=+19-38 K Benefits and costs of decentralisation OBJECTIVES 1, 2 Jackson Ltd, a chain of traditional supermarkets, is interested in gaining access to the organic and health food retail market by acquiring a regional company in that sector. Jackson intends to operate the newly acquired stores independently from its supermarkets.

One of the prospects is Health Source, a chain of 20 stores in Queensland. Buying for all 20 stores is done by the company’s central office. Store managers must follow strict guidelines for all aspects of store management in an attempt to maintain consistency between stores. Store managers are evaluated on the basis of achieving profit goals developed by the central office.

The other prospect is Harvest Moon, a chain of 30 stores in NSW. Harvest Moon managers are given significant flexibility in product offerings, allowing them to negotiate purchases with local organic farmers. Store managers are rewarded for exceeding self-developed return on investment goals with company share options. Some managers have become significant shareholders in the company, and have even decided on their own to open additional store locations to improve market penetration. However, the increased autonomy has led to competition and price cutting among Harvest Moon stores within the same geographical market, resulting in lower margins.

Required 1 Would you describe Health Source as having a centralised or decentralised structure? Explain.