ASSOSA UNIVERSITY

COLLEGE OF BUSINESS AND ECONOMICS

DEPARTMENT OF MANAGEMENT
MASTERS OF BUSINESS ADMINISTERATION
MBA (WEEKEND) STUDENTS
Management Theory and Practice
Individual Assignment #1 (15%)

Submitted By: ASMAMAW BEYENE BOKA

ID No:
Submitted To: Dr. Abraham A. (PhD)

March___/2021 G.C

Q1. Managers often find it necessary to change an organization’s degree of centralization or

decentralization. Begin this exercise by reflecting on two very different scenarios in which this
issue has arisen:
Scenario A. You’re the top manager in a large organization with a long and successful history of
centralized operations. For valid reasons beyond the scope of this exercise, however, you’ve decided
to make the firm much more decentralized.
Scenario B. Assume the exact opposite of the situation in Scenario A: You still occupy the top spot in
your firm, but this time you’re going to centralize operations in an organization that’s always been
decentralized.
1. For Scenario A, list the major barriers to decentralization that you foresee
Organizations function in different manners. depending at the industries they service employee
strength scope of business scale of business nature of organisation and many other factors
organisation structure are designed. those are required exchange on occasion decentralization refers to
diffusion and transfer of power and authority from higher levels of control in an organization to the
lower levels of control. for decentralization to prevail it must be a complaint with advocate delegation
of authority and change in mind-sets of humans involved
Decentralization an organization can have several barriers. Some of them are discussed below
 Resistance to change is a primary human tendency people are naturally resistant to any kind
of change imposed on them. Resistant through Senior managers to let move power, mind-set
and personal equation with other employees is in step with have the most powerful barrier to
decentralization
 There may be a loss of readiness amongst decrease levels of management and other
employees to start taking decisions besides authority and take ownership of task and functions
 There may be a lake of willingness to make decentralization’ about successful amongst top
management half-hearted efforts are never successful in such an implementation
2. For Scenario B, list the major barriers to centralization that you foresee.
Centralization is the process where in all the authority and decision-making power is help up by the
higher-level authorities in an organisation. Thus, centralizing does not encourage the middle level
managers to carry on their departmental job. Functioning in their manner and are always dependent on
the higher authorities for all kind of decision.
Scenario B talks of an organization that had decentralized operations for many years. the top
managers of the company determined to implement centralization in the organization. the following
can be the values and problems that the top-level management will should face inside the process
 Registrant from the lower and middle level managers as they will need to forego the
flexibility in task scheduling and planning enjoyed by way of them. when the
organization was decentralized the overall decision-making process inside the
organization may additionally become time-consuming as the hierarchical
communication made take some more time than before resulting in probably delays
inside the functioning
 The organization can also experience reduction in the capability to respond to external
environmental changes and may land up losing few of the opportunities
 Increase in the paperwork administrative task as each of the decisions can be pinned
down on paper by way of the higher management and circulated in every department. and
the vice versa manner can be observed by every of the departmental heads to
acknowledge the receipt in their communication

3. In your opinion, which scenario would be easier to implement in reality? In other words, is
it probably easier to move from centralization to decentralization or vice versa? Whatever
your opinion in the matter, be ready to explain it.
In my opinion it will be easier for an organization to move from one centralization towards
decentralisation as there can be better corporation some of the staff members the conversion of
centralization to decentralization results in empowering. The middle and the lower level management
with authority and choice making powers that is typically welcome with the aid of the team of
workers individuals. The reverse situation will bring about resistance from the employees as they
would lose work flexibility due to lack of authority and decision-making powers.

Following are the reasons that justify my preference for decentralized structure organisations

 decentralized organisations ofer it staf with authority and power to take the
most of the work-related decision on their own

 a greater amount of work flexibility is experience in the decentralized organisation

 the company has the ability to make speedy decision the company has can quickly
adjust to its external environmental changes due to its decentralized nature

4. Given a choice of starting your career in a firm that’s either highly centralized or
highly decentralized, which would you prefer? Why? (40)

I prefer decentralization for it gives every employee or manager and or supervisor to have the
autonomy to make choices based on the level of complexity of the decisions to be made.
Decentralization is preferred for the following motives: it is empowering specifically if one is the
worker.

