Chapter 11

____ is the degree to which decision making authority is retained at higher managerial levels. a. Formalization b. Centralization c. Specialization d. Unification

b. Centralization

Cisco's _________ corporate-level structure was useful in implementing its ___________ business-level strategy (Chapter 11 Strategic Focus). a. SBU form; integrated cost leadership-differentiation b. competitive form; differentiation c. cooperative form; cost leadership d. cooperative form; integrated cost leadership-differentiation

d. cooperative form; integrated cost leadership-differentiation

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? a. functional b. simple c. vertically integrated d. multidivisional

d. multidivisional

The 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? a. Amos should consider adopting the multidivisional structure. b. Mr. Ball has insufficient power to change the structure of the organization. c. Restructuring must only be done from a position of strength, so it is necessary to wait until the company's overall performance improves before making radical changes. d. These businesses are too disparate to coordinate within one corporate structure.

a. Amos should consider adopting the multidivisional structure.

____ is the degree to which rules and procedures govern work. a. Formalization b. Centralization c. Specialization d. Unification

a. Formalization

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? a. aligning the corporate structure with the demands of global expansion b. more accurate monitoring of the performance of each business c. facilitation of comparison between divisions d. stimulating managers of poorly performing divisions to look for ways of improving performance

a. aligning the corporate structure with the demands of global expansion

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. a. competitive form of the multidivisional b. SBU form of the multidivisional c. worldwide geographic area d. distributed strategic network

a. competitive form of the multidivisional

The heavy use of integrative mechanisms in the ____ multidivisional organizational structure is intended to achieve ____. a. cooperative; economies of scope b. competitive; cost efficiencies c. functional; sensitivity to cultural diversity d. SBU; quick response to local customer needs

a. 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 a. coordination and control problems. b. bureaucratic inefficiencies. c. excessive competition among division managers. d. limited communication among functional specialists.

a. coordination and control problems.

Walmart's effective strategy/structure configuration is a. cost leadership/functional. b. differentiation/functional. c. related-constrained/multidivisional. d. related-linked/multidivisional.

a. cost leadership/functional.

The integrated cost leadership/differentiation strategy is difficult to implement mostly because a. different primary and support activities are emphasized when using cost leadership and differentiation strategies. b. this strategic approach demands more flexibility than most firms can manage. c. the dual reporting relationships required for this strategy slow organizational decision-making. d. the cost leadership strategy requires less structured job roles than does the differentiation strategy.

a. different primary and support activities are emphasized when using cost leadership and differentiation strategies.

Selecting the organizational structure and controls that effectively implement the chosen strategy is a challenge for managers because a. firms must be flexible while retaining a degree of stability. b. managers are never able to obtain all the information necessary to make the best selection. c. the structure of a firm should not duplicate the structures of its competitors. d. the environment changes too rapidly for corporations to maintain a consistent corporate structure.

a. firms must be flexible while retaining a degree of stability.

In the competitive form of the multidivisional structure, the focus of headquarters is on all the following EXCEPT a. integration. b. performance appraisal. c. resource allocation. d. long range planning.

a. integration.

Toyota heavily uses a strategic network of vertical relationships. Toyota enables engineers in supplier firms to communicate easily with companies with whom Toyota has contracts for services. This results in the suppliers and the Toyota (the strategic center firm) being more a. interdependent. b. rivalrous. c. creative. d. complementary.

a. interdependent.

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 a. make the partners' true loyalties and intentions unclear . b. make the role of the strategic center firms more critical to alliance success. c. distribute the alliances along several segments of the airline industry value chain. d. be most effective when the alliances are with airlines headquartered in different nations.

a. make the partners' true loyalties and intentions unclear

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 a. reduce transaction costs. b. increase negotiating leverage with suppliers. c. become less dependent on its suppliers. d. move toward horizontal alliances with its suppliers.

a. reduce transaction costs.

