Exam 11: Organizational Structure and Controls

Strategic controls allow corporate-level managers to

The integrated cost leadership/differentiation strategy is difficult to implement mostly because

Case Scenario 3: Jewell Company. Jewell Company (JC) is a $2 billion diversified manufacturer and marketer of simple household items, cookware, and hardware. While JC's 16 different lines of business may appear quite different, they all share the common characteristics of being staple manufactured items and sold primarily through volume retail channels like Wal-Mart, Target, and Kmart. Because JC operates each line of business autonomously (separate manufacturing, R&D, and selling responsibilities for each line), it is perhaps best described as pursuing a related linked diversification strategy. The common linkages are both internal (accounting systems, product merchandising skills, and acquisition competency are centralized in the corporate office) and external (distribution channel of volume retailers). Despite this partial centralization of the divisions' operations, each business is run entirely separately. To keep the managers focused on their respective businesses, they are paid a base salary but can earn up to three times that salary in bonuses based on meeting divisional performance targets. An additional, but smaller part of their compensation is derived from stock options. -(Refer to Case Scenario 3) The centralization of Jewell's operations can be described as

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 worldwide geographic area structure is an organizational form in which

In the ____ multidivisional structure there is complete independence among the firm's divisions.

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

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

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.

McDonald's operates through a franchising system wherein the head office uses strategic and financial controls to ensure that the franchises are creating the greatest possible value. This is an example of a(an):

Some experts consider the ____ structure to be one of the 20?? century's most significant organizational innovations because of its value to diversified firms.

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

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 firm's ____ specifies the work to be done and how to do it given the firm's strategy or strategies.

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

Which of the following is NOT a variation of the multidivisional structure?

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) What type of organizational structure was likely to have been in place under CI's multidomestic strategy?

Case Scenario 3: Jewell Company. Jewell Company (JC) is a $2 billion diversified manufacturer and marketer of simple household items, cookware, and hardware. While JC's 16 different lines of business may appear quite different, they all share the common characteristics of being staple manufactured items and sold primarily through volume retail channels like Wal-Mart, Target, and Kmart. Because JC operates each line of business autonomously (separate manufacturing, R&D, and selling responsibilities for each line), it is perhaps best described as pursuing a related linked diversification strategy. The common linkages are both internal (accounting systems, product merchandising skills, and acquisition competency are centralized in the corporate office) and external (distribution channel of volume retailers). Despite this partial centralization of the divisions' operations, each business is run entirely separately. To keep the managers focused on their respective businesses, they are paid a base salary but can earn up to three times that salary in bonuses based on meeting divisional