Association of Chartered Certified Accountants (ACCA) Certification Practice Test

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Which disadvantage may arise from geographic departmentation?

Increased economies of scale
Consistency in methods
Duplication of functions
Reduced local responsiveness

The correct answer is: Duplication of functions

Geographic departmentation involves organizing a company into divisions based on geographic regions. This structure can lead to several challenges, one of which is the duplication of functions. Each geographic division may require its own set of resources, including sales teams, marketing, management, and administrative functions. As a result, this can create inefficiencies within the organization, as multiple divisions may engage in similar activities, thereby duplicating efforts and increasing overall costs. This duplication can hinder the company's overall operational efficiency, as resources may not be utilized to their fullest potential. Additionally, it can lead to inconsistencies in operations and strategic direction across the different geographic divisions, creating challenges in coordination and collaboration. In contrast, increased economies of scale and consistency in methods are generally advantages associated with centralized structures, while reduced local responsiveness is more fitting to centralized operations where flexibility to local market needs may be sacrificed.