Question

In international operations, we will need to consider to what degree we delegate decision making to our foreign subsidiaries. Explain THREE advantages and disadvantages of centralized versus decentralized decision making.

Answer 1

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here I am going to describe the three advantages and disadvantages of centralized vs decentralized decision making.

when an organization is working globally or in the international market it is really important to consider up to what degree we should delegate the decision making power to the foreign subsidiaries as the power plays a very important role in the decision making. the one with the more power will exercise more control over the decisions and the one with less Power will exercise less control over the decisions. Therefore it is really important to know up to what degree the power delegation can take place for the foreign subsidiaries.

Centralization means keeping all the power with the superiors of the organization whereas on the other hand decentralization means the delegation of authority and the power to the employees in the subordinates.

Advantages of centralized decision making:-

1) The main company can exercise full control over the decision-making than that of delegating it to the subsidiary companies.

2) The decision-making would be a lot easier and as compared to the delegation of authority and power of decision making among the foreign subsidiaries.

3) The decision would be considered appropriate if the decisions are taken by the superior and the main company.

Disadvantages of centralized decision making:-

1) There would be a lack of coordination among the subsidiary companies and the main company because of a lack of power and authority sharing.

2) There wouldn't be a healthy relationship among the subsidiary company and the main company has the subsidiary company would feel less motivated towards the decisions.

3) A lot of burden on the main company due to a lot of decision making.

Advantages of decentralized decision-making:-

1) The company can focus properly on the main decisions when the other decisions can be followed up by the subordinates and the subsidiary companies. all the main decisions can be taken by the main company and other decisions can be followed by the foreign subsidiary companies.

2) By the decentralization method, there is less burden on the main company and the work is divided among the foreign subsidiaries and the main company.

3) The coordination increases by the means of decentralization between the main company and the subsidiary companies just like the employee and the employees or the superior and the subordinates.

Disadvantages of decentralized decision-making:-

1) the main company would have less control over the decisions if the power is delegated to subsidiary companies

2) it would be very hard to coordinate between the decisions of the main company and the subsidiary companies together

3) the decisions would be late.