CAIE A-Level Business A2 7.1.5 Centralisation Vs Decentralisation Topic Practice

Analyse two possible advantages to DL of centralisation as the business continues to expand.

Use Table A to mark candidate responses to this question.

AO1 out of 2 marks.

AO2 out of 2 marks.

AO3 out of 4 marks.

Note:

- Only reward advantages.

- If more than two advantages are referred to, reward the best two.

Indicative content

Responses may include:

AO1 Knowledge and understanding

- Definition of centralisation: keeping all the important decision-making powers within head office or the centre of the organisation.

- Possible advantages include:

Rapid decision-making

Consistent policies throughout the organisation

Decisions taken in the interest of the whole business rather than just one division of it

Central buying

Experience of senior managers resulting in better decisions.

AO2 Application

- DL is the market leader in country Y so the success of DL has been achieved with centralised structure.

- Central buying of milk and other ingredients gives opportunity for economies of scale.

- Experience of Gabriel as founder and director of DL since 2012.

- Linking centralisation to future growth plans of the business including opening shops in country Y and franchising abroad.

- Quick decision-making needed to compete against global brands that have entered country Y's market.

- Protecting Devonice as a premium brand.

1

AO3 Analysis

- Central buying and economies of scale leading to lower unit costs. Enables DL to compete against global brands.

- Decisions made in interests of the business as a whole will ensure consistency in tactics to support DL's strategic goals. As a premium brand it is important that there is consistency, for example the decision about lower prices or increased promotion in relation to brand image.

- Senior managers at head office will be experienced decision-makers resulting in better decisions for DL to achieve its objectives.

- Centralisation more likely to ensure that as DL expands, with new shops and franchises abroad, there will be more consistent marketing to support the brand image. This will boost sales.

Accept all valid responses.

AO1

AO2

AO3