4.1.2.3 Advantages in PM

① It focuses the attention of subordinate management on business performance and results.

② Management by objectives can be applied more easily.

③ The manager of the unit knows better than anyone else.

④ It gives more authority to junior managers and grooms them for more senior positions in the future.

⑤ It reduces the number of levels of management.

⑥ The top executives in each division are able to report directly to the chief executive of the holding company.

4.1.2.4 Disadvantages in PM

① A division is partly insulated by the holding company from shareholders and capital markets.

② The divisions are more bureaucratic than they would be as independent corporations, owing to the performance measures imposed by the strategic apex.

③ Headquarters management might usurp divisional profits by management charges and unfair transfer pricing systems.

④ It may be impossible to identify independent products or markets for which divisions would be appropriate.