Module 2: L1

Question 1

Are centralization and decentralization “opposites”? Why or why not?

Answer 1

No. Decentralization is a form of centralization. It just differs on where the coordination occurs.

Question 2

Which is best - centralization or decentralization? Why (3x points)?

Answer 2

Neither is inherently better.
1. It all depends on the external environment
2. The relation with it leads to the structure
3. What leads to one or the other is being in several markets

Question 3

DuPont ran into an issue when it was selling fertilizer. What were the 4x symptoms mentioned in the lecture?

Answer 3

Issue: selling to both industrial and individual customers.
1. Tracking costs were insufficient to control stock of supplies
2. Various product lines had different problems
3. Perception of top administration was not adequate
4. Marketing, manufacturing, and purchase of raw materials were integrated

Question 4

What was DuPont’s remedy to it’s issues (4x points in lecture)? Was this centralization or decentralization?

Answer 4

Remedy: Divisionalization
1. Integration of marketing, manufacturing, and purchase of raw materials segmented by market
2. Create a division for each market
3. Problems of each product line solved at division level
4. Each division looks the same from top administration

Question 5

In essence, what is decentralization?

Answer 5

Centralization at several levels

Question 6

General Motors (GM) was a mass marketing system subcontracting to several manufacturers. What were it’s 3x problems mentioned in the lecture?

Answer 6

1. Dealers (not suppliers) had the information on the market
2. Suppliers did not have direct info on the market
3. Could not predict long term demand (critical to cutting costs)

Question 7

What was GM’s solution to its issue(s) and list the 3x key aspects of it. Was this centralization or decentralization?

Answer 7

Solution: A central office (centralization)
1. Coordinate projected demand for parts
2. Segment demand for variations on the product
3. Coordinate service and sales market

Question 8

What is centralization?

Answer 8

Coordination and integration of functions at specific organizational level

Question 9

What were some of Sears’ challenges according to the lecture (5x were listed)?

Answer 9

1. Competition with regional wholesalers
2. Decentralized local demands, i.e. different climates and different seasons means different products needed by customers
3. Diverse commodity lines by region
4. Each commodity line requires different expertise in the region
5. Need to coordinate local demands through national commodity line buyers

Question 10

What were Sears’ solutions to their challenges (3x listed)? Was this centralization or decentralization?

Answer 10

Solution: New Information System (neither/both)
1. Aggregate info across lines and regions
2. Project production for each individual item
3. Buying power with manufacturers

Question 11

There’s a general problem/question that arises: Can the same production system serve different markets?

What 3x points did the lecture mention about this question?

Answer 11

1. Market segments carry different information
2. Each marketing structure leads to engineering and manufacturing info
3. Decentralization more likely when market info must be translated immediately to production decisions