Chapter 11

Simple organizational structures often exhibit low levels of formalization and specialization. Which of the following is not a benefit of employing a simple organizational structure?

employing specialists that can develop deep knowledge/expertise in their field

A functional structure is recommended when a firm

has a low level of diversification.

When a firm diversifies into different product lines and geographies, a ________ structure is preferred.

multidivisional

Vanessa just graduated from law school and wants to open her own law firm. Vanessa should probably adopt a(n) ______ structure for the firm.

simple

While working a night job at a call center, John creates an app called iFood, which can be used to place orders at restaurants, rate the restaurants, and make reservations. Because he receives good responses for his app, he quits his current job to focus his efforts on iFood. He creates a start-up called JohnBuilt1 and hires three people to help him improve iFood and maintain the servers that run it. In this scenario, JohnBuilt1 most likely has a ________ structure

simple

Organizational design is

the process of creating, implementing, and modifying the structure of an organization.

A company that is using extrinsic motivation as an output control mechanism will most likely

threaten to lay off employees if they do not achieve targets.

The most important yet least visible element of organizational culture is

values

Which of the following best exemplifies the use of input controls?

McDonald's use of standard operating procedures

Which of the following real-world scenarios best exemplifies formalization?

McDonald's use of standard operating procedures across the world

What is most likely to happen if a firm relies too long on a competency without honing, refining, and upgrading as the firm and the environment change?

The firm's culture can turn from a core competency into a core rigidity

Yubaba Inc., a fidget spinner manufacturing company, encourages its employees to enjoy their work by taking on additional responsibilities or switching jobs with each other. It allows its employees immense flexibility in charting their own career path within the organization. Bill has worked at Yubaba for eight years, but has never had a boss or supervised an employee. Which of the following is most likely true in this scenario

Yubaba Inc. has a flat organizational structure.

Which of the following types of groups is most susceptible to groupthink?

a cohesive group

Fang and Bone Corp. is a successful drug manufacturer. Because the pharmaceutical industry features a high rate of change and the threat of disruption is high, Fang and Bone Corp. should

be prepared to restructure as the landscape changes.

Leslie has completed the organizational design of her firm but is now interested in the second key informal building block, which she believes will help her firm achieve a competitive advantage. Specifically, she's interested in how things will get done on a day-to-day basis and the intangible piece of her organization that cannot be easily codified. Leslie wants to build an effective

organizational culture

Denise wants to clearly communicate and create a ________, a key input control, before her team tackles business activities. This way the team will be able to better allocate her firm's scarce resources in order to accomplish the tasks at hand.

budget

Once a firm finds success in a given organizational structure, it should seek to reinforce and maintain that structure for the life of the firm.

False

Paper Street Soap Company, a cosmetics firm, has offices in New York, Texas, California, New Mexico, and New Jersey. Each of these offices is headed by a president who reports directly to Jennifer Watson, the CEO. The heads of the centralized HR, Finance, and Marketing teams report to Jennifer Watson as well. Managers in the various offices also report to the CEO directly. Based on this information, which of the following statements is most likely to be true?

Jennifer Watson has a wide span of control.

Omni Consumer Products operates as a strategic business unit (SBU) under Total Inc., a home- furnishings manufacturer. From this information, it may be reasonable to infer that

Omni Consumer Products is led by its own CEO (or equivalent general manager)

A firm that uses a functional structure will typically have efficient top-down and bottom-up communication, but

communication may be hampered among the horizontal, distinct organizational functions.

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

focus on economies of scale

Oceanic Airlines Inc., a transportation firm, is headed by Denise Cordova, 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, Oceanic Airlines Inc. can be said to have a(n)

tall hierarchical structure

Which of the following statements best describes groupthink?

It is a situation in which opinions coalesce around a leader without individuals critically challenging and evaluating that leader's opinions and assumptions.

Angelika is the Chief Operating Officer of One Spice Inc., a firm that grows and processes the Naga Viper pepper, one of the world's hottest peppers. Angelika wants to better understand the relationship between her firm's organizational culture and the ability to achieve competitive advantage. The relationship between these two states that

a firm can achieve competitive advantage if their organizational culture follows the VRIO principles

Tom is the inventor of a personal fitness tracking device, and he is in the process of hiring employees after receiving investment funding. When considering how to structure his company, he should

first establish a strategy and let that be him guide.

