Exam 11: Organizational Structure and Controls

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

Case Scenario 2: Palmetto. Palmetto was an early pioneer of personal data assistants (PDAs) and dominates that market space (in terms of market share) with its core product, the Palmetto Pidgy. Because this product category was entirely new to the market, Palmetto had to internally develop the hardware and software sides of the business, and today is both a manufacturer of PDAs and a programmer and licensor of its PDA operating system software. Recently however, the hand-held device maker's performance has taken a dive as a result of slumping sales and costly inventory problems. Palmetto has also had difficulty coordinating its software and hardware businesses, in part due to the near absence of a coherent structure and the differing economics underlying the two. Specifically, hardware for PDAs is increasingly a cost-based business, while software is a highly differentiated one. While Palmetto is doing pretty well in both businesses, its own resource base does not allow it to compete any differently than that proscribed for other industry participants (i.e., competes on cost with hardware and features with software). In addition to these fundamental differences, new large entrants are entering both the equipment (e.g., Sony) and software (e.g., Microsoft) sides of its business, putting further pressure on margins. Management has decided that it is unable to focus on the complexities of each of these businesses so it is opting to break Palmetto into two separate, independent public companies - Pal, Inc. will be devoted to hardware and Mettolink, Inc. will be devoted to software. -(Refer to Case Scenario 2) How would the implementation of this structure differ for Pal?

Financial controls are most important in the ____ strategy.

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.

Case Scenario 1: Compliance, Inc. Compliance, Inc., (CI) conducts clinical human and animal trials for the pharmaceutical and biotechnology industries. Revenues are split evenly between early and late drug development services. While the bulk of its business is conducted in Europe and the U.S. (10 and 17 subsidiaries, respectively), CI also has subsidiaries in Africa, Latin America, Asia, and Australia. Historically CI operated under a multidomestic strategy, owing to the fact that the clinical testing industry was geographically fragmented to meet the diverse needs of the many strong local pharmaceutical companies and distinct regulatory environments. CI's organizational structure truly reflected the autonomous character of each country's businesses. Many of the country managers have been with CI for over a decade, and have a great deal of discretion over the activities of their home-market businesses. However, globalization of the regulatory environment (both global and local standards), globalization of the biotechnology firms (increasing the geographic scope of their operations), and tremendous consolidation in the pharmaceutical industry (reducing the number of pharmaceutical industry participants to only a handful of major global companies) caused CI to question its multidomestic strategy. Consequently, the firm has begun its transition to a transnational strategy. -(Refer to Case Scenario 1) Given its change from a multidomestic strategy to a transnational strategy, Compliance Inc. should change its structure from ___________ to ___________.

When a corporation pursues a related-constrained diversification strategy, financial controls may not add value to strategy implementation efforts since it is difficult to

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

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.

One disadvantage of the functional structure is that

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.

The primary disadvantage of the multidomestic strategy and worldwide geographic area structure relates to limited

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?

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

Organizational structure

In the Chapter 11 Strategic Focus, Cisco used the ____________ structure to implement its ___________ strategy.

The ____ structure is an organizational structure that combines both functional specialization and business product or project specialization.

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.

The heavy use of integrative mechanisms in the ____ multidivisional organizational structure is intended to achieve ____.

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

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