Business Studies Multiple Choice Question – 10 October 2021

Stafford Hotels owns 10 hotels across the county of Staffordshire.

It uses a decentralised organisational structure to run these hotels. 

What is an advantage of using a decentralised organisational structure?

Select ONE answer:

1. There is a clear strategic direction
2. There is a greater consistency in the decisions made
3. There is an increased ability to achieve economies of scale 
4. There is an increased motivation amongst staff

Show your workings to arrive at your answer, and explain and justify your reasons:

……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………

This multiple-choice question is suitable for Accounting KS5 classes.

The answer is 4

1. Not correct – it is more difficult to coordinate overall strategy as each hotel might make different decisions and these are not made by the senior management.
2. Not correct – as more decisions are being made away from the centre of the business by local managers, it is inevitable that some consistency of service will be foregone between the 10 hotels.
3. Not correct – economies of scale are less easy to achieve as each of the 10 hotel controls what supplies are stocked or sold in their hotels reducing purchasing economies.
4. Correct – A decentralised organisational structure is where some decisions are made at headquarters and some are taken by local managers.  Each of the hotel managers is empowered to make decisions in each of the 10 hotels, reacting to local market changes.  This may result in staff feeling more valued leading to better customer service in the long term, and thus increased profits.

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