Centralized Decision Making Is Favored Over Decentralized Decision Making

question 36

Multiple Choice

Centralized decision making is favored over decentralized decision making:

• A) when there are no principal-agent problems.
• B) when decisions need to be made on a case-by-case basis.
• C) when coordinated decisions are essential.
• D) when information that is relevant to the decision is dispersed.
• E) when the firm has a flat organizational structure.

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Definitions:

Diversification

A strategy of reducing risk by owning a variety of investments or business operations across different industries or categories.

Mechanistic Structures

Describes organizational forms that are highly bureaucratic, with strict rules, procedures, and a clear hierarchy of authority.

Formalization

The process of creating or implementing formal rules, procedures, and structures within an organization to standardize operations and behaviors.

Standardization

The process of implementing and developing technical standards to ensure consistent, quality processes and products.