Which of the following statements is true of organizational culture?

It is better for founder CEOs to create a relevant culture, structure, and strategy in the early stages.

A change in company culture is most commonly accompanied by a change in leadership

True

AT&T, IBM, Siemens, and Pfizer, have been shifting their innovation strategy toward a model designed to blend internal knowledge with external knowledge by sourcing strategic alliances. This example best represents the

open innovation framework

A firm's ________ determines how the work efforts of individuals and teams are orchestrated and how resources are distributed

structure

Jared works as a front-line employee for a nationwide retail store. He reports to a floor manager, who reports to a departmental manager, who reports to a regional supervisor, who reports to a vice president, who reports to the CEO. Which of the following best describes this retail store?

tall structure

Which of the following is an advantage offered by a functional structure?

It allows for a higher degree of specialization and deeper domain expertise

What most likely happens when a firm optimizes its organizational structure to its current situation?

It plants the seed of subsequent failure: the tightly coupled system can break apart when internal or external pressures occur.

Firms that pursue a closed approach to innovation typically enjoy first-mover advantages.

True

Why should managers using the M-form organizational structure to support a related-diversification strategy ideally concentrate decision making at the top of the organization?

it allows a high level of integration.

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

organizational inertia

The four key elements of a firm's organizational structure are specialization, centralization, formalization, and generalization

False

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

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

Which of the following provides an example of a common drawback of a functional strategy?

Jack had a difficult time communicating efficiently with the manager of another department

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.

Why is it difficult to imitate the organizational culture of firms like Southwest Airlines and Zappos?

Their culture reflects complex relationships with their employees, customers, and suppliers.

McDonald's operates Hamburger University that trains students to ensure consistent food quality across its outlets throughout the world. This indicates that McDonald's

is mechanistic in nature

Susan works for a firm that has high degrees of formalization in their organizational structure. She understands that one of the main drawbacks of working in a firm with such high levels of formalization can often result in which of the following?

a slower decision-making process

Elvira is the CEO of All Things Inc. which employs a matrix structure which is the combination of the ________ and ________ structure.

functional; M-form

A planned emergence approach to strategic planning is most likely to be found in a highly centralized firm.

False

Which of the following accurately describes an organic organization?

a flexible organization that fosters fast decision making and high employee motivation

GM's insistence on sticking to a bureaucratic culture combined with its M-form structure and it subsequent failure to adapt to changing customer preferences for more fuel-efficient cars, produce higher quality, and create innovative designs best exemplifies

core rigidty

Which of the following global strategies best matches with a multidivisional structure?

multidomestic

To effectively implement a differentiation strategy, managers rely on a functional structure that resembles an organization that is highly

organic

Successful ________ requires managers to design and shape structure, culture, and control mechanisms

strategy implementation

A primary advantage of the matrix organizational structure is that it simplifies decision making and communication in geographically diverse organizations.

False

An open innovation model reduces a firm's absorptive capacity

False

Which of the following is an advantage of using a functional structure when pursuing a cost-leadership strategy?

It allows a cost-leader to upgrade core competencies in manufacturing and logistics.

Why does a firm use an organic organization combined with a functional structure when implementing a differentiation strategy?

It allows the firm to constantly upgrade core competencies in R&D, innovation, and marketing.

Why does strategy implementation often require changes within an organization?

Strategy implementation transforms strategy into actions and business models.

Hooli, a web development firm, wants to implement an organic structure to foster innovation and attract the most talented creative minds. Which of the following features will make it difficult to do so?

dedication to a cost-leadership business strategy

Umbrella Corp is a notebook manufacturing company based in Ohio. Umbrella Corps' main market is Texas. It aims at providing its products at better prices than its competitors. Which of the following structures is Umbrella Corp likely to use if it has functional setup?

mechanistic

PolyCon's, a large and successful retail chain on the East Coast, decides to expand its operations across the United States. Which of the following organizational structures should PolyCon's use?

multidivisional

Li runs a firm that has diversified into different product lines and geographies. She should probably use a(n) _______ organizational structure

M-form

Sarah, a recent fashion design school graduate, has received praise for her clothing designs from her peers and friends on social networking sites; this has inspired her to set up a store where she can design and sell apparel. After experiencing some success with sales, she recruits two employees to handle customers at the store. However, she handles other day-to-day affairs herself, while continuing to design clothes. Which of the following is likely to be a pitfall of this organizational structure established by Sarah?

