Page 25 - Articles Written by JGJ EF DPS

PARAGRAPH 4

Having seen several large companies get into trouble when division
directors made mistakes and the division suffered large losses, Sweet
concluded that he had gone too far with decentralisation. As a result, he
withdrew some of the authority delegations to the division directors and
required them to get top corporate management approval on such matters
as:

1: unplanned capital expenditure (over £10,000)
2: new-product introduction
3: marketing and pricing strategies and policies
4: plant expansion
5: changes in personnel policies

Q: Analysis of these areas shows increased synergistic value plus a
tighter control mechanism. But, what types of decisions are these?

A: All are strategic in nature

1: Any additional expenditure must gain central approval first – a means
by which to ensure budgets are well thought through and adhered to
unless a case can be made otherwise.

2: New product introduction is not left in the hands of a division but rather
centralised to achieve strength in depth based on the whole being greater
than the sum of the parts.

3: Marketing and pricing may be adapted to the local market but
synergistically it is more logical to centralise when the product offering is
global. It also avoids destructive inter division price wars.

4: Plant expansion is likely to be a major, long-term financial commitment
which cannot be taken on a piecemeal division by division basis. It must
be centralised in order to maximise economies of scale, scope and
synergy.

5. Changes in personnel policies are likely to be based upon the global or
regional markets rather on division by division basis thereby avoiding
conflicts.