What Are The Advantages And Disadvantages Of Centralized Or Decentralized Organization
In contrast to a small owner-manager retailer, retail chain management need to supervise divisions that are geographically distant from each other. Exhibit 8.3 illustrate a supermarket chain organization structure in corporate headquarter. The Managing Director or CEO has seven directors by division namely, merchandising, operations, marketing, human resource, I.T., finance and distribution/warehousing reporting to him or her.
The decisions made at the corporate headquarter involve activities offering economics of scale through coordinating the regional chains’ activities, for example, having one merchandising program and one information technology system is much more efficient and effective than having separate systems and programs in each stores.
8.4. What are the advantages and disadvantages of centralized versus decentralized organization structure?
Centralization is referring to which authority for retailing decisions making are all done in corporate headquarter rather than by the store managers. Generally, most of the national and large supermarket chain, departmental stores chain and specialty store chain are having centralized organization structure. The main advantage is to reduce the overhead costs if the retailers are centralizing their decision-making in corporate headquarters.
The second advantage of centralization is to achieve lower or better costing from suppliers as the corporate buyers can have better buying bargaining power with suppliers as centralize
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