Association of Chartered Certified Accountants (ACCA) Certification Practice Test

Why might economic advantages be lost in geographic departmentation?

1. Localized staffing needs

2. Inconsistency of standards across regions

3. Centralized decision-making

4. Decreased product specialization

The correct answer is: Inconsistency of standards across regions

Economic advantages might be lost in geographic departmentation primarily due to the inconsistency of standards across regions. When an organization structures itself by geographic regions, each region might develop its own operational procedures, policies, and quality standards. This can lead to significant variations in how products and services are delivered, which may hinder effective competition against standardization achieved in a functional departmentation approach. Inconsistencies can create challenges such as varying customer experiences, inefficiencies in resource use, and difficulty in maintaining brand integrity. The lack of uniformity may also drive up costs, as regions may reinvent processes rather than share best practices, resulting in higher operational expenditures. While localized staffing needs could also lead to inefficiencies, they tend to focus more on human resources rather than the broader implications of operational standards. Similarly, centralized decision-making often counteracts the intended benefits of geographic structure by limiting responsiveness to local markets. Decreased product specialization may occur, but the primary concern linked to economic advantages connects more closely with maintaining consistent quality and efficiency across all regions.