Centralisation and Decentralisation

Question 1

Q: What is centralisation?

Answer 1

A: When decision-making is kept at the top of the organisational hierarchy.

Question 2

Q: What is decentralisation?

Answer 2

A: When decision-making is spread out to include junior managers and local units.

Question 3

Q: Give two drawbacks of centralisation.

Answer 3

A: (1) Reduces staff motivation due to lack of authority. (2) Local managers may be ignored even though they understand customer needs better.

Question 4

Q: Give two benefits of decentralisation.

Answer 4

A: (1) Decisions made closer to customers, so more suitable to local needs. (2) Motivates junior managers and develops their skills.

Question 5

Q: Give two drawbacks of decentralisation.

Answer 5

A: (1) Harder to ensure consistency across all locations. (2) May lead to overspending or poor long-term decisions.

Question 6

Q: Which type of business is more likely to use centralisation?

Answer 6

A: Large fast-food chains (e.g. McDonald’s) – to ensure uniform customer experience.

Question 7

Q: Which type of business is more likely to use decentralisation?

Answer 7

A: Hotel chains – local managers handle customer problems quickly.

Question 8

Q: How can centralisation affect costs?

Answer 8

A: It can reduce costs through standardisation, but extra layers of management increase wage costs.

Question 9

Q: How can decentralisation affect staff motivation?

Answer 9

A: It usually increases motivation because employees feel trusted to make decisions.

Question 10

Q: How does customer service differ between centralisation and decentralisation?

Answer 10

A: Centralisation = consistency across branches
Decentralisation = more personalised service to local needs

Question 11

Q: Why might a growing business choose to decentralise?

Answer 11

A: To delegate decision-making as the business gets bigger and more complex.

Question 12

Q: Why might a struggling business choose to centralise?

Answer 12

A: To regain tighter control and reduce mistakes or inefficiencies.

Question 13

Give two benefits of centralisation.

Answer 13

Consistency across all branches. easier and quicker to implement common policies.