Question

A management decision may be beneficial for a given profit center, but not for the entire company. From the overall company viewpoint, this decision would lead to

Answer 1

Management must consider the effects of decisions on individual profit centers and the overall company. What benefits a profit center might not benefit the entire organization, potentially impacting the company's profit and strategic goals.

Step-by-step explanation:

Management decisions within a company often have to balance the interests of individual profit centers with those of the company as a whole. A decision that benefits a single profit center may not align with the broader objectives or profit potential of the entire company.

For instance, if a profit center decides to shut down a factory to cut costs, this could be profitable for that center in the short term. However, if this factory could have brought in significant revenues in the long run or provided strategic advantages, then the decision might ultimately hamper the entire company's management plans and profit goals.

Similarly, launching a new product may look favorable to a specific segment of the company, but if it leads to brand dilution or diverts resources from more profitable endeavors, the overall company suffers. The complexity of these decisions makes it essential for management to evaluate the impact of decisions not just on a profit center but on the company's broader strategy and performance.

Answer 2

A management decision may be beneficial for a given profit center, but not for the entire company. From the overall company viewpoint, this decision would lead to:

Sub-optimization.

Step-by-step explanation:

Suboptimization describes a situation whereby changes effected in a unit of an organization improves the specific component without benefiting the whole organization. It is a common policy mistake that management makes when it uses its success in a department or division to apply the same techniques in a different division without achieving similar results. This implies that management may focus on one component of its organization and make improvements in that one component while the effects on the other components are ignored. Simply, it means optimizing the results of a unit rather than the results of the whole organization.