way strive harder to perform better and thus reach for the highest profitability. Denial of budget on non-performance and increasing of budget allocation on performance makes the division to strive harder to keep it up and achieve more growth; in the end yes certainly there is a link between decentralized operations and increased profitability.

3)Advantages: i)well linked and interdependent operations ii)reporting to one centralised authority which is sole decision maker iii) consistent and uniform policies

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