Centralization and Decentralization at Home Depot

December 14, 2017 Philosophy

Clearly, giving the authority to local store managers and correspondingly, their teams, is an example of decentralized the authority and ability to generate new business on a very basic level, that of direct sales. Reaping rewards. For the entire reporting year of 2013, the Depot out-profited Low’s by 15 h percent (Orlando, K. 013).

Low’s strictly centralized overall corporate style mandated the company adopt one particular strategy, investing in inventory it hoped would sell in spring, from which it could not sufficiently recover. Low’s could have benefited from a decentralized philosophy. Unlike the Depot, Low’s did not adjust, and could not because of the top-down management style employed. One could easily reason Low’s could have adopted a similar strategy as the Depot, with equally successful results. Local store managers simply were not given the authority. Lack of decentralization costs profits.

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This lack of foresight specifically can be pointed to as the greatest single factor in Low’s lack of comparable profit to the Depot. One simply has to compare a mirror-like competitor such as the Depot to prove this statement. Factors influencing change. The single most important factor determining whether a business needs to change is profit margin. There is sufficient impetus for Low’s, one can assume, to change management style from heavily centralized to some form of decentralization. When he competition is beating your profit margin by factors of xx, this is a clear indicator of needed change, in any business.

One can speculate on other factors, such as corporate culture, ego, etc. , but these are minor considerations when one considers why a business exists to begin with. It is clear, then, when the market place chooses a winner, there are corresponding reasons for the victory. The Home Depot’s adoption of a decentralized philosophy when it came to recovering from an economic downtown was successful, while keeping a more or less centralized distribution yester; while Low’s strategy, comprised of highly-centralized decision making, was less profitable and therefore less successful.


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