1. It makes it easier for one to accept responsibility for decisions made and the
outcomes thereof.
2. It makes it less complicated for one to respond to changes that surround the decision
making and with precision.
3. it is motivating for one in order to make decisions around and based totally on the areas
they work on.
4. contrary to the above.
5. it is believed that strong leadership is best given from above consequently need for
centralization.
6. Decentralized decisions may gain the individual or unit at the expense of others.
7. Standardized processes can bring about cost financial savings for the company not
always the individual.
8. there's more control of the organisation if decision making is centralized.

Q2. You’re the vice president of a large company that makes outdoor furniture for decks,
patios, and pools. Each product line and the firm itself have grown substantially in recent years.
Unfortunately, your success has attracted the attention of competitors, and several have entered
the market in the last two years. Your CEO wants you to determine how to cut costs by 10
percent so that prices can be cut by the same amount. She’s convinced that the move is
necessary to retain market share in the face of new competition.
You’ve examined the situation and decided that you have three options for cutting costs:
• Begin buying slightly lower-grade materials, including hardwood, aluminium, vinyl, and
nylon.

• Lay off a portion of your workforce and then try to motivate everyone who’s left to work
harder; this option also means selecting future hires from a lower skill labor pool and paying
lower wages.
• Replace existing equipment with newer, more efficient equipment; although this option entails
substantial up-front investment, you’re sure that you can more than make up the difference in
lower production costs.
1. Carefully examine each of your three options. In what ways might each option affect
other parts of the organization?

A. A less expensive material could impact the durability of the product. poor-quality
products will have a massive impact on customer satisfaction. Such services and products
cause a business to lose customers quicker than they could gain new ones. lowering the
quality of product would be disastrous in a marketplace where the competition is only
ready to drag one's organization down. It may result in a lack of marketplace as well as
the firm's reputation inside the marketplace. The products that are manufactured are to be
used outdoors and hence must be such as to be able to stand the consequences of sun,
wind, rain or snow. poor quality costs an organization money in terms of productiveness
problems. If an organization uses low-quality parts, systems damage down, regardless of
any high-quality components also used. Low-quality components can cause mechanical
breakdowns, as well as work slowdowns or maybe stoppages.

B. laying off the workforce isn't always best a company loses more than just a warm body;
they lose the employee’s expertise, experience, and expertise Laying-off a part of the
workforce usually has a destructive effect on the morale of the remaining staff. hence the
motivation to work more difficult may be very likely to fail, specifically once they see the
new hires coming in with a lower skill level and at a lower wage. Lack of interest also
cause in rest of the staff. Because of hiring new lower level skill employees. Additionally,
this move could impact the product quality because of the lack of skilled workers to do
the job properly. laying of employees can create surroundings of uncertainty for
remaining employees. in lots of cases, retained employees are required to pick up the
slack of their former co-workers, that can result in poor morale, issue over job stability
and overworked personnel who can be more liable to mistakes. shedding employees can
also have a poor efect on stages of customer service.

C. A high level of investment is also not a good option because high level of investment
means that the firm will have fewer funds for other expense. For example, sales and
promotion, product development and other expenses. But this is the least disruptive
option as compared to the other two options. Its overall effect must be evaluated well.

2. Which is the costliest option in terms of impact on other parts of the organization, not in
terms of absolute dollars? Which is the least costly?
The first option seems to be very costly in terms of impact on other part of organisation the
company has grown substantially in few years due to its quality products it could also build up a
good brand name and a huge number of loyal customers in the market. If the company start
producing low quality products it will affect the trust of the customer this will also create a
negative image about the company in the market A company with the bad image cannot survive
in the market.
Replacement of old equipment with newer will be the least costly method. even if the initial
investment is used in the manager could implement it efficiently by providing proper training and
motivating employees will it create success the profit returns will be high and movement of
workers will be less which will make employee to feel free from pressure

