Question

Decision rights at Starbuck’s Coffee (a coffee house chain offering specialty coffee drinks) are more centralized than decision rights at Cooker’s Restaurants (a chain of “family restaurants”). For example, Cookers’ store managers are given discretion concerning what items to place on the menu, pricing of meals and store decoration. Starbucks store managers are not provided this discretion.

1. How is the specialty coffee business different from the family restaurant business and why would these differences make a centralized decision making structure optimal for Starbucks and a decentralized decision rights optimal for Cooker’s.
2. What should be measured to evaluate the store managers of a Cookers versus a Starbucks store manager and why?

Note the words “versus” and “why” in part (b). Rather than provide an elaborate list of what you would measure, outline what you would measure focusing on the differences between the two chains and flush out the logic.

Answer 1

a).  The organizational structure of Starbucks is decentralized in nature. The basic principle of the structure is that the company provides decision making power to each manager.

Centralized organizational structures rely on one individual to make decisions and provide direction for the company. Small businesses often use this structure since the owner is responsible for the company's business operations

b). Differences between the two chains:-

Decentralized

· The decentralized structure of the organization is efficient as it saves time, money and it has improved the communication process of the company as well.

· The decision making procedure has highly improved and thus it has reduced the waiting time or the time lag in taking any decision about the company.

· The mangers of the store remain closer to the customers. who stay closer to their customers can respond faster to the changing customer demands and can take decisions at a faster rate.

Centralized

Centralized organizations can be extremely efficient regarding business decisions. Business owners typically develop the company’s mission and vision, and set objectives for managers and employees to follow when achieving these goals.Advantages of centralized structure-

1. A clear chain of command

2.Focused vision

3.Reduced costs

4.Quick implementation of decisions

Summary

Centralization refers to a setup in which the decision-making powers are concentrated in a few leaders at the top of the organizational structure. Decisions are made at the top and communicated to lower-level managers for implementation.