Once the firm starts growing and attracting more customers she is likely to feel overloaded

Duke & Duke is the parent company of GetItDone.com and NownNever Inc. To cut costs, Duke & Duke integrated GetItDone.com's and NownNever Inc.'s management functions with Duke & Duke's management, while keeping other functions such as product development independent. Duke & Duke has encourage the senior teams at both GetItDone and NownNever to exploit the success of their existing products while exploring new products for the future. This scenario best exemplifies a(n)

ambidextrous organization.

Sean is having hard time replicating his competitors' strong organizational culture because of ________ and ________, which stem from the VRIO framework.

casual ambiguity; social complexity

A firm that uses a structure that is organized along different business functions such as HR, R&D, Sales, and Marketing and also along different geographical areas such as different countries of the world is most likely using a ________ structure.

global matrix

Organizational culture can help a firm gain and sustain competitive advantage only if the culture makes a positive contribution to the firm's economic value creation and

obeys the VRIO principles

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.

Bill Lewis is the CEO of Nordic Technologies Inc., a firm that offers a limited line of standard products that competes in a similar manner with a narrow, local market focus and whose competitive advantage is a focus on low cost derived from gaining economies of scale. Bill should use a

functional structure

Paul runs an organization that implements a cost-leadership strategy. This business-level strategy supports both a ________ and ________ structure.

functional; mechanistic

Aperture Science relies on its employees to provide innovative ideas for new educational products. To foster intrinsic motivation in its workforce, Aperture Science should

give employees a "free day" every two weeks to pursue ideas for new educational toys

Output controls can sometimes discourage collaboration among different strategic business units However, more and more work requires creativity and innovation, especially in highly developed economies. One way firms are grappling with this issue is by

introducing results-only-work-environments to tap intrinsic motivations.

Jerry is one of the SBU managers for a firm that has been in business for over 50 years. The external environment in which they have operated has changed significantly in the past decade, but this firm is still operating under a "business as usual" mantra. Jerry can't seem to convince the upper level executives to reorganize the firm's structure and formal reporting relationships. This firm is probably experiencing

organizational inertia

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

Hooper's Store Inc. started a chain of organic supermarkets that had initial success. The managers achieved a mastery of the firm's current environment, thereby filling a need in the market. However Hooper's Store defined and measured it success by financial metrics, with a focus on short-term performance. As a result, the firm put in place metrics and systems to accommodate and manage increasing firm size due to continued success. As a result of this tightly coupled system, Hooper's Store developed a(n)

resistance to change

________ refers to the degree to which decision making is concentrated at the top of the organization.

centralization

Results-only-work-environments (ROWEs) are characterized by their use of extrinsic motivations such as promotions or the threat of layoffs.

False

Which of the following statements is true of strategy in an organization?

Organizational structure must follow strategy in order for firms to achieve superior performance.

Blue Cat Restaurant Group relies on a highly centralized functional structure to ensure consistency in the quality and taste of its products and to drive down costs via process innovations. However, as a consequence of its highly compartmentalized structure, the firm has found it difficult to transfer information and ideas from one department to the next. With the launch of its new line of breakfast foods coming up, how can the Blue Cat Restaurant Group improve its ability to collaborate without sacrificing the benefits of its current structure?

by establishing cross-functional teams

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

organic organization

________ describes the collectively shared values and norms of an organization's members.

organizational culture

In which of the following ways does Zappos achieve organizational control?

It enforces that each group member's compensation depends in part on the group's overall productivity.

The Estelle Leonard Talent Agency recently underwent a reorganization. Based on customer feedback, the company eliminated many of its middle management positions and implemented a flatter structure. Which of the following is a possible drawback of this decision?

The increased span of control for remaining managers may lead to higher levels of stress and possible burnout.

A firm that successfully balances exploitation of current opportunities and exploration of future possibilities is considered ambidextrous.

True

Employees learn about an organization's culture through the process of

socialization

Managerial decisions about a firm's strategy and their organizational structure should always be interrelated.

True

Which of the following is a disadvantage of a functional strategy?

It cannot effectively address a higher level of diversification.