In most cases, the focus strategy is best managed using a ____ structure. a. simple b. functional c. multidivisional d. vertical

a. simple

both colored precious stones and diamonds. Generations of wealthy families have patronized Andermeyer. Andermeyer has been owned and managed by the Andermeyer family since its founding, and has never had more than 20 designers and jewelers in its shop. Andermeyer Jewelers should use the ____ structure. a. simple b. functional c. matrix d. network

a. simple

A firm's ____ specifies the work to be done and how to do it given the firm's strategy or strategies. a. structure b. controls c. culture d. strategy

a. structure

Implementing the multidomestic strategy requires decentralization a. to facilitate the tailoring of products to the demand in local markets. b. to develop economies of scale. c. in order to achieve economies of scope. d. to reduce bureaucracy and speed up decision-making.

a. to facilitate the tailoring of products to the demand in local markets.

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. a. transnational; combination b. global; worldwide product divisional c. multidomestic; worldwide geographic area d. competitive; strategic business unit multidivisional

a. transnational; combination

When a corporation pursues a related-constrained diversification strategy, financial controls may not add value to strategy implementation efforts since it is difficult to a. use them without reducing cooperation among divisional managers. b. transfer capital between units. c. maintain an arms-length relationship between headquarters and the divisions. d. identify which objective criteria to monitor.

a. use them without reducing cooperation among divisional managers.

Which of the following is a TRUE statement about organizational structures for implementing business-level strategies? a. A cost leadership strategy requires a simple structure emphasizing high specialization, centralization, and structured job roles. b. A differentiation strategy requires a functional structure with limited formalization, broad job descriptions, and an emphasis on the product R&D and marketing functions. c. An integrated cost leadership/differentiation strategy requires a multidivisional structure using high formalization, decentralized decision-making, and vertical coordination. d. A focused strategy requires a functional structure featuring high levels of both specialization and formalization.

b. A differentiation strategy requires a functional structure with limited formalization, broad job descriptions, and an emphasis on the product R&D and marketing functions.

Megaline, Inc., follows the competitive form of the multidivisional structure. It has five divisions. One division has not met the rate-of-return goals for the past year. One division has exceeded the rate-of-return goals. The other three divisions met the rate-of-return goals. The headquarters office is making decisions about where to allocate capital in the next year. Which scenario is the MOST likely? a. The poorest performing division will get the highest capital allocation so that it can fix its problems and achieve the rate-of-return goal next year. b. 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. c. The average performing divisions which met the rate-of-return goals will receive the highest allocation because their performance exactly matched corporate requirements. d. All divisions will receive the same capital allocation for the next year because this organizational structure rewards divisional managers based on achievement of strategic goals.

b. 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.

To successfully implement a cost leadership strategy, there is a need for a. freedom from constraining rules. b. centralization of authority. c. communication between functional silos. d. sharing of competencies among divisions.

b. centralization of authority.

Firms such as Textron Inc. that frequently acquire and divest other firms are most likely to use the ____ structure. a. matrix b. competitive multidivisional c. hybrid combination d. horizontal complementary strategic alliance

b. competitive multidivisional

The fewest integrative devices are used in the ____ structure. a. simple b. competitive multidivisional c. SBU d. network

b. competitive multidivisional

Successful implementation of the differentiation strategy requires a structure that a. has specialized jobs. b. decentralizes decision-making. c. focuses on the finance function. d. is dominated by the operations function.

b. decentralizes decision-making.

In an SBU structure, ____ is/are evaluated using strategic controls, whereas ____ is/are evaluated using financial controls. a. each SBU, divisions within the SBUs b. divisions within the SBUs, each SBU c. managers of the SBUs, headquarters staff d. headquarters staff, managers of the SBUs

b. divisions within the SBUs, each SBU

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. a. simple b. functional c. multidivisional d. network

b. functional

The ____ structure is the most appropriate structure for implementing the integrated cost leadership /differentiation strategy. a. simple b. functional c. multidivisional d. strategic business unit

b. functional

A multidomestic strategy would be associated with a. high levels of coordination. b. informal coordination among units. c. many integrative mechanisms. d. interdependent divisions.

b. informal coordination among units.

