Question

What are the advantages and disadvantages of decentralization? Would you prefer to work in a centralized or decentralized organization and why?

What are opportunity costs and what are the economic benefits? Can you think of various industries that these types of costs and benefits could be applied?

Answer 1

Solution:

PART A:

Decentralization means the transfer of authority to decide the appropriate level from the center top to a lower level of management.

Advantage of Decentralisation is as follows

1. Speedier decision making: As the time for taking approval eliminates and lower-level management can take appropriate decision within the authorities assigned to them.

2. Development of future top-level employee: Decentralisation increase the initiative taking nature among the employee and to take a decision which in turn prepare the future manager for the company

3. Reduce the burden on top management and help them to focus on core business operations and future explanations.

4. Promote motivation among employee and generate the feeling of belongingness among employee toward the company

5. Better control and supervision could be possible due to decentralization of power among the level of management

Disadvantage of Decentralisation

1. Co-ordination problem among the level of management as under decentralization employee at there level free to take a decision

2. Larger interest of the company gets compromised

3. lack of qualified manager who can take the correct decision in real-time to overcome challenges in the business environment

4. decentralization of certain activities is not possible

5. This can lead to duplication of the effort of staff which is an economical loss to the company.

Conclusion:

I will like to work under decentralization work environment because the benefit outweighs the disadvantage.

1. This gives me an opportunity to make a decision and get a in hand experiences to deal with challenges
2. help me to develop managerial skills for the future.
3. This keeps me motivated to work in a more efficient manner to contribute to the company.

PART B:

Opportunity cost is the "NEXT BEST ALTERNATIVE FORGONE". If you have $100,000 to invest in project A with a 10% return, project B with an 8% return and Project C with a 6% return. If you choose the project A then Opportunity cost for choosing project returns from project B 8% return ( next best alternative)

Economic Benefit: Is the amount which we can quantify in term of money. Like Profit, cash flow, etc.

Application of cost and benefit in the industry are as follows

1. Evaluation of Investment opportunity
2. Assessing the change initiatives
3. Hiring a new employee
4. Make or Buy decision
5. Quantifying the effect of decision making on shareholder wealth.