BAC G1-G2 2010

Oral Test

Centralization or Decentralization?

Sharp and Marsden Ltd is a group of men's wear stores. Its clothes which are stylish and expensive are aimed at the fashion-conscious eighteen to thirty-year-old buyer. The group is expanding fast in the United Kingdom. It has ten stores at present in large cities, and plans to open many more in the coming years.

The group faces a difficult problem. The directors disagree about how the group should be organized in the future. Some of the directors - Group A - believe that the stores should have a great deal of autonomy. Each store manager should be given considerable independence and responsibility. The other directors - Group B - have other ideas about how the stores should be organized.

Group A wants the stores to have responsibility for things like the buying of goods, stock control, warehousing, the selection and training of staff, advertising and promotion and the payment of salaries and bonuses. The task of Head Office would be mainly to set profit targets for the stores and maintain financial controls. Head Office should not interfere.

Directors in Group B, however, see things differently. They think that Head Office should have more control and more direct involvement in the running of the stores.

This group would like Head Office to do the buying of merchandise for all ten stores. Stocks should be held in large regional distribution centers, and supplied to the individual stores when needed. Head Office would carry out such functions as the selection and training of staff, salary administration, advertising and promotion, etc. In addition, the Finance Department would keep a close check on the performance of each store. Also, Head Office would keep tight control over all aspects of the stores' work. According to Group B directors, the tasks of the manager should be to run the store under the close guidance of Head Office.