Study Notes

Centralised structures

AS, A Level
AQA, Edexcel, OCR, IB

Last updated 22 Mar 2021

Businesses that have a centralised structure keep decision-making firmly at the top of the hierarchy (among the most senior management).

Fast-food businesses like Burger King, Pizza Hut and McDonald's use a predominantly centralised structure to ensure that control is maintained over their many thousands of outlets. The need to ensure consistency of customer experience and quality at every location, together with a desire to exploit economies of scale, are the main reasons for this choice.

The main advantages and disadvantages of this approach can be summarised as follows:

Advantages Disadvantages
Easier to implement common policies and practices for the business as a whole More bureaucratic – often extra layers in the hierarchy
Prevents other parts of the business from becoming too independent Local or junior managers are likely to much closer to customer needs
Easier to co-ordinate and control from the centre – e.g. with budgets Lack of authority down the hierarchy may reduce manager motivation
Economies of scale and overhead savings easier to achieve Customer service does not benefit from flexibility and speed in local decision-making
Greater use of specialisation
Quicker decision-making (usually) – easier to show strong leadership

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