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Centralizing and Decentralizing Marketing Activities

For organizations which have expanded so that they operate in several regions, the first choice is between centralizing and decentralizing their marketing activities. The point is that some method has to be found of planning and controlling the growth of the business in order to utilize effectively the evolving skills and emerging reputation of the firm, and so avoid an uncontrolled dissipation of energy and talent. Centralized operations make co-ordination much easier and are better at avoiding duplication. In centralized organization, there is no strategic level of management in the subsidiary units, particularly with respect to new product introductions. This kind of organizational form tends to lead to standardized strategies, especially with regard to product management. The problem here, of course, is that unless great care is exercised, subsidiary units can easily become less sensitive to the needs of individual markets, and hence lose flexibility in reacting to competitive moves.

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Decentralization allows for more flexibility and better exploitation of local opportunities. Central services, such as market research and public relations, are repeated at subsidiary company level. It can also be seen that there is a strategic level of management at the subsidiary level, the acid test being whether subsidiary company/unit top management can introduce new products without reference to headquarters. The point about this kind of decentralized organizational structure is that it leads inevitably to duplication of effort and differentiation of strategies, with all the consequent problems, unless a major effort is made to get some synergy out of the various systems by means of a company-wide planning strategy. In respect of achieving a flexible and enterprising organization, there are no ‘right’ or ‘wrong’ options. The choice will depend on the organization's product diversity, the need for local variations, and the management’s ability to get a good balance between co-ordination and control. The latter is necessary to avoid fragmentation and to prevent managers feeling that they have no effective freedom of choice. An ideal arrangement, of course, is to organize around a combination of both in order to gain the benefits of each. This involves putting marketing as close to the customer as possible, while also having some kind of centralized marketing function. In this way, the potential for costly and unnecessary duplication is minimized, and the possibility of achieving economies of scale and effective knowledge transfer is optimized.

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