Divisionalization
From Wikireedia
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* Profit Center - focus on selling | * Profit Center - focus on selling | ||
| + | *See [[Divisional Performance Measurement]] | ||
[[Category:Finance]] | [[Category:Finance]] | ||
Revision as of 09:50, 9 February 2011
Divisionalization
Companies who organize as divisions can do so along:
- Geographical regions
- Product lines
Why?
- Delegation and control closer to the product
- Motivation
- Quicker decisions
- Take account of regional issues
- Exploit managerial expertise
- Divisions may be in competition
- Top management loses control
- Risk avoidance - because no diversified portfolio at division level
- Increased costs - duplication, lack of scale.
Prerequisites
- Alignment and Integration
- Are divisions similar or diverse
- Some functions could be centralized and others at Div level
Broken down into
- Cost Centers- Providing services to other divisions - focus keeop costs down
- Investment Center - provides services - maximise ROI
- Profit Center - focus on selling
