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CMA Foundation · Fundamentals of Business Economics and Management · Organisation Structure, Responsibility, Accountability and Delegation of Authority

A company with a single plant making one standard product, very small size, and a founder who wants close control is considering its structure. Which factor most strongly supports greater centralisation in this case?

Small size and uniform operations needing consistent control most strongly support centralisation. With one plant and one standard product, top management can take decisions easily and keep uniformity. Geographic spread, diversified products and many competent managers instead favour decentralisation.

  1. AWide geographical dispersion of units
  2. BDiversified product lines needing specialised decisions
  3. CSmall size and uniform operations needing consistent controlCorrect
  4. DAvailability of many competent middle managers

Explanation

Small size, a single location and a standard product make it easy for top management to decide everything and keep uniform control, favouring centralisation. Dispersion, diversification and a strong managerial pool all push towards decentralisation.

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