In 2013, CEO Hsieh announced that Zappos would implement a reorganization in which, as Hsieh said, "... employees ... act more like entrepreneurs and self-direct their work ..." Hsieh changed Zappos from

a hierarchy to holocracy

Firms with a flat structure and a low degree of specialization tend to foster innovation better than firms with a tall structure and high degree of specialization.

True

A high degree of formalization in an organization is most likely to

slow down decision making

Which of the following organizational structures matches best with an international strategy?

functional

Why is the optimal organizational structure a multidivisional structure?

its focus on driving down costs

Why are controls like budgets and operating procedures that McDonald's implements known as input controls?

They are considered before employees make any decisions.

________ define appropriate employee attitudes and behaviors

norms

Los Pollos Hermanos is a nationwide fast-food chain. Decision power resides at the top of the organization. Each job is documented in minute detail. The firm has many levels of supervision, including vice presidents and regional managers. The firm's headquarters provides detailed instructions to each of its franchisees so that they provide comparable quality and service across the board. Based on this scenario, which of the following is an accurate statement about Tony's?

Los Pollos Hermanos has a high degree of specialization, formalization, and centralization and relies on a tall hierarchy

Delos Inc. is an apparel manufacturer. The management at Delos Inc. prefers moderate control over the operations of the different departments such as R&D, design, marketing, and sales. It allocates a budget to each function at the beginning of each quarter. This is an example of implementing control through

input controls

An organization that is organized according to strategic business units (SBUs) and also along organizational structures is most likely using a ________ structure

matrix

Two leading home appliance companies, Globex Inc. and Pug Tech, are in competition for market share. In their quest for exciting new products, Globex employs an open innovation model, while Pug Tech pursues a closed innovation model. Which of the following statements is most likely true?

Pug Tech will protect its intellectual property with patents and trade secrets.

Organizational design involves establishing a firm's structure, culture, and control mechanisms.

True

One of Black Mesa's core values is to provide unbeatable customer service, a commitment introduced to the company by its founder more than 10 years ago. This value is expressed in the company's "Always You" campaign, which promises a no-questions-asked returns policy and an offer to stitch the customer's initials onto any item for free using a patented sewing technique, two features that are not offered by any of Black Mesa's competitors. Although the campaign has resulted in a 10 percent decline in profits, Black Mesa has decided to continue to pursue its founder's vision to reward customers and maintain employees' sense of purpose. Why does Black Mesa's culture, exemplified by the "Always You" campaign, fail to support a competitive advantage

It does not increase economic value creation for the firm.

Stratton Oakmont pursues a related diversification strategy, deriving less than 70 percent of revenues from its original business unit, Stratton Piedmont, and maintaining several related units including Stratton Wellmont and Stratton Fredmont. Which of the following structures is most likely to support this strategy?

M-Form with centralized decision-making power (cooperative multidivisional)

Nerissa sets up a business consulting firm in which the employees are motivated because they find their work interesting and creative. She carefully hires workers who fit well with their assigned tasks. Also, she clearly defines the results expected of each worker, but allows the workers to determine the means to these results. Which of the following best describes Nerissa's business?

a firm that relies on high output controls to tap into intrinsic motivation

Weyland Yutani Inc. is an electronic appliances manufacturer that has many strategic business units\ (SBUs), among which, television and computers share a close relationship. These SBUs have to fight each other for R&D funding because there is a combined amount set aside for these two units. However, they share technological findings with each other and work together to ensure that their combined output is better that of the other SBUs. Such a relationship between SBUs in a business is referred to as

co-opetition

The University of Central Florida has a typical College of Business which houses several specific mini-departments such as management, marketing, finance, accounting, economics, and real estate.This College of Business best resembles a(n) ________ structure.

functional

Sirius Cybernetics Corp. produces touch-enabled wearable devices. Its research and development team recently became aware of a new, open-source technology produced by a firm overseas that would improve the processing speed and battery life of all Sirius Cybernetics devices. In this scenario, Sirius Cybernetics would be best served to embrace

open innovation

E Corp is a pharmaceutical company that has many breakthroughs in medicine to its credit. Unlike many other pharmaceutical companies, E Corp has a relaxed work environment where employees are free to discuss projects with each other. Employees are encouraged to choose the projects that interest them; communication between team members and their supervisors is open and easy. Because of the company's work culture, its employees feel motivated to work harder and display more entrepreneurial behaviors. In this scenario, E Corp Inc. is most likely an organization that is

organic