A company X limited manufacturing cosmetics, which has enjoyed a pre-eminent position in business, has grown in size. Its business was very good till 1991. But after that, new liberalised environment has seen entry of many MNC’s in the sector.

With the result the market share of X limited has declined. The company had followed a very centralised business model with Directors and divisional heads making even minor decisions. Before 1991 this business model had served the company very well as consumers had no choice. But now the company is under pressure to reform.

Questions
What organisation structure changes should the company bring about in order to retain its market share?
How will the changes suggested by you help the firm? Keep in mind that the sector in which the company is FMCG.

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Solution

A major change that needs to be adopted is a move towards decentralisation. As the organisation is growing it cannot maintain complete centralisation. The employees must be given some authority and responsibility to ensure smooth and efficient functioning of the organisation. Moreover, it would enable quick decision making in the organisation.

Decentralisation would benefit the organisation in the following manner.

1. With decentralisation the lower level managers would get freedom and autonomy to take initiatives.
2. Decentralisation would help in developing managerial competence which would prove useful in the process of growth.
3. With decentralisation the decisions are taken quickly and in a timely manner. This is useful in finding solutions to the problems easily.

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Similar questions

A company X Ltd. manufacturing cosmetics, which has enjoyed a pre-eminent position in a business, has grown in size. Its business was very good till 1991. But after that, a new liberalised environment has seen an entry of many MNC's in the sector.

With the result, the market share of X Ltd. has declined. The company had followed a very centralised business model with directors and divisional heads making even minor decisions. Before 1991, this business model had sewed the company very well as consumers have no choice. But now, the company is under pressure to reform.

What organisation structure changes should the company bring about in order to retain its market share?

How will the changes suggested by you help the firm? (Keep in mind that the sector in which the company is FMCG).

Q. XYZ Ltd. Co., manufacturing cosmetics and enjoying a predominant position in the industry has grown in size. Its business was very good till 1991. But after that new liberalized environment has seen the entry of many MNCs. In this sector with the result that market share of XYZ has declined. The company followed a very centralised business model with directors and divisional heads making even minor decisions.
(a) Which function of management is being indicated here?
(b) What dimension of environment is implicit in this case? Indicate by quoting the lines from above para.

A company manufacturing consumer goods has grown in size. It was a market leader but with changes in the economic environment and with the entry of MNCs its market scheme is declining. The company was following a centralised business model as even the minor decisions were in the hands of the top level. Before 1991 this model was suitable for the company but now the company is under pressure to reform.

What organisational structure changes should the company bring about in order to retain its market share?

Q. A company manufacturing consumer goods has grown in size. It was a market leader but with changes in economic environment and with the entry of MNCs its market scheme is declining. The company was following a centralized business model as even the minor decisions were in the hands of top level. Before 1991 this model was suitable for company but now company is under pressure to reform.
What organisational structure changes should the company bring about in order to retain its market share?

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