CH11
Which of the following is a TRUE statement about organizational structures for implementing business-level strategies?
A differentiation strategy requires a functional structure with limited formalization, broad job descriptions, and an emphasis on the product R&D and marketing functions.
Amos Ball Printing Company was established in 1866. Currently, Amos Ball V is the CEO and chairman of the board. The company has traditionally used a functional structure. Five years ago, the company branched into online publishing and small-batch printing in addition to its regular large-batch operations. Both new businesses are significantly different in technology and marketing from each other and from Ball's traditional business. Despite the hiring of experienced professionals in these new endeavors, performance continues to be poor and is affecting Ball's overall performance. Which of the following statements is TRUE?
Amos should consider adopting the multidivisional structure.
______ is the degree to which decision-making authority is retained at higher managerial levels.
Centralization
______ controls are objective criteria that allow corporate managers to evaluate the returns earned by individual business units.
Financial
Which of the following is a TRUE statement about implementing corporate-level strategies and effective organizational structures?
Firms pursuing a related constrained strategy should implement a cooperative structure, use integrative devices to link divisions, centralize the R&D function, and emphasize sharing.
______ is the degree to which rules and procedures govern work.
Formalization
Which organizational structure will emphasize financial controls for headquarters' evaluation of operating units while the operating units will emphasize strategic controls within their units' performance?
SBU form
Which of the following multidivisional structures is CORRECTLY paired with the appropriate corporate-level strategy?
SBU form with related-linked strategy
Which of the following is TRUE?
Strategy has a more important influence on structure than structure has on strategy.
Megaline, Inc., with five divisions, follows the competitive form of the multidivisional structure. One division has not met the rate-of-return goals for the past year. Another division has exceeded the rate-of-return goals. The other three divisions met the rate-of-return goals. The headquarters office must decide where to allocate capital in the next year. Which scenario is the MOST likely?
The highest-performing division will get the highest capital allocation because it has the best prospects for creating more wealth for the shareholders next year.
The multidivisional structure was initially designed to produce three major benefits over the functional form. Which of the following is NOT one of the three benefits?
aligning the corporate structure with the demands of global expansion
Which of the following is NOT a preliminary task of the strategic center firm in a strategic network?
allocating internal capital
Icarus Aviation, Athena Instrumentation, and Hercules Miniaturization are strategic business units of Olympia Industries. One can expect that Icarus, Athena, and Hercules
are not necessarily related to one another in terms of products or markets.
Successfully implementing a cost leadership strategy requires
centralization of authority.
One disadvantage of the functional structure is that
communication and coordination are difficult among organizational functions.
In the ______ multidivisional structure there is complete independence among the firm's divisions.
competitive
In the ________ structure hierarchy, the headquarters relies on strategic controls to set rate-of-return targets and financial controls to monitor divisional performance relative to those targets.
competitive
A firm pursuing an unrelated diversification strategy will utilize a _____ structure.
competitive form multidivisional
The CEO of Transector, Inc., set a 6.5 percent rate-of-return target for all divisions for the past year. Now, at the end of the year, three of Transector's seven divisions have not met this rate-of-return goal. The division managers of these three under-performing divisions have all secretly contacted executive-placement firms to investigate openings at other firms, because they know their future at Transector is in jeopardy as financial performance is all- important at Transector. Transector probably uses the ______ structure.
competitive form of the multidivisional
The LG Company has units operating in significantly different industries and uses financial controls to manage its portfolio. LG is most likely using the ______ structure.
competitive form of the multidivisional
Firms such as Textron Inc. that frequently acquire and divest other firms are most likely to use the _______ structure.
competitive multidivisional
The fewest integrative devices are used in the ______ structure.
competitive multidivisional
Structural stability affects the organization's ability to
consistently and predictably manage its daily work routines.
