The Chief Disadvantages of a Decentralized Organizational Structure Include

question 25

Multiple Choice

The chief disadvantages of a decentralized organizational structure include

• A) increasing the size of the corporate bureaucracy.
• B) slowing a company's response times to changing external events because approval of what course of action to take has to go up the chain of command to the top of the management bureaucracy.
• C) discouraging lower-level managers and rank-and-file employees from exercising initiative, engaging in creative thinking, and taking responsibility for their actions.
• D) putting the organization at risk if many "bad" decisions are made at lower levels in the organization-top management lacks "full control."
• E) creating more layers of management.

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Definitions:

Natural Monopoly

A market condition where due to high fixed costs or unique resources, a single company can supply a product or service at a lower cost than any potential competitor, thus dominating the market.

Unit Costs

The price a business incurs for the production, storage, and distribution of a single unit of a certain product or service.

Minimum Efficient Scale

The smallest amount of production a company can achieve while still taking full advantage of economies of scale regarding costs per unit of output.

Diseconomies of Scale

The condition when a company grows so large that the costs per unit increase, causing a decrease in efficiency.