Exercise 12-34 (Static) Advantages and Disadvantages of Decentralization (LO 12-2) The Benefits and Costs of Decentralized Decision Making. Whole Foods Market, Inc. (now a part of Amazon.com, Inc.) is a chain of grocery stores emphasizing natural and organic products. Starting out with a single store in 1980, the company has grown to over 400 stores in North America and the United Kingdom. As a part of the corporate culture, local and regional managers had wide discretion on sourcing and operations. Such discretion can lead to increased costs in the form of administrative duplication Recently. Whole Foods "is whittling away at some of that autonomy in an effort to reduce costs and boost its clout with suppliers. One way the company will do this "is shifting more responsibility for buying packaged foods, detergents and other nonperishable items for the more than 430 stores to its Austin, Texas, headquarters." At the same time, the company recognizes the benefits to decentralized authority. While taking duplication out of the system, the company wants to retain the elements that are important to the company "We want to evolve the structure in such a way that we take out redundancy and waste and at the same time though we're not diminishing the culture, the empowerment efforts that make Whole Foods Market special" he John Mackey, CEO) told analysts in November As of early 2018, the expected benefits have failed to materialize. As an example, items were sometimes out of stock after the store began using an inventory system as directed by corporate management This is an example of how difficult it can be to implement new policies that run counter to established corporate cultures. Required: What best describes the costs) Whole Foods likely hoped to reduce by removing some of the authority of local managers to source food and make operational decisions? increased costs in the form of administrative duplication Recently, Whole Foods "is whittling away at some of that autonomy in an effort to reduce costs and boost its clout with suppliers. One way the company will do this is shifting more responsibility for buying packaged foods, detergents and other nonperishable items for the more than 430 stores to its Austin, Texas, headquarters." At the same time, the company recognizes the benefits to decentralized authority. While taking duplication out of the system, the company wants to retain the elements that are important to the company "We want to evolve the structure in such a way that we take out redundancy and waste, and at the same time though, we're not diminishing the culture, the empowerment efforts that make Whole Foods Market special," he (John Mackey, CEO) told analysts in November As of early 2018, the expected benefits have failed to materialize. As an example, items were sometimes out of stock after the store began using an inventory system as directed by corporate management. This is an example of how difficult it can be to implement new policies that run counter to established corporate cultures. Required: What best describes the cost(s) Whole Foods likely hoped to reduce by removing some of the authority of local managers to source food and make operational decisions? Dysfunctional decision making and poor decisions from incomplete information Dysfunctional decision making Administrative duplication Poor decisions from incomplete information Administrative duplication and poor decisions from incomplete information
