Centralization is the process when decision making is concentrated in a few hands. It may also mean having one focus of control which improves efficiency by utilizing economies of scale. Centralization in an organization can lead to decision making only at the top level, operating authority with the middle level managers, lower level operations being performed only at the directions from top level.
Centralized organizations effectively rely on one person to make decisions and give directions to the company. In centralized organizations all decisions of the lower level are subject to the scrutiny and approval of the higher level. Opposite of centralized organization is decentralized organizations where several individuals are responsible for making business decisions and running a business.
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