Firms seeking to compete on the basis of cost leadership particularly need support from the ____ and ____ functions. a. finance, accounting b. manufacturing, process R&D c. product R&D, marketing d. management information, finance

b. manufacturing, process R&D

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. a. network b. multidomestic c. global d. transnational

b. multidomestic

Which of the following is NOT a variation of the multidivisional structure? a. competitive form b. regional form c. cooperative form d. strategic business unit form

b. regional form

Typically, an organization using a simple structure would be a. large. b. small. c. of any size if the firm is privately held. d. a family-owned-and-managed firm of any size.

b. small.

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 and the top administration has decided to have each school of the university become a profit center. This scheme is somewhat parallel to the organizational ____ structure. a. network b. strategic business unit multidivisional c. functional d. matrix

b. 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(an): a. worldwide product divisional structure. b. strategic network. c. SBU multidivisional structure. d. simple structure.

b. strategic network.

The need for the organization to combine local responsiveness and efficiency is most critical in a ____ strategy. a. multidomestic b. transnational c. global d. focus

b. transnational

It is easiest to identify the company that functions as the strategic center firm in a. horizontal complementary strategic alliances. b. vertical complementary strategic alliances. c. corporate-level cooperative partnerships. d. international cooperative partnerships.

b. vertical complementary strategic alliances.

____ controls are objective criteria that allow corporate managers to evaluate the returns earned by individual business units. a. Strategic b. Managerial c. Financial d. Environmental

c. Financial

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? a. Functional structure b. Cooperative M-Form c. SBU Form d. Competitive M-Form

c. SBU Form

Which of the following multidivisional structures is CORRECTLY paired with the appropriate corporate-level strategy? a. competitive form with related constrained strategy b. cooperative form with unrelated strategy c. SBU form with related linked strategy d. competitive form with related linked strategy

c. SBU form with related linked strategy

Which of the following is NOT a preliminary task of the strategic center firm in a strategic network? a. strategic outsourcing b. encouraging friendly rivalry among network members c. allocating internal capital d. supporting development of new core competencies

c. 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 a. use integrative mechanisms to share core competencies among themselves. b. compete with one another in Olympia's internal capital markets. c. are not necessarily related to one another in terms of products or markets. d. are network member firms while Olympia is the strategic center firms.

c. are not necessarily related to one another in terms of products or markets.

In the ____ multidivisional structure there is complete independence among the firm's divisions. a. cooperative b. matrix c. competitive d. SBU

c. 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. a. functional b. cooperative c. competitive d. SBU

c. competitive

A firm pursuing an unrelated diversification strategy will utilize a ____ structure. a. network b. cooperative form multidivisional c. competitive form multidivisional d. functional

c. competitive form multidivisional

The LG Company (Chapter 11Strategic Focus) has units operating in significantly different industries and uses financial controls to manage its portfolio. LG is most likely using the ___________ structure. a. combination-matrix b. cooperative form multidivisional c. competitive form multidivisional d. strategic business unit multidivisional

c. competitive form multidivisional

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? a. cooperative structure; no bonus due to failure to meet divisional target. b. competitive structure; no bonus due to failure to meet divisional target. c. cooperative structure; a bonus for increasing organizational performance. d. competitive structure; a bonus for increasing organizational performance.

c. cooperative structure; a bonus for increasing organizational performance.

The noted business historian Alfred Chandler viewed the multidivisional structure as an innovative response to a. an emerging professional management philosophy. b. the increasing demand by consumers for both quality and low-price. c. coordination and control problems. d. a shift toward the global economy.

c. coordination and control problems.

