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Jomo Kenyatta University of Agriculture and Technology

School of Human Resource Development Individual 3rd Trimester Assignment Unit Title: Principles of Management Unit Code: HBC 2108/HPS 2206 Centralization versus Decentralization Organizational Design Structures In 1992, Honda Motor Co., like many other Japanese firms, found itself facing increased competition in a depressed global market place. It realized that its strategy of relying on product innovation to increase its sales growth had led it to neglect the cost and efficiency side of the equation. As a result, its profit margins were eroding. Under its founder, Shoichiro Honda, Honda had pioneered the concept of the Honda Way, based on decentralized, participative, consensus approach to management. At Honda, teams led the decision-making process, and authority was decentralized throughout the company. However, Hondas new Chief Executive Officer, Nobuhiko Kawamoto, concluded that this process had gone too far. He decided to recentralize authority in order to provide the control and direction needed to slash costs and efficiency. He began to give Hondas top managers more and more authority for corporate-wide strategy, and mad them responsible for overseeing both the companys domestic and global strategy. The effect of this move was unexpected. Many of his top executives found it physically impossible to assume the extra responsibility that this new policy of centralization required. One key executive, Shoichiro Irimajiri, who was assigned responsibility for overseeing both Hondas global R & D and manufacturing operations, was forced to resign abruptly after his doctors told him that his extra overload had pushed him to the brink of heart attack. As Kawamoto commented, maybe he had given Irimajiri too much responsibility. Since the new policy of centralization was not working, Kawamoto had to find a new solution to the centralization-decentralization problem. He decided to delegate more authority back down the hierarchy on a global basis. Managers in Hondas North American, European, and Japanese divisions would take responsibility for managing strategy for their divisions. The role of Hondas corporate executives would be to provide coordination among divisions and facilitate the sharing of skills and resources to reduce costs. In this way, Honda hopes to strike a new balance between centralization and decentralization, so that it can remain innovative and responsive to customer needs in order to encourage sales growth, but at the same time become more efficient to reduce costs. The company has returned to the Honda Way it pioneered.

Required: (a) Determine with reasons the model for: (i) The original organizational structure at Honda (ii) The revised organizational structure at Honda after the in-coming new Chief Executive Officer (iii) The compromised organizational structure after the one in (ii) above failed. (b) Draw the organizational structures for each in (a) above and outline the advantages and disadvantages at Honda. (c) Explain the concepts of decentralization and centralization relating the application to the theories of management. Link these two concepts with respective possible theories illustrating when it is appropriate to use each of these concepts. (d) Ed Illustrate the type(s) of organizational structure (s) that can be recommended in future at Honda as the environment becomes turbulent, dynamic, unpredictable, uncertain and fluid at all levels, i.e. macro, industry and micro. Justify your illustrations with appropriate principles and concepts from additional referencing of relevant literature. NB. Any form of plagiarism may be punishable with no awarding of any mark for all identified without any option of makeup assignment. The work is strictly individual. Assignment shall be handed in not later than 30th November 2011. The assignment must be typed. Hand-written work will not be accepted.

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