Question 1

An SBU is operated essentially like a separate business within the corporation.

Accepted Answer

An SBU (Strategic Business Unit) is a division or unit within a larger corporation that is operated as a separate business entity with its own strategy, budget, and resources. The objective of an SBU is to focus on a particular market or product and create a competitive advantage to increase profits and growth. Therefore, it is true that an SBU is operated essentially like a separate business within the corporation.

Question 2

Organic structures are those that are focused on stability and hierarchical decision making.

Accepted Answer

Organic structures are characterized by flexibility, decentralized decision-making, and a lack of strict hierarchy, focusing instead on adaptability and informal communication.

Question 3

Maintaining some clear differences between divisions is an important component of proper multidivisional structure.

Accepted Answer

Maintaining clear differences between divisions helps ensure that each division can focus on its own specific goals and objectives without interference or confusion from other divisions. This allows for greater efficiency and effectiveness within the overall organization.

Question 4

The classic problem for an entrepreneur is when and how to move away from a simple organizational form to a more complex structure.

Accepted Answer

As a business grows, it may become necessary to adopt a more complex organizational structure to accommodate the increasing complexity of operations. This is a common challenge faced by entrepreneurs.

Question 5

A mechanistic structure is one that is more flexible, innovative, and able to adapt to its environment.

Accepted Answer

A mechanistic structure is the opposite of a flexible, adaptable structure. It is characterized by rigid rules, hierarchical decision-making, and a focus on efficiency rather than innovation.

Question 6

The multidivisional is the most complicated of all the organizational structures.

Accepted Answer

The multidivisional structure is complex, but not necessarily the most complicated; organizational complexity varies based on factors like size, diversity of operations, and the degree of centralization or decentralization. Matrix and network structures can be more complicated due to their multiple lines of authority and communication.

Question 7

If a firm is involved in a set of countries that can also be subdivided into distinct cultures, then it may be best to have a divisional structure to address each one.

Accepted Answer

A divisional structure allows for decentralization and specialization, which can be beneficial when dealing with multiple cultures within a set of countries. Each division can focus on understanding and meeting the needs of their specific cultural group, leading to increased effectiveness and efficiency in serving customers or clients.

Question 8

A large organization with activities strongly related to each other is expected to have a matrix structure based either on customers or geography.

Accepted Answer

A matrix structure is based on both functional and divisional lines of authority. It is not based on customers or geography.

Question 9

If a firm wishes to obtain economies of scale and scope, it will need an organizational structure that more closely links its divisions so that it can employ a global strategy more effectively.

Accepted Answer

This is true as a more closely linked organizational structure can facilitate communication and coordination between different divisions, allowing for greater efficiency and coordination in implementing a global strategy.

Question 10

As firms internationalize, they typically prefer spending the money to open in a foreign location initially rather than to export goods.

Accepted Answer

Firms often start by exporting goods to foreign markets as it involves lower risk and investment compared to opening a physical location abroad, which requires significant capital and understanding of the local market.

Question 11

A firm's structure is the official manner in which the various tasks and parts of the business are to interact, coordinate, and report with each other, and at what levels decisions are made.

Accepted Answer

This statement accurately defines a firm's structure.

Question 12

In an M-division structure, the firm is divided into different divisions, sometimes along product lines, each of which has its own internal set of functional areas.

Accepted Answer

In an M-division structure, the firm is indeed divided into different divisions, sometimes based on product lines, and each division has its own internal set of functional areas.

Question 13

The benefits of a multidivisional structure include the fact that the firm can avoid duplicating activities and may benefit from scale economies in activities such as marketing and finance.

Accepted Answer

A multidivisional structure often leads to duplication of activities across divisions, which can prevent the firm from achieving scale economies in areas like marketing and finance.

Question 14

Agency theory was developed principally by researchers in economics and finance to highlight the fact that individual employees will often act in the interest of their employer rather than in their own self-interest.

Accepted Answer

Agency theory was developed to recognize that employees may prioritize their own interests over those of the employer.

Question 15

An SBU results in an employee having two managers, which can lead to conflict.

Accepted Answer

An SBU, or Strategic Business Unit, operates as a separate unit with its own vision and direction, not a structure where an employee reports to two managers, which is characteristic of a matrix organization.

Question 16

The matrix structure can work particularly well in settings where there are highly trained and highly skilled workers.

Accepted Answer

The matrix structure allows for employees to work on multiple projects that align with their skills and expertise, making it beneficial for organizations that have highly trained and skilled workers.

Question 17

In a differentiation strategy, the focus is more on effectiveness and less on cost as it builds the firm's structure.

Accepted Answer

A differentiation strategy is focused on creating unique products or services that are perceived as valuable and different from what competitors offer. This can lead to higher prices and profitability, as customers are willing to pay more for the unique features and benefits. Therefore, the focus is more on effectiveness rather than cost cutting measures.

Question 18

Increasing the administrative component decreases the time needed to make decisions.

Accepted Answer

Increasing the administrative component typically increases the time needed to make decisions, as there are more people and processes involved in the decision-making process.

Question 19

Typically, the functional structure is used by international firms that have operations in large numbers of countries.

Accepted Answer

International firms often use a geographical or divisional structure to manage operations in various countries, allowing for localized decision-making and adaptation to specific market needs, rather than a functional structure which is more centralized and organized by departmental functions.

Question 20

Economies of scope occur when cost savings result from performing two activities jointly.

Accepted Answer

Economies of scope occur when the cost of producing two different products jointly is less than the cost of producing each of the products individually. This leads to lower production costs and economies of scale.

Quiz 13: The Structure of the International Firm