Centralisation and decentralisation — common mistakes

In exam answers, avoid simplistic statements that a business is 'centralised' or 'decentralised'. The best responses analyse the degree of centralisation. Use the case study to argue why certain functions (e.g., finance, brand strategy) might remain centralised, while others (e.g., local sales promotions, recruitment of junior staff) could be decentralised to improve efficiency and motivation. This demonstrates evaluative thinking.

No, this is a common misconception. The optimal structure is contingent on the business's specific circumstances. A small, single-site business might thrive with a centralised model for consistency, while a large multinational may need a decentralised approach to manage its global operations effectively. The best approach often involves a blend of both, where strategic decisions are centralised and operational ones are decentralised.

Not at all. Effective decentralisation is not an abdication of responsibility. Senior managers set the overall strategy, budgets, and performance targets. They use control systems, such as regular reporting and performance reviews, to monitor the decentralised units. The authority delegated is for operational decisions within a pre-defined strategic framework, ensuring alignment with corporate goals.

No. Key strategic decisions, such as major financial investments, mergers and acquisitions, or changes to the corporate mission, are almost always retained by the most senior management at the centre of the business. Decentralisation typically applies to operational and tactical decisions, such as local marketing campaigns, day-to-day staffing, and choosing suppliers for a specific branch.