Prerequisites for a divisionalized structure, More appopriate for companies with diversified activities, Independence is beneficial, but if too great, no benefit of being whole company, Relations between divisions regulated so that no division by seeking to increase its own profit, can reduce the profitability of the company as a whole, Advantages of a divisionalized structure, Improved quality of decisions, Speedier decisions, Increases managerial motivation, Enables top management to devote more time to strategic issues, Disadvantages of a divisionalized structure, Suboptimatization and may promote a lack of goal congrence, More costly to operate a divisionalized structure, Loss of control by top management, Ways a manager could 'game' or manipulate a budget, spending money at year end to avoid losing it, deferring necessary expenditures, accelerating sales near year end to meet the budget, negotiating easier targets, Negative effect of gaming, creating false info may affect next years budgets, even though they haven't succeeded when it come to meeting the target, they would still receive additional money, management wouldn't be able to fully understand how the company may react in the future, Beyond budgeting, Jeremy Hope and Robin Fraser - Swedish bank 1998, shows the company doesn't need budgets, which are costly and time-consuming, to succeed, clear boundaries - responsibility understood, managers have more freedom, information support systems are transparent and ethical, managerail targets are based on relative success and linked to shareholder value, Negative about budgeting, prevents rapid response, too detailed and expensive, out of date within a few months, divorced from strategy, stifles initiative and innovation, reinforces command and control, demotivates people, encourages unethical behaviour and increases reputational risk

Divisionalized structure

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