A firm pursuing a related-constrained diversification strategy would typically need all of the following EXCEPT a. centralization of some organizational functions for the sake of coordination. b. frequent, direct contact between division managers. c. division managers' rewards based on division financial performance. d. temporary teams or task forces formed around specific projects.

c. division managers' rewards based on division financial performance.

One of the primary disadvantages of the global strategy and worldwide product divisional structure is that a. it is difficult to achieve economies of scale. b. the firm must develop centers to offer after-sales service to customers. c. it is difficult to respond effectively to local market needs and preferences. d. achieving economies of scale with this strategy/structure combination is nearly impossible.

c. it is difficult to respond effectively to local market needs and preferences.

Some experts consider the ____ structure to be one of the 20th century's most significant organizational innovations because of its value to diversified firms. a. network b. cooperative c. multidivisional d. functional

c. multidivisional

A worldwide geographic area structure is an organizational form in which a. multiple alliances across the globe link complementary businesses. b. standardized products are offered across country markets. c. national interests dominate and management adapts to local or cultural differences. d. responsiveness to local demand is combined with economies of scale.

c. 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? a. increasing diversification b. coordination and control issues c. need for knowledge-sharing among specialists d. greater amounts of data and information to process

c. need for knowledge-sharing among specialists

Firms seeking to differentiate particularly need support from the ____ and ____ functions. a. finance, accounting b. engineering, operations c. product R&D, marketing d. management information, finance

c. product R&D, marketing

Functional structures work best for firms for all of the following strategies EXCEPT a. cost leadership. b. differentiation. c. related constrained diversification strategy. d. single or dominant business corporate strategy.

c. related constrained diversification strategy.

Financial controls are most important in the ____ strategy. a. single business b. related constrained c. unrelated diversified d. vertical complementary

c. unrelated diversified

Typically, a successful firm pursuing a differentiation strategy will a. have a very hierarchical structure. b. require a structure which is very formal. c. use cross-functional development teams. d. develop free-standing business units.

c. use cross-functional development teams.

An important lesson from the Chapter 11 Opening Case about Borders is that a. Borders did a good job of implementing its strategy but its structure was wrong. b. structures rarely evolve in response to strategic change. c. while a firm's structure usually follows the strategy, once in place, structure can have a significant effect on strategy. d. Borders' decentralized structure led to poor decision making.

c. while a firm's structure usually follows the strategy, once in place, structure can have a significant effect on strategy.

Which of the following is a TRUE statement about implementing corporate-level strategies and effective organizational structures? a. Firms pursuing a related-linked strategy should implement a competitive structure with a competitive culture and centralized strategic planning activities. b. Firms pursuing an unrelated diversification strategy should use an SBU structure with a small corporate staff, emphasize the R&D function, and integrate divisions to achieve synergies. c. Firms pursuing a related-linked strategy should use an SBU structure, emphasize interdependence among divisions, and manage the strategic planning function from the central office. d. 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.

d. 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.

One disadvantage of the functional structure is that a. career paths and professional development are limited. b. dual reporting relationships blur lines of authority. c. the CEO cannot coordinate and control the efforts of functional level employees. d. communication and coordination are difficult among organizational functions.

d. communication and coordination are difficult among organizational functions.

Structural stability affects the organization's ability to: a. resist organizational inertia. b. cope with uncertainty about cause-and-effect relationships in the global economy. c. develop new competitive advantages. d. consistently and predictably manage its daily work routines.

d. consistently and predictably manage its daily work routines.

The __________ structure is best for implementing the related constrained diversification strategy. a. functional b. competitive form of the multidivisional c. SBU form of the multidivisional d. cooperative form of the multidivisional

d. cooperative form of the multidivisional

In the Chapter 11 Strategic Focus, Cisco used the ____________ structure to implement its ___________ strategy. a. functional; cost leadership. b. SBU form of the multidivisional; related linked c. cooperative form of the multidivisional; related linked d. cooperative form of the multidivisional; related constrained

d. cooperative form of the multidivisional; related constrained

The most centralized and most costly form of the multidivisional structure is the a. integrated. b. competitive. c. SBU. d. cooperative.

d. cooperative.

