Business Policy Chapter 11

Why did W.L. Gore reorganize itself into a functional structure from a simple structure?

A simple structure could not provide the effective division, coordination, and integration of work required to accommodate future growth.

Frappe operates as a strategic business unit under More or Less Inc., a home-furnishings manufacturer. From this information, it may be reasonable to infer that

Frappe is led by its own CEO (or equivalent general manager)

Why does a functional structure rely on a flat organizational structure?

It allows for efficient bottom-up and top-down communication

W.L. Gore has 4 product divisions: electronic, industrial, medical, and fabrics. It also has manufacturing facilities in U.S., China, Germany, Japan, and Scotland, and business activities in 30 countries across the globe. Based on this information, which of the following statements is most accurate?

W.L. Gore is using a multi-divisional structure

Inertia

a firm's resistance to change the status quo. can set the stage for a firm's subsequent failure.

core rigidity

a former core competency that turned into a liability because the firm has failed to hone, refine, and upgrade the competency as the environment changed.

organizational structure

a key building block of organizational design that determines how the work efforts of individuals and teams are orchestrated and how resources are distributed. defines how jobs and tasks are divided and integrated, delineates the reporting relationships up and down the hierarchy, defines formal communication channels, and describes how individuals and teams coordinate work efforts.

founder imprinting

a process by which the founder defines and shapes an organization's culture, which can persist for decades after his or her departure

exploitation

applying current knowledge to enhance firm performance in the short term

best structures for integration strategy

balance centralization with decentralization. managers must attempt to combine the advantages of the functional structure variations used for both strategies while mitigating their disadvantages.

formalization

captures the extent to which employee behavior is steered by explicit and codified rules and procedures. characterized by detailed written rules and policies of what to do in specific situations. is sometimes necessary, but can slow decision making, reduce creativity and innovation, and hinder customer service.

mechanistic organizations

characterized by a high degree of specialization and formalization, and a tall hierarchy that relies on centralized decision making. this allows for standardization and economies of scale, and often are used when the firm pursues a cost-leadership strategy at the business level

strategy implementation

concerns the organization, coordination, and integration of how work gets done. it is key to gaining and sustaining competitive advantage. this along with formulation, are part of an interdependent reciprocal process in order to ensure continued success.

multidivisional structure (M-form)

consists of several distinct strategic business units, each with its own profit and loss responsibility. each SBU is operated more or less independently from one another and each is led by a CEO (or equivalent general manager) who is responsible for the unit's strategy and its daily operations. All CEOs report to the corporate office, which is led by the company's highest ranking titles. widely adopted structure

specialization

describes the degree to which a task is divided into separate jobs. larger firms tend to have higher specialization. requires a trade off between breadth and depth of knowledge. while it can increase productivity, it can also reduce employee satisfaction due to repetition of tasks.

hierarchy

determines the formal, position-based reporting lines and thus stipulates who reports to whom. more levels of hierarchy means a structure is TALL. tall equals narrow span of control. in flat structures, span of control is wide.

Which of the following features helps match a cost leadership strategy to a functional structure?

focus on economies of scale

functional structure

generally adopted by firms as sales increase. groups employees into distinct functional areas based on domain expertise. the functional areas often correspond to distinct stages in the company value chain such as R&D, engineering, and manufacturing, marketing, and sales, as well as supporting areas like HR, accounting, and finance. allows for a higher degree of specialization and deeper domain expertise. relies on a relatively flat structure.

simple structure

generally used by small firms with low organizational complexity. In such firms, the founders tend to make all the important decisions and run the day to day operations. Flat hierarchies operated in a decentralized fashion. low degree of formalization and specialization.

To maintain its core competency of providing a superior customer experience in the face of explosive growth, Zappos split the organization into 10 standalone units. Which of the following does this scenario best illustrate?

how an organization accommodates strategy implementation through a flexible organizational structure

Why is the optimal organizational structure a multi-divisional structure?

its focus is on driving down costs

organic organizations

low degree of specialization and formalization, a flat organizational structure, and decentralized decision making. tend to be correlated with a fluid and flexible information flow among employees in both horizontal and vertical directions, faster decision making, and higher employee motivation, retention, satisfaction, and creativity.

best structures for cost-leadership strategy

managers must create a functional structure that contains the organizational elements of a mechanistic structure (centralized with well defined lines of authority up and down the hierarchy) leveraging economies of scale is important

best structures for differentiation strategy

managers should rely on a functional structure that resembles an organic organization. firm should be able to reap economies of scope from its core competencies

_______________ organizations have a low degree of specialization and formalization as well as a flat organizational structure

organic

Which of the following types of organizations best helps match a differentiation strategy to a functional structure?

organic organization

matrix structure

organizational structure that combines the functional structure with the M-form combines domain expertise, economies of scale, and the efficient processing of information (all from the M-form), with responsiveness and decentralized focus (from the functional structure).

Which of the following is an unintended side effect of a high degree of specialization in an organization?

reduced employee satisfaction due to repetition of tasks

exploration

searching for new knowledge that may enhance future performance

input controls

seek to define and direct employee behavior through a set of explicit, codified rules and standard operating procedures.

output controls

seek to guide employee behavior by defining expected results (outputs), but leave the means to those results open to individual employees, groups, or SBUs.

key building blocks of organizational structure

specialization, formalization, centralization, and hierarchy

3 key levers that managers have at there disposal when designing their organizations for competitive advantage

structure, culture, and control

To gain and sustain competitive advantage, _____________ must follow ___________.

structure, strategy

cross-functional teams

temporary teams in which members come from different functional areas to work together on a specific project or product, usually from start to completion.

How does W.L. Gore exemplify founder imprinting?

the four core values articulated by Bill Gore guide the company and its associates to this day

Zappos established its unique organizational culture

through explicitly stated values that are connected to its reward system

examples of internal shifts

accelerated growth, change in business model, entry into new markets, a change in the top management team, or mergers and aquisitions

strategic control-and-reward systems

internal-governance mechanisms put in place to align the incentives of principals (shareholder) and agents (employees). they allow managers to specify goals, measure progress, and provide performance feedback.

organizational culture

the collectively shared values and norms of an organization's members; a key building block of organizational design

Which of the following real-world scenarios best exemplifies the use of organizational culture to build competitive advantage?

Southwest Airlines pilots sometimes help load baggage, which results in quick turnaround time

Which of the following is true of the process of organizing for competitive advantage?

To maintain competitive advantage, companies need to restructure as they grow and the competitive environment changes.

Black Mouse Inc., a web development firm, is headed by Rob Dennis, the CEO. Each functional department of the company- marketing, finance, and HR- has a president who reports to the CEO directly. Each department has various managers who manage teams. The managers report to the presidents and the team leads report to the managers. Finally, the employees at the lowest level report to their team leads. It is rare for a lower-level employee to interact with the CEO of the company. In this scenario, Black Mouse inc. can be said to have:

a tall hierarchical structure

drawbacks of the functional structure

lacks effective communication channels across departments cannot effectively address a higher level of diversification

centralization

refers to the degree in which decision making is concentrated at the top of the organization. often correlates with slow response time and reduced customer satisfaction.

international strategy

the best match for this strategy is a functional organizational structure, which allows the company to leverage its core competency most effectively

organizational design

the process of creating, implementing, monitoring, and modifying the structure, processes, and procedures of an organization. key components are structure, culture, and control.