• Organisations contain formal, documented systems and procedures which enable them to control what they do.
• Different people do different things, or specialise in one activity.
• They pursue a variety of objectives and goals.
• Most organisations obtain inputs (eg materials), and process them into outputs (eg for others to buy).

Business strategy is a practical plan for achieving an organization’s mission and objectives. Organizational structure is the formal layout of a company’s hierarchy. Both strategy and structure are crucial elements of doing business, and even companies that do not have formal strategies and structures likely still have both in one form or another.

A company’s organizational structure must support its strategy. Employees at all levels of the company must be empowered to effectively complete the tasks necessary to achieve organizational objectives, and company structure can aid or hinder employees in their roles. Structure can also dictate the means by which strategies are crafted and implemented.

A centralised organization is one where core important decisions are taken by those at a higher level of authority. All important decisions are routed through this channel and are taken by those who are in a position to look at things from a broader perspective and have gained a lot of knowledge and experience over the years. After the decision is taken, it is communicated to the lower level employees who are expected to follow the orders.
This kind of structure depends heavily on certain key people to conceptualise and implement certain key decisions. This needn’t mean that there is just one person making all the decisions in the organization. People at different levels are authorised but, unlike decentralised organizations, there is less team based decision making and more of individual decision making.
A decentralised organization is one where the decision making authority is not solely in the hands of a particular group or figure but with multiple people at multiple levels of the hierarchy.
In this type of organization, most of the decisions are made by middle level or lower level employees rather than being made by the top management, as is the case with centralised organizations.

• Decisions can be co-ordinated more easily, and management have better control over decisions.
• Goal congruence. Decisions taken carefully should be based on overall objectives, whereas decentralised decisions may be influenced by short-term or local objectives of the people making the decisions.
• Standardisation. For example, in any country McDonald’s customers expect to find standard menus and pricing. If local managers were allowed to take decision about changing menus or prices, this could undermine the business model.
• Resource allocation. Centralised decision making should allow resource usage to be coordinated effectively between different functions and divisions, based on overall corporate objectives.
• Economies of scale. For example, companies might be able to get bulk discounts if they coordinate all their purchasing requirements and make a single order. Similarly, the corporate centre may be able to obtain cheaper bank loans and finance than (which have less assets to secure a loan against).
• Speed of decision making. For example, when a quick decision is required in response to a crisis, it may not be practical to involve local managers.                                                                                                                                          (Any 4 points)

• Centralization Is Unsuitable For Large Organization
  Centralization is impractical in large business organization having various branches in different locations. It is difficult to communicate managerial decisions to different operating levels in the management hierarchy. Top level managers cannot effectively supervise and control all the activities of the organization.
• Manager Is Overburdened
  In centralization, top managers are over-burdened with authority and responsibility while managing each and every activity of the organization. He/she cannot devote sufficient time in other major issues. It tends to decrease working efficiency of the organization.
• Possibility Of Power Misuse
  Centralization of authority at the top level may result in under-utilization of power. Top level managers may exercise their powers on the basis of their personal judgment. This may lead to misuse of authority if the managers lack proper skills and ability.
• Low Morale/Motivation
  In centralization, middle and lower level managers feel uncomfortable while performing the assigned task. They do not have the required authority to deal with problems effectively. They do not get any opportunity to show and develop their personality. The lack of motivation tends to affect the morale of subordinates.
• Lack Of Environmental Adaptation
  Business environment is dynamic and therefore, it changes according to time. In business, it is essential to take quick decisions to resolve problems of concerned departments or branches. Centralization is not applicable in dynamic environment as flexibility will not come promptly from the top level.
• Inappropriate For Routine Decisions
  In centralization, top level managers may be compelled to devote maximum time in taking routine decisions. Therefore, they cannot devote more time in non-programmed decisions. This will have a negative impact on the long term performance of the organization.                                                                                                                                                      (Any 4 points)