Cost Accounting (15th Edition)

Published by Prentice Hall
ISBN 10: 0133428702
ISBN 13: 978-0-13342-870-4

Chapter 22 - Management Control Systems, Transfer Pricing, and Multinational Considerations - Assignment Material - Questions - Page 865: 22-4

Answer

Benefits: 1. Greater Responsiveness: Decentralization allows local units to respond more effectively to specific local needs, which can lead to improved customer satisfaction and service quality. 2. Faster Decision Making: Decentralized decision-making processes can result in quicker responses to issues and opportunities, enhancing the organization's agility and competitiveness. 3. Increased Motivation: Subunit managers in a decentralized system often have more autonomy and responsibility, which can boost their motivation and job satisfaction. Costs: 1. Coordination Challenges: Decentralization can lead to coordination issues between different units, potentially causing inefficiencies and conflicts. 2. Risk of Inconsistent Strategies: When subunits have substantial decision-making authority, it may lead to inconsistent strategies or goals across the organization, which can impact overall cohesion and alignment.

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