Question

1. How can a company decide what type of organizational structure is best suited for its strategic needs?
2. Discuss the advantages and disadvantages of decentralized decision making compared to centralized decision making.

Answer 1

1 There are several types of organization structures and organizations have the variety of business process and products and market structures. The best organizational structure for a business arranges jobs in a way that helps a company accomplish its strategic goals.

These are the following ways firm can decide the types of organizational structure is best suitable for its strategic needs-

1. Analyzing the company strategy like company focusing on quality control, for instance, might be more likely to favor a more mechanistic approach since it allows for greater oversight. Structure must always follow from a company's strategy.
2. Consider how dynamic, flexible and agile the company needs to be to compete and determine the stability of the market and industry.
3. Consider the organization’s size and age like small and young organizations require less of a management hierarchy than do larger, older organizations.
4. Consider different organizational structures like functional structure typically departmentalizes jobs based on work classifications such as marketing or production.
5. Review organization analysis from the previous steps to determine whether the company is better served with a mechanistic or organic approach to structure, or something in between.
6. Create an organizational chart of the structure or structures the company is considering. Graphically representing the company this way will clarify issues such as who reports to whom, where responsibility will fall, the need to add or cut employees or management levels, and changes that might have to be made in procedures.

2 Let’s focus on decentralized purchasing. A major advantage to decentralized purchasing is that materials can be acquired by each department on an as needed basis, or only when required. This can ensure that the proper quantity of something and the quality of something for a specific department can be easier to oversee from an operational stand point. Depending on the type of company that is involved, there may not be a large investment initially required to make purchases. With that being said, there are things that are needed ASAP and decentralized purchasing allows orders to be placed faster. If there are any issues with purchased products, there is less time taken to replace or notice the defect at hand. As always, there are also disadvantages of decentralized purchasing. One of the disadvantages that stands out the most to me is that businesses cannot save as much because they may not have the opportunity to purchase in bulk. To piggyback on that some staff and employees may not be as “purchasing” savvy so the specialized procurement knowledge may be missing. With decentralized purchasing, there can be a miscalculation of how much to purchase. There are too many opportunities for departments to buy too much at once OR buy too little and have to make another order. As always there is the issue of lack of department to department communication and cooperation as well.

Let’s shift the focus to centralized purchasing. Some of the advantages here are what some of the disadvantages mentioned above that can be avoided. There is one person/place that is taking on the buying responsibilities so there is a lower limit to possible duplication of orders so costs and overall management of purchasing is going to be more efficient. This will alleviate the pressure from managers from all different departments from making and overseeing the purchases for their own departments. Centralized purchasing allows management to concentrate on one less thing because the responsibility for purchasing falls on someone else. Centralized purchasing also allows purchases to be made in bulk and that can in turn save money. This can also allow direct contact with some suppliers and can hopefully have a more streamlined purchasing workflow. This can also then be seen as one purchasing process. One person orders the same way every time. Costs can be saved with transportation, shipping, and storage. There is less ability to place blame on others for wrong doings because this responsibility will fall on one department/person. Disadvantages for centralized purchasing are a little different. Ifthere is a mistake made with a wrong purchase, this can hurt more than just one department. This can also result in delays (shipping, receiving) that can also be felt companywide not just within one department. When there is centralized purchasing, those doing the purchasing are not experts on what all the needs are or will be for purchasing a wide variety of products for one company. With a large number or departments