MGMT 490 Chapter 11
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
A simple structure is an organizational form in which the owner-manager makes all major decisions directly and monitors all activities, while the staff merely serves as an extension of the manager's supervisory authority. a. True b. False
A
An overriding lesson from the Chapter 11 Opening Case about Borders is that failure to properly structure an organization can contribute to poor strategic decisions and eventually bankruptcy. a. True b. False
A
The marketing and R&D functions are emphasized in the differentiation strategy's functional structure. a. True b. False
A
Research has consistently shown that there is one best way to structure all organizations, regardless of competitive strategy. a. True b. False
B
Research shows that structure has a more important influence on strategy than the reverse and hence the emphasis of the chapter on the subject of structure. a. True b. False
B
According to Michael Dell, an overemphasis on financial controls to produce attractive short-term results contributed to performance difficulties at Dell, Inc. This point emphasizes the importance of properly balancing the use of strategic and financial controls. a. True b. False
A
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. a. simple b. functional c. matrix d. network
A
As a firm grows, it typically shifts from a simple structure to a functional structure. a. True b. False
A
Firms implementing the multidomestic strategy often attempt to isolate themselves from global competitive forces by establishing protected market positions or by competing in industry segments that are most affected by differences among local countries. a. True b. False
A
High levels of formalization of rules and procedures which often emanate from the centralized staff are a characteristic of the structure used to implement the cost leadership strategy. a. True b. False
A
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
In most cases, the focus strategy is best managed using a _____ structure. a. simple b. functional c. multidivisional d. vertical
A
In the hybrid form of the combination structure, some divisions are oriented toward products while others are oriented toward market areas. a. True b. False
A
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
Organizational controls guide the use of strategy, indicate how to compare actual results with expected results, and suggest corrective actions to take when the difference is unacceptable. a. True b. False
A
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.
A
Organizational structures must be both stable and flexible. a. True b. False
A
Over time, large and complex organizations must customize their structure to fit their unique strategic needs. a. True b. False
A
RexMacDonald, Inc., uses a differentiation strategy that relies on cooperation, communication, and sharing of ideas among employees. In order to foster this behavior, RexMacDonald should emphasize strategic controls over financial controls. a. True b. False
A
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
Strategic controls are largely subjective criteria intended to verify that the firm is using appropriate strategies for the conditions in the external environment and the company's competitive advantages. a. True b. False
A
Strategy has an important influence on structure, although once in place, structures influence strategy. a. a. True b. False
A
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
The Chapter 11 Opening Case about Borders shows that although strategy has an important influence on structure, once a particular structure is in place, that structure influences strategy. a. True b. False
A
The centralized structure used by Borders (Chapter 11 Opening Case) did not provide information from local stores that might have been useful in changing its technology strategy more quickly than it did. This example illustrates the effect of structure on strategy. a. True b. False
A
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
The integrated cost leadership/differentiation strategy needs structural features that are partially centralized and partially decentralized, jobs that are semi-specialized, and rules and procedures that call for some formal and some informal job behavior. a. True b. False
A
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. facilitating comparison between divisions d. stimulating managers of poorly performing divisions to look for ways of improving performance
A
The organizational structure for an internationally diversified firm requires trade-offs between global integration and local market responsiveness. a. True b. False
A
The selection of an organizational structure for an internationally diversified firm should consider the international corporate-level strategy the firm is using. a. True b. False
A
The simple structure is used by owner-managed firms which are characterized by informal relationships, few rules, limited task specialization, and unsophisticated information systems. a. True b. False
A
The worldwide geographic area structure differs from the worldwide product divisional structure in the level of centralization of decision making. a. True b. False
A
The worldwide product divisional structure has centralized decision-making authority in the worldwide division headquarters to coordinate and integrate decisions and actions among business units. a. True b. False
A
To properly execute strategic controls in firms using related diversification, the executives must have a deep understanding of each unit's business-level strategy. a. True b. False
A
Walmart's effective strategy/structure configuration is: a. cost leadership/functional. b. differentiation/functional. c. related constrained/multidivisional. d. related linked/multidivisional.
A
______ is the degree to which rules and procedures govern work. a. Formalization b. Centralization c. Specialization d. Unification
A
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
As shown in the Chapter 11 Opening Case, Borders was able to structure its operations in ways that allowed it to manage the different businesses in each country and market effectively. a. True b. False
B
Centralized and formalized procedures allow for greater flexibility, an important factor for firms using a cost leadership strategy. a. True b. False
B
Companies and business units of large diversified firms using the cost leadership strategy should use strategic controls. a. True b. False
B
Companies and business units using the differentiation strategy should emphasize financial rather than strategic controls. a. True b. False
B
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
Firms switch from a functional structure to a multidivisional structure because greater levels of environmental complexity and uncertainty make it necessary for the firm to develop cooperative relationships with its stakeholders. a. True b. False
B
Firms using the differentiation strategy need to respond quickly to environmental opportunities and threats. The structural features that are best for these requirements are centralization, specialization, and many rules and procedures. a. True b. False
B
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
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
Organizational inertia often prompts top management to initiate structural change when organizational performance levels drop. a. True b. False
B
Specialization refers to the extent to which authority for decision making is retained at higher managerial levels. a. True b. False
B
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
Successfully implementing a cost leadership strategy requires: a. freedom from constraining rules. b. centralization of authority. c. communication between functional silos. d. sharing of competencies among divisions.
B
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
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
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
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
With a related diversification corporate-level strategy, financial controls are used by corporate leaders to verify the sharing of appropriate strategic factors such as knowledge, markets, and technologies across businesses. a. True b. False
B
____ is the degree to which decision-making authority is retained at higher managerial levels. a. Formalization b. Centralization c. Specialization d. Unification
B
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
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
Financial controls are most important in the ______ strategy. a. single business b. related constrained c. unrelated diversified d. vertical complementary
C
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
Functional structures work best for firms for all of the following strategies EXCEPT: a. cost leadership strategy. b. differentiation strategy. c. related constrained diversification strategy. d. single or dominant business corporate strategy.
C
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
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
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 high quality and low prices. c. coordination and control problems. d. a shift toward the global economy.
C
Typically, a successful firm pursuing a differentiation strategy will: a. have a very hierarchical structure. b. require a structure that is very formal. c. use cross-functional development teams. d. develop free-standing business units.
C
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
______ 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
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: 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
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
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
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
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 that the firm undertake a multi-year restructuring period that will delay retirement. d. suggests that the firm's previous choices were not the best ones.
D
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
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
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
The benefits of a simple structure include all of the following EXCEPT: a. ease of coordination within the organization. b. the lack of a need for sophisticated information systems. c. active involvement by the owner-manager. d. the ability of specialists to develop deep expertise.
D
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
The three structural characteristics that differ among organizational structures include all of the following EXCEPT: a. centralization. b. formalization. c. specialization. d. intermediation.
D
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
Which of the following is TRUE? a. Organizations tend to change structure too frequently, which erodes their competitive advantage. b. Large organizations can retain a simple structure as long as they have a focus strategy. c. Flexibility in structure is more important than stability. d. Strategy has a more important influence on structure than structure has on strategy.
D
