Deck 11: Organizational Structure and Controls

Question 1

Research has consistently shown that there is one best way to structure all organizations, regardless of competitive strategy.

Answer 1

False

Question 2

Companies and business units of large diversified firms using the cost leadership strategy should use strategic controls.

Answer 2

False

Question 3

Strategy has a more important influence on strategy, although once in place, structures influence strategy.

Answer 3

True

Question 4

In the Chapter 10 Opening Case about Borders shows that although strategy has a more important influence on structure, once a particular structure is in place, that structure influences strategy.

Question 5

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.

Question 6

Organizational inertia often prompts top management to initiate structural change when organizational performance levels drop.

Question 7

Over time, large and complex organizations must customize their structure to fit their unique strategic needs.

Question 8

Organizational structures must be both stable and flexible.

Question 9

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.

Question 10

Companies and business units using the differentiation strategy should emphasize financial rather than strategic controls.

Question 11

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.

Question 12

As a firm grows, it typically shifts from a simple structure to a functional structure.

Question 13

To properly execute strategic controls in firms using related diversification, the executives must have a deep understanding of each unit's business-level strategy.

Question 14

As shown in the Chapter Opening 11 Case, Borders was able to structure its operations in ways that allowed it to manage the different businesses in each country and market effectively.

Question 15

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.

Question 16

An overriding lesson from the Chapter 10 Opening Case about Borders is that failure to properly structure an organization can contribute to poor strategic decisions and eventually bankruptcy.

Question 17

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.

Question 18

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.

Question 19

The simple structure is used by owner-managed firms which are characterized by informal relationships, few rules, limited task specialization, and unsophisticated information systems.

Question 20

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.

Question 21

In the Chapter 11 Strategic Focus, Cisco went too far in trying to achieve cooperation among its various units resulting in managers attending several meetings and an overall slowed decision making process.

Question 22

There are three variations of the multidivisional structure.

Question 23

To implement a related constrained strategy, firms should use the cooperative form of the multidivisional structure.

Question 24

The cooperative form is an M-form structure in which horizontal integration is used to bring about interdivisional cooperation.

Question 25

An SBU structure consists of at least three levels: the top level, the corporate headquarters; the next level, the strategic business units (SBUs); and the final level, SBU divisions.

Question 26

According to the Chapter 11 Strategic Focus, Cisco implemented the related constrained strategy using the SBU form of the multidivisional structure.

Question 27

The divisions within each SBU are related in terms of shared products or markets, but the divisions of one SBU have little in common with the divisions of the other SBUs.

Question 28

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.

Question 29

The marketing and R&D functions are emphasized in the differentiation strategy's functional structure.

Question 30

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.

Question 31

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.

Question 32

The functional structure is most appropriate for large firms with very high levels of diversification.

Question 33

The three multidivisional structures that are used to implement a diversification strategy are the competitive form, the strategic business unit form, and the integrated form.

Question 34

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.

Question 35

The matrix organization has a dual structure combining functional specialization and business product or project specialization.

Question 36

To implement a related-linked strategy, a firm usually needs an SBU structure.

Question 37

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.

Question 38

Centralized and formalized procedures allow for greater flexibility, an important factor for firms using a cost leadership strategy.

Question 39

Specialization refers to the extent to which authority for decision-making is retained at higher managerial levels.

Question 40

The competitive form of the M-form structure is characterized by complete independence among the form's divisions. Unlike the divisions included in the cooperative structure, divisions that are part of the competitive structure do not share common strengths.

Question 41

Alliances of organizations in the same position on the value chain are known as vertical alliances.

Question 42

The Chapter 11 Strategic Focus illustrates the use of the competitive form of the multidivisional structure to implement an unrelated diversification strategy by the LG Company.

Question 43

Arnold Schwartz, CEO and founder of Schwartz Engineering, has repeatedly rebuffed efforts by other firms to draw Schwartz Engineering into strategic alliances. Schwartz Engineering has built its highly-successful business around proprietary processes invented by Mr. Schwartz in the 1980s. Mr. Schwartz is concerned that his firm will be required to share the sources of its competitive advantage with alliance partners. This is a reasonable fear.

Question 44

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.

Question 45

Distributed strategic networks are the organizational structure used to manage international cooperative strategies.

Question 46

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.

Question 47

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.

Question 48

The selection of an organizational structure for an internationally diversified firm should consider the international corporate level strategy the firm is using.

Question 49

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.

Question 50

If firms band together in a large number of vertical complementary strategic alliances, there is a danger that the government will suspect them of illegal collusive activities.

Question 51

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.

Question 52

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.

Question 53

For firms in a vertical complementary alliance (such as between Toyota and its suppliers), it is more difficult to identify the strategic center firm than in a horizontal complementary alliance (e.g., airline alliances).

Question 54

In the Chapter 11 Strategic Focus on the LG Company, the removal of the CEO after two quarters of losses shows illustrates the characteristic use of strategic controls in the competitive form of multidivisional structure.

Question 55

Internal competition for corporate resources is effective for companies with an unrelated diversification strategy, but dysfunctional for companies with a related-constrained strategy.

Question 56

A strategic network can be characterized as a loose federation of partners revolving around a strategic center firm.

Question 57

The worldwide geographic area structure differs from the worldwide product divisional structure in the level of centralization of decision-making.

Question 58

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

Question 59

The organizational structure for an internationally diversified firm requires trade-offs between global integration and local market responsiveness.

Question 60

In the hybrid form of the combination structure, some divisions are oriented toward products while others are oriented toward market areas.

Question 61

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.

Question 62

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.

Question 63

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.

Question 64

____ 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

Question 65

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

Question 66

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.

Question 67

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

Question 68

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.

Question 69

Financial controls are most important in the ____ strategy.

A) single business
B) related constrained
C) unrelated diversified
D) vertical complementary

Question 70

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.

Question 71

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.

Question 72

In most cases, the focus strategy is best managed using a ____ structure.

A) simple
B) functional
C) multidivisional
D) vertical

Question 73

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

Question 74

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

Question 75

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

Question 76

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.

Question 77

The three structural characteristics which differ between organizational structures include all of the following EXCEPT

A) centralization.
B) formalization.
C) specialization.
D) intermediation.

Question 78

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.

Question 79

Andermeyer Jewelers has been in existence since the 1870s. It specializes in high-end jewelry using 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

Question 80

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.