What different organizational choices can be made in an international business? (Vertical Differentiation)
Vertical differentiation
- Centralized decision-making
Facilitates greater coordination and integration of operations, helps ensure that all decisions made are consistent with organizational objectives, makes it easier to avoid duplication of activities and therefore keeps costs low, and finally helps managers maintain enough power to enforce radical decisions such as strategic aggressive pricing or organizational changes.
- Decentralized decision-making
By decentralizing decision-making, a firm is able to relief top managers of certain decisions which allows them to focus on more important issues. Decisions made by managers of the local production might be able to make greater decisions based on familiarity and previous knowledge, as well as responding quicker to urging issues. Finally, greater freedom is a motivational force which can encourage employees to work more efficiently.