Normatively speaking, which trend is preferable: greater centralization or decentralization?

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An answer to this question generally depends upon the context of the centralizing or decentralizing process that you are discussing. For example, many businesses have modeled their market practices upon either of these two organizing principles.

Ford, for example, based its business model on the concept of vertical integration, which was essentially the desire to centralize every industry involved in automobile production—from manufacture to railroad transport to the extraction of rubber from trees, etc.—under the ownership of one company. The Ford company therefore owned almost all of the industries that were even remotely involved in the production of the Model T and thus centralized control over all of them.

Coca-Cola, however, chose a decentralizing model for its business practices. In the 1900s, Coca-Cola made the decision to outsource all of its bottling operations, giving franchise ownership over the local production and sale of Coca-Cola product. This decision was made in the attempt to reduce overhead costs and free the Coca-Cola company from the responsibility of responding to local crises, such as labor unrest or natural disasters. This decentralized franchise approach has made Coca-Cola one of the most powerful companies of the twentieth century.

To reiterate, either centralization or decentralization can be effective. What matters is the context and the rationale behind using one method over another.

Last Updated by eNotes Editorial on
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