In Japan, the center firm in a strategic network of vertical relationships might be expected to undertake all of the following EXCEPT a. reducing its transaction costs by promoting longer-term contracts with subcontractors. b. enabling engineers in upstream companies to have better communication with those companies with whom it has contracts for services. c. encouraging subcontractors to modernize their facilities and providing them with technical and financial assistance to do so. d. decreasing communications between network members to reduce communication costs.

d. decreasing communications between network members to reduce communication costs.

The BEST multidivisional structure to use a. is the competitive form. b. is the SBU form. c. is the cooperative form. d. depends on the degree of diversification.

d. depends on the degree of diversification.

Strategic controls allow corporate-level managers to a. evaluate business-level performance on objective criteria. b. concentrate on day-to-day corporate operations. c. assess performance of employees and managers in each business unit. d. examine the fit between what the firm might do and what it can do.

d. examine the fit between what the firm might do and what it can do.

plans to compete on the basis of cost, offering the lowest processing cost per claim in her market area. Ms Adams' company should a. be the strategic center firm in a network structure. b. have a specialized multidivisional structure. c. develop alliances with firms with complementary competencies. d. have a highly centralized, functional structure.

d. 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. a. horizontal complementary strategic alliance b. competitive multidivisional c. strategic business unit multidivisional d. hybrid combination

d. hybrid combination

Which of the following is NOT associated with an organizational structure that supports a cost leadership strategy? a. centralization b. specialization c. formalization d. integration

d. integration

The three structural characteristics which differ between organizational structures include all of the following EXCEPT a. centralization. b. formalization. c. specialization. d. intermediation.

d. intermediation.

The cooperative multidivisional firm a. establishes profit centers based on products or markets. b. has a flat organizational structure which broadens jobs and empowers workers. c. is a structure organized around both functional specialization and business projects. d. is a structure requiring heavy use of horizontal integrative devices.

d. is a structure requiring heavy use of horizontal integrative devices.

The ____ structure is an organizational structure that combines both functional specialization and business product or project specialization. a. functional b. worldwide geographic area c. network d. matrix

d. matrix

The primary disadvantage of the multidomestic strategy and worldwide geographic area structure relates to limited a. centralization. b. coordination across divisions. c. ability to meet local market needs. d. potential for global efficiency.

d. potential for global efficiency.

The benefits of a simple structure include all of the following EXCEPT a. ease of coordination within the organization. b. no need for sophisticated information systems. c. active involvement by the owner-manager. d. specialists can develop deep expertise.

d. specialists can develop deep expertise.

Organizational structure a. specifies the firm's formal reporting relationships, procedures, controls, and authority and decision-making processes. b. specifies the firm's informal reporting relationships, procedures, controls, and authority and decision-making processes. c. specifies the firm's formal value proposition, the markets it will serve, and how the firm will provide value in those markets. d. specifies the firm's control mechanisms, grievance procedures, reporting relationships, procedures, and authority over decision-making processes.

d. specifies the firm's control mechanisms, grievance procedures, reporting relationships, procedures, and authority over decision-making processes.

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 company to have better communication with Toyota. This is an example of a(an): a. worldwide product divisional structure. b. functional structure. c. SBU multidivisional structure. d. strategic network.

d. strategic network.

One reason why a long-tenured top-level manager may hesitate to conclude the firm's structure is a problem is that doing so a. indicates to competitors that the firm is vulnerable to a hostile takeover. b. will only lead to inefficiencies. c. requires the firm undertake multi-year restructuring period that will delay retirement. d. suggests that their previous choices were not the best ones.

d. suggests that their previous choices were not the best ones.