The _______ structure is best for implementing the related-constrained diversification strategy.
cooperative form of the multidivisional
Cisco used the ______ structure to implement its ______ strategy.
cooperative form of the multidivisional; related constrained
Cisco's ______ corporate-level structure was useful in implementing its ______ business-level strategy.
cooperative form; integrated cost leadership-differentiation
Ortiz is a manager of BRS Corp. Ortiz's division did not meet financial targets this year. Ramirez, manager of another division, has indicated that Ortiz's division incurred significant costs which resulted in Ramirez's division setting record profits for the year. As a result, performance for BRS as a whole exceeded projections. Which pairing of organizational structures for BRS and bonus for Ortiz is most plausible?
cooperative structure; a bonus for increasing organizational performance
The most centralized and most costly form of the multidivisional structure is:
cooperative.
The heavy use of integrative mechanisms in the _______ multidivisional organizational structure is intended to achieve ________.
cooperative; economies of scope.
Jumbo Industrial Supply has grown from a one-location firm with a restricted product line to a multi-state organization with numerous product lines and a large sales staff. Sales have doubled every year for the last three years. It currently has a simple structure with Jared Smith, the owner-manager, making all major decisions. Jumbo is probably now experiencing or will soon experience
coordination and control problems.
The noted business historian Alfred Chandler viewed the multidivisional structure as an innovative response to
coordination and control problems.
Walmart's effective strategy/structure configuration is
cost leadership/functional.
Successful implementation of the differentiation strategy requires a structure that
decentralizes decision making.
In Japan, the center firm in a strategic network of vertical relationships might be expected to undertake all of the following EXCEPT
decreasing communications between network members to reduce communication costs.
The BEST multidivisional structure to use
depends on the degree of diversification.
The integrated cost leadership/differentiation strategy is difficult to implement mostly because
different primary and support activities are emphasized when using cost leadership and differentiation strategies.
A firm pursuing a related constrained diversification strategy would typically need all of the following EXCEPT
division managers' rewards based on division financial performance.
In an SBU structure, ______ is/are evaluated using strategic controls whereas _______ is/are evaluated using financial controls.
divisions withing the SBUs; each SBU
Strategic controls allow corporate-level managers to
examine the fit between what the firm might do and what it can do.
Implementing the multidomestic strategy requires decentralization to
facilitate the tailoring of products to the demand in local markets.
Selecting the organizational structure and controls that effectively implement the chosen strategy is a challenge for managers because
firms must be flexible while retaining a degree of stability.
Leslie is a newly graduated certified public accountant with a specialty in corporate tax. She wishes to join an organization (not an accounting firm) that will allow her to concentrate on corporate tax and become deeply proficient in this area. Leslie should look for a position in a firm with a _____ structure.
functional
The _______ structure is the most appropriate structure for implementing the integrated cost leadership/differentiation strategy.
functional
The cooperative multidivisional firm
has a structure requiring heavy use of horizontal integrative devices.
Agatha Adams founded Insurance Specialists to process medical claims for physicians' practices. She plans to compete on the basis of cost, offering the lowest processing cost per claim in her market area. Ms. Adams' company should
have a highly centralized, functional structure.
Ichabod Industries has a Latin American Division, a European Division, an Industrial Lubricants Division, and a Food Service Division. Ichabod Industries probably uses the ______ organizational structure.
hybrid combination
A multidomestic strategy would be associated with
informal coordination among units.
Which of the following is NOT associated with an organizational structure that supports a cost leadership strategy?
integration
In the competitive form of the multidivisional structure, the focus of headquarters is on all of the following EXCEPT
integration.
Toyota heavily uses a strategic network of vertical relationships. Toyota enables engineers in supplier firms to communicate easily with companies with which Toyota has contracts for services. This results in the suppliers and Toyota (the strategic center firm) being more
interdependent.
The three structural characteristics that differ among organizational structures include all of the following EXCEPT
intermediation.
One of the primary disadvantages of the global strategy and worldwide product divisional structure is that
it is difficult to respond effectively to local market needs and preferences.
