Question

Discuss how multinational company move towards centralization and decentralisation.Discuss how multinational company move towards centralization and decentralisation.

Answer 1

Centralisation is one of the international organisation's systemic components. It refers to the division of the decision-making authority between a local entity and an external (parent company) controlling it. In marketing terminology, centralization refers to the degree to which a subsidiary's local management is involved in, or excluded from, the marketing policies, plans, and tactics decision-making process. In an era of can competition, it is important to delegate sufficient decision-making autonomy to subsidiaries in order to allow timely responses to changes in the local environment;

By itself, centralisation is not an end. Actually, it helps the company to organize its resources to meet the goals set. While there are several of these goals, they generally apply either to benefit maximization or risk minimization. Although multinationals standardize with the goal of increasing their income, they also pursue centralization to reduce risk.

Centralization correlates negatively with the scale of a global company. Larger multinationals have far more executives, divisions and contingencies, and as activities become more difficult to regulate, a high degree of autonomy is given. However, the obstacles to centralisation, the inability to control the actions of the subsidiary and the managers 'inability to handle large conglomerates, are weakened as new technology advances and managers' skills increase

Markets used to be decentralised in general. Nevertheless, technology has encouraged a move towards centralisation in more recent times, just as it has for standardization. Centralisation patterns have also mirrored those in the standardization stage. Decisions about the product itself are more centralized while decisions on advertisement, pricing and delivery are more decentralized. Those are identical to the relative rankings found for the standardization stage, and this is why it is widely agreed that the two are linked, even without empirical proof. This is this supposed connection that has led to relationships evident to the level of standardization being often extended without doubt to the level of centralization