Question

1.What is a segment? Thinking of your current or past employer, how is/was the business segmented?

What is meant by decentralization? What are the advantages and disadvantages?

2. what is the danger in allocating common fixed costs among product lines or other segments of an organization? Give examples.

3.

Answer 1

A segment refers to the subsection within the organization which can be identified separately because of certain set of process and product portfolio in that category of business. The business was segmented offering consultancy services depending upon the business life cycle of the organization. Advisory services can be segmented based on several stage and types of issues and challenges faced by the organization. Business segment under the advisory services organisation include Business segments according to the sectors and industry working professionals are catering to such as Pharma/ Life Science sector, Automobile, Consumer goods. They are also segmented based on type of consulting services provided to the clients for instance Transaction Advisory services, Transfer pricing, Technology & Innovation and Deal Advisory Services. Business can be segmented based on various departments such as Marketing, Sales, Finance, HR departments, internal divisions within the organization.

Decentralization refers to the transfer of authority/ decision making power from top level management of the organization to all the employs, stakeholder of the business. Its means to empower all the employees to decide key decision regarding the business and future action plans & objectives of the organisation thus motivating them to be part of key decision making and increasing their job satisfaction.

Advantages of decentralization includes Autonomy to all the employees to take key business decisions. It also helps in fast decision making within the organization. Whereas decentralization also results in loss of control as the decision making power is delegated from top level management to all the subordinates thus decentralization results in loss of authority and control for the top level management moreover it is cumber-some, expensive and time-taking process. Organization need to do cost benefit analysis before decentralization of authority and control to lower level of management.

Fixed costs of each business segment should be charged separately within the organization. In case common fixed costs are allocated among product lines therefore the cost of the various product lines will tend to increase and organization will not be able to compute and measure the true financial position of the product lines as the fixed costs are charged among all the product lines. Ideally organization should measure the fixed cost of each product lines separately to know the correct financial position of the product line in terms of gain/loss from product lines taking into consideration separate costs of each product lines.