Airlines have forged a number of complementary strategic alliances, in part because many airlines are not profitable. Some airlines participate in several alliances simultaneously. This tends to
make the partners' true loyalties and intentions unclear
Firms seeking to compete on the basis of cost leadership particularly need support from the ______ and _______ functions.
manufacturing; process R&D
The _______ structure is an organizational structure that combines both functional specialization and business product or project specialization.
matrix
Alfred Chandler found that firms grow in a predictable pattern and that the firm's growth patterns determine its structural form. Which form corresponds to the FINAL stage in Chandler's theory?
multidivisional
Some experts consider the ______ structure to be one of the 20th century's most significant organizational innovations because of its value to diversified firms.
multidivisional
Galatea Foods was founded in Greece by Galatea Chronos in 1978, and the company spread rapidly through Western Europe. Ms. Chronos retains the office of CEO. The Spanish division is headed by her oldest son. The North European division is headed by her only daughter, and the French-Italian division is headed by Ms. Chronos' brother. This company probably uses the ______ strategy.
multidomestic
A worldwide geographic area structure is an organizational form in which
national interests dominate and management adapts to local or cultural differences.
Which of the following does NOT cause a firm to move from a functional structure to a multidivisional structure?
need for knowledge-sharing among specialists
The primary disadvantage of the multidomestic strategy and worldwide geographic area structure relates to limited
potential for global efficiency.
Firms seeking to differentiate particularly need support from the _____ and ______ functions.
product R&D; marketing
After years of negotiating short-term contracts with its suppliers, Icon Images has decided to agree to longer-term contracts. In doing this, Icon Images is hoping to
reduce transaction costs.
Which of the following is NOT a variation of the multidivisional structure?
regional form
Functional structures work best for firms for all of the following strategies EXCEPT
related constrained diversification strategy.
Andermeyer Jewelers, which specializes in high-end jewelry, has been in existence since the 1870s and has served generations of wealthy families. Owned and managed by the Andermeyer family since its founding, it has never had more than 20 designers and jewelers in its shop. Andermeyer Jewelers should use the _____ structure.
simple
In most cases, the focus strategy is best managed using a _____ structure.
simple
Typically, an organization using a simple structure would be
small.
Organizational structure
specifies the firm's formal reporting relationships, procedures, controls, and authority and decision-making processes.
A private university is made up of various "schools," such as the School of Journalism, the School of Business, the School of Law, the School of Arts and Sciences, and so forth. The university is experiencing some financial problems, so the administration has decided to have each school of the university become a profit center. This scheme is somewhat parallel to the ______ organizational structure.
strategic business unit multidivisional
McDonald's operates through a franchising system wherein the head office uses strategic and financial controls to ensure that the franchises are creating the greatest possible value. This is an example of a(n)
strategic network.
Toyota and its suppliers have a relationship in which Toyota encourages suppliers to modernize their facilities and provides them with technical and financial assistance to do so. It also promotes longer-term contracts with suppliers and enables engineers in the supplier companies to have better communication with Toyota. This is an example of a(n)
strategic network.
A firm's _____ specifies the work to be done and how to do it given the firm's strategy.
structure
One reason why a long-tenured top-level manager may hesitate to conclude the firm's structure is a problem is that doing so
suggests that the firm's previous choices were not the best ones.
The benefits of a simple structure include all of the following EXCEPT
the ability of specialists to develop deep expertise.
The need for the organization to combine local responsiveness and efficiency is most critical in a ______ strategy.
transnational
IKEA is a global furniture retailer with more than 300 outlets in 39 countries and regions. IKEA focuses on lowering its costs as well as understanding customer needs, especially younger ones. IKEA's international strategy is best described as _______ and the appropriate organizational structure to implement this strategy is the _______ structure.
transnational; combination
Financial controls are most important in the ______ strategy.
unrelated diversified.
A successful firm pursuing a differentiation strategy will
use cross-functional development teams.
When a corporation pursues a related constrained diversification strategy, financial controls may not add value to strategy implementation efforts because it is difficult to
use them without reducing cooperation among divisional managers.
It is easiest to identify the company that functions as the strategic center firm in
vertical complementary strategic alliances.
An important lesson from the Chapter 11 Opening Case about Borders is that
while a firm's structure usually follows the strategy, once in place, structure can have a significant effect on strategy.
