A2 past paper Sound and Vision
Decentralisation is where the authority for decision-making is delegated to subordinates in the organisational structure.
There are different reasons why Sound and Vision plc. has a decentralised structure at the moment. One reason might be that it enables quicker decisions within the company by having separate profit centres. As a consequence the business can be more efficient which could lead to an increase in profitability. Furthermore they can respond quicker to customer needs and trends which might give them a competitive advantage.
Another reason might be that a decentralised structure allows each manager of Sound and Vision to stock items according to the tastes of their local market, and bonuses are awarded based upon the profitability of their store. Therefore the decentralised structure can be seen as a motivation factor as well. The managers are therefore enriched and may see the store as their own business. As a result each store may be more efficient which could lead again to increased profitability.
Payback: 3years / NPV: £29,6>£25
The Investment appraisal indicates that Amina will achieve with her new strategy a net present value of more than £25 million and a payback within three years.
However, how realistic the Investment appraisal is depends upon the reliability of the budgeted figures. We know that Amina was a Chief Operations Officer. Therefore it might be that Finance and market assessments might not be her strong point.