Relationship

Based on the case study, the proper strategy which able to overcome the current problems from Untargeted company Is using centralized authority. According to Robert Monika, the centralized authority exists when the decision-making process is the responsibility of a single person. The single person will be duty bound by the top management of the company and will be accountable for proper performance of any purchasing activities. Monika, 2005) Centralized authority able to help Untargeted educe the cost by working with Extent is because centralized authority helps Untargeted centralized control. Centralized control able to help Untargeted to overcome the problem of which the three different operating units was buying the same products from Extent without any coordinating among themselves and hence the different operating units was purchase the same products with different prices. By centralized control, Untargeted able to analyze and calculate the actual total stock requirement from each of the three units and make an order together.

This can help efferent operating units on Untargeted to purchase the material with the same prices and lower price because they are able to receive the volume discount. In conclusion, the centralized control able to help Untargeted to reduce cost because It helps them to get a better price of materials and avoid the problem of different units purchase the materials with higher price than others. Second reasons which adopting centralized authority to overcome the problem is because centralized authority able to help Untargeted to lower administrative costs.

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The different operating units of Untargeted currently was order their materials parallel and without any coordination. This make the Untargeted have to make 3 times of order, 3 times of purchase, 3 times of delivery, 3 times of payment making and 3 times of reconsidering. These administrative activities costs can be large amount in long term and which is unfavorable for the Untargeted. After these three operating units was centralized and which the purchase decision was making by one person, Untargeted can collect the order from the three different operating units and make the order together.

In conclusion, the centralized authority help Untargeted to educe cost and enhance their competitive advantages because Untargeted Is able to lower their administrative costs by making fewer orders, reducing purchasing, receiving, inspection, accounts payable and reconsidering expenses. The third reasons which adopting centralized authority to overcome the problems is because the centralized authority able to help Untargeted leveraging of volume purchases. The current problem was the different operating units makes their order without any coordinate.

This can result In small or less volume In each of the order If ampere to the three different operating units are order together. After the Untargeted develop the centralized authority, the three operating units are able to coordinate with each others and the top management can order the materials from Extent with larger volume in every order rather than three different operating units order separately. When the Untargeted was order in large volume of the same and similar materials, the volume discounts Is able to receive by Untargeted In order to reduce order to gaining maximum competitive advantage from its total economic power.