Deck 11: Organizational Structure and Controls

Question 1

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.

Answer 1

True

Question 2

Strategy has an important influence on structure, although once in place, structures influence strategy.

Answer 2

True

Question 3

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.

Answer 3

True

Question 4

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 5

A centralized structure does not provide information from local stores that would be useful in changing its technology quickly. This example illustrates the effect of structure on strategy.

Question 6

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 7

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 8

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

Question 9

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

Question 10

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 11

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

Question 12

Failure to properly structure an organization can contribute to poor strategic decisions and eventually bankruptcy.

Question 13

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 14

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 15

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 16

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

Question 17

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

Question 18

Strategy has an important influence on structure, once a particular structure is in place, that structure influences strategy.

Question 19

Organizational structures must be both stable and flexible.

Question 20

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

Question 21

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 22

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 23

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

Question 24

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 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

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 27

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

Question 28

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

Question 29

There are three variations of the multidivisional structure.

Question 30

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

Question 31

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 32

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

Question 33

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 34

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 35

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

Question 36

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

Question 37

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

Question 38

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

Question 39

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

Question 40

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 41

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 42

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 43

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 44

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

Question 45

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 46

______ 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 47

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 48

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 49

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 50

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

Question 51

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 52

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

Question 53

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 54

Financial controls are most important in the ______ strategy.

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

Question 55

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 56

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.

Question 57

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 (for example, airline alliances).

Question 58

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

Question 59

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

Question 60

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 61

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) Dacilitating comparison between divisions
D) Stimulating managers of poorly performing divisions to look for ways of improving performance

Question 62

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.

Question 63

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.

Question 64

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 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

______ is the degree to which rules and procedures govern work.

A) Formalization
B) Centralization
C) Specialization
D) Unification

Question 67

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.

Question 68

Walmart's effective strategy/structure configuration is:

A) cost leadership/functional.
B) differentiation/functional.
C) related constrained/multidivisional.
D) related linked/multidivisional.

Question 69

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.

Question 70

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 71

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 72

____ is the degree to which decision-making authority is retained at higher managerial levels.

A) Formalization
B) Centralization
C) Specialization
D) Unification

Question 73

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

Question 74

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

Question 75

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

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

Question 76

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 77

The three structural characteristics that differ among organizational structures include all of the following EXCEPT:

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

Question 78

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.

Question 79

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

Question 80

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.