3. What are the primary obstacles that you might face in trying to implement each of your
three options?
Using of lower grade material is the first option. Implementation of this option can cause many
problems. There are many primary obstacles which might we face in trying to implement.
  Customer dissatisfaction
 Durability of product
 Disruptive reputation or bad image in marketplace
 Lack of involvement of customers
 Lack of financial support
 Employee resistance to change
 Lack of long-term vision
 Unrealistic expectation
Poor quality material use in product makes the customer dissatisfied and their involvement in product
become less. Poor quality material product has a large impact on reputation of marketplace. It also
effects on the durability of product.
Laying off employees is the second option. It is also not a good option and we might has faced several
obstacles for the implementation of this option. Following are primary obstacles.
 Lack of interest of rest of the employees
 Pressure of harder work on rest of the employees
 Lying off the employee means loss of experience and skills of such employees
 shedding employees have a poor efect on stages of customer service.
 Lack of motivation and satisfaction of employees
 Lack of recognition and rewarding for success
 Every task will be gaining more time

Third option is high level of investment. It’s a good option as compared to the other three option,
but we might also has faced some obstacles for the implementation of this option

Following are the primary option

 More investment means more funds and loans

 Fewer funds for other expenses
 Less promotions and sales
 Lack of cash flow
4. Are there any other options for accomplishing your goal of reducing costs?
(40) Gain control of Your inventory & Purchases
The longer you keep your stocks, the more costs you need. therefore, it is essential to recognize
exactly when to resupply and make sure that you’re no longer getting stuck with extra or obsolete
stock. inventory shortages lead to backorders which require you to add greater transport costs and
even worse, they can cause unsatisfied customers. meanwhile, overstocking can cause decay or
contamination and requires extra costs including maintenance or insurance costs.

You’re the vice president of a large company that makes outdoor furniture for decks, patios, and
pools. Each product line and the firm itself have grown substantially in recent years. Unfortunately,
your success has attracted the attention of competitors, and several have entered the market in the
last two years. Your CEO wants you to determine how to cut costs by 10 percent so that prices can
be cut by the same amount. She’s convinced that the move is necessary to retain market share in the
face of new competition. You’ve examined the situation and decided that you have three options for
cutting costs:
 Begin buying slightly lower-grade materials, including hardwood, aluminum, vinyl,
and nylon.
 Lay off a portion of your workforce and then try to motivate everyone who’s left to
work harder; this option also means selecting future hires from a lower-skill labor pool and
paying lower wages.
 Replace existing equipment with newer, more efficient equipment; although this option
entails substantial up-front investment, you’re sure that you can more than make up the
difference in lower production costs.
 1. Carefully examine each of your three options. In what ways might each option affect other
parts of the organization?
Quality has a direct bearing on customer satisfaction. If a company produces a quality product,
satisfied customers will rank that company higher in surveys than companies that fail to provide
quality products or services. In addition, dissatisfied customers are more vocal in their criticisms of
a company with quality problems.
Poor companies may get an initial sale of a product or service but it will not create repeat
customers or it loses its customers. Therefore low quality product is very risky for the company.
2. Which is the most costly option in terms of impact on other parts of the organization, not in terms of
absolute dollars? Which is the least costly?
Produce Low quality product impacts other parts of the organization and Replace
existing equipment with newer is least cost compare to others.
3. What are the primary obstacles that you might face in trying to implement each of
your three options?
If we produce low quality product we lose our customers, Lay off a portion of our workforce makes
shortage of skilled man power within our organization and Replace existing equipment with newer,
it requires fund rising but it is more efficient equipment.
4. Are there any other options for accomplishing your goal of reducing costs?

Yes; some Examples are;

 Maximize our employees’ skills.

Assess the current usage of employee experience and skills. Give responsibilities to the employees with
the most skill and efficiency in those areas. Don’t use expert sales people for word processing or
“numbers” people for design functions. It's often necessary for one person to be responsible for a
variety of tasks, but consider exchanging some of those tasks with another individual who shows
greater efficiency.

 Focus on quality.

Quality sells whether in the form of products or services. Satisfied customers increase sales through
referrals and repeat purchases.

 Modernize our marketing efforts.

Of course, you don't want to eliminate paid advertising that is working; however, it can be worthwhile to take
a look at some cheaper alternatives.

 Increase social media use and reduce traditional marketing

 Build our customer e-mail list and implement a referral program. A recommendation
from a current customer is far more likely to result in a sale than traditional marketing.

 Network more, advertise less. Clients are more likely to hire a business with a face they
recognize.

 Cut marketing costs by doing more in-house.