Question

A company X limited manufacturing cosmetics, which has  enjoyed a pre-eminent position in business, has grown in  size. Its business was very good till 1991. But after that,  new liberalised environment has seen entry of many MNC’s  in the sector. With the result the market share of X limited  has declined. The company had followed a very centralized  business model with Directors and divisional heads making  even minor decisions. Before 1991 this business model had  served the company very well as consumers had no choice.  But now the company is under pressure to reform. What  organisation structure changes should the company bring  about in order to retain its market share? How will the  changes suggested by you help the firm? Keep in mind that  the sector in which the company is FMCG.

Answer 1

A major change that needs to be adopted is a move towards decentralisation. As the organisation is growing it cannot maintain complete centralisation. The employees must be given some authority and responsibility to ensure smooth and efficient functioning of the organisation. Moreover, it would enable quick decision making in the organisation.

Decentralisation would benefit the organisation in the following manner. 

1. With decentralisation the lower level managers would get freedom and autonomy to take initiatives.
2. Decentralisation would help in developing managerial competence which would prove useful in the process of growth.
3. With decentralisation the decisions are taken quickly and in a timely manner. This is useful in finding solutions to the problems easily.