Chapter 11

26) Burnley and Co., a graphic design 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 Emma Burnley, the CEO. The heads of the centralized HR, Finance, and Marketing teams report to Emma Burnley 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?

Emma Burnley has a wide span of control.

34) Cheetah, 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

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

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

2) 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

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

FALSE

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

It cannot effectively address a higher level of diversification.

76) 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.

73) 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.

15) 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.

60) Island Home Goods pursues a related diversification strategy, deriving less than 70 percent of revenues from its original business unit, Island Furniture, and maintaining several related units including Island Lighting and Island Hardware. Which of the following structures is most likely to support this strategy?

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

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

McDonald's use of standard operating procedures

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

McDonald's use of standard operating procedures across the world

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

TRUE

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

They are considered before employees make any decisions.

82) 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.

32) Tony's Tacos 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. Tony'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?

Tony's has a high degree of specialization, formalization, and centralization and relies on a tall hierarchy.

33) Which of the following accurately describes an organic organization?

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

45) Sunset Foods 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 Sunset improve its ability to collaborate without sacrificing the benefits of its current structure?

by establishing cross-functional teams

53) ABX 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.

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

focus on economies of scale

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

functional

84) Turquoise Games relies on its employees to provide innovative ideas for new educational products. To foster intrinsic motivation in its workforce, Turquoise should

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

55) 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

78) Spiderweb Inc. is an apparel manufacturer. The management at Spiderweb 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.

81) 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.

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

is mechanistic in nature.

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

multidivisional

50) Harvey's, a large and successful retail chain on the West Coast, decides to expand its operations across the U.S. Which of the following organizational structures should Harvey's use?

multidivisional

74) 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.

61) Butterfly Technologies 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 Butterfly devices. In this scenario, Butterfly would be best served to embrace

open innovation.

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

organic organization

30) BioCure Inc. is a pharmaceutical company that has many breakthroughs in medicine to its credit. Unlike many other pharmaceutical companies, BioCure 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, BioCure Inc. is most likely an organization that is

organic.

21) 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

17) InSeason 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, InSeason 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, InSeason developed a

resistance to change.

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

slow down decision making.

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

socialization.

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

structure

11) Organizational design is

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

80) 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.

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

Boxer will protect its intellectual property with patents and trade secrets.

64) ________ define appropriate employee attitudes and behaviors.

Norms

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

Organizational culture

23) W. L. Gore & Associates is organized in such a way that it has no formal job titles, job descriptions, or chains of command. This implies that it has

a decentralized structure.

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

ambidextrous organization.

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

multidomestic

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

strategy implementation

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

a cohesive group

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

FALSE

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

organic.

28) Jen works as a front-line employee for a nationwide retail store. She 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

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

core rigidity.

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

FALSE

27) Galaxy Toys Inc., a toy 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. Chris has worked at Galaxy Toys for eight years, but has never had a boss or supervised an employee. Which of the following is most likely true in this scenario?

Galaxy Toys Inc. has a flat organizational structure.

42) 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.

52) 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.

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

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

13) 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.

71) 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.

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

TRUE

29) Uptown Office Systems 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.

72) 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.

83) Mona 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 Mona's business?

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

14) Tina is the inventor of a personal fitness tracking device, and she is in the process of hiring employees after receiving investment funding. When considering how to structure her company, she should

first establish a strategy and let that be her guide.

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

mechanistic

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

Centralization

12) Why does strategy implementation often require changes within an organization?

Strategy implementation transforms strategy into actions and business models.

67) 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.

58) Why is the optimal organizational structure a multidivisional structure?

Its focus is on driving down costs.

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

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

51) Avalanche operates as a strategic business unit (SBU) under Snowfall Inc., a home-furnishings manufacturer. From this information, it may be reasonable to infer that

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

8) An open innovation model reduces a firm's absorptive capacity.

FALSE

43) 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.

75) One of Waterfall Apparel'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 "True to 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 Waterfall's competitors. Although the campaign has resulted in a 10 percent decline in profits, Waterfall has decided to continue to pursue its founder's vision to reward customers and maintain employees' sense of purpose. Why does Waterfall's culture, exemplified by the "True to You" campaign, fail to support a competitive advantage?

It does not increase economic value creation for the firm.

36) Ruby, 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 Ruby?

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

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

Organizational inertia

4) 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

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

TRUE

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

TRUE

69) 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.

18) ValueHealth is a successful drug manufacturer. Because the pharmaceutical industry features a high rate of change and the threat of disruption is high, ValueHealth should

be prepared to restructure as the landscape changes.

41) A functional structure is recommended when a firm

has a low level of diversification.

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

matrix

35) While working a night job at a call center, Eric creates an app called EatOut, 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 EatOut. He creates a start-up called BestApps and hires three people to help him improve EatOut and maintain the servers that run it. In this scenario, BestApps most likely has a ________ structure.

simple

25) Telescopic 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, Telescopic Inc. can be said to have a(n)

tall hierarchical structure.

66) The most important yet least visible element of organizational culture is

values.