Association of Chartered Certified Accountants (ACCA) Certification Practice Test

Successful divisionalisation requires which of the following?

1. High levels of centralization

2. Properly delegated authority

3. Minimal interaction between units

4. Lack of management support

The correct answer is: Properly delegated authority

Successful divisionalisation fundamentally relies on properly delegated authority. This allows each division within the organization to operate with a degree of autonomy, enabling managers at each level to make decisions that best suit their specific market or operational circumstances. Effective delegation empowers managers with the responsibility and authority necessary to manage resources, respond to challenges, and seize opportunities rapidly. When authority is well-delegated, divisions can focus on their objectives, encourage innovation, and optimize their processes without awaiting approval from upper management for every decision. This agility contributes to a more responsive business structure that can better align with market demands and customer preferences. In contrast, high levels of centralization, minimal interaction between units, and lack of management support can hinder divisional effectiveness. Centralization can stifle the initiative of divisional managers, while minimal interaction may lead to a lack of coordination and collaboration across divisions, which is often detrimental in complex business environments. Likewise, without management support, even well-delegated authority can falter, as divisions may lack the necessary resources or backing to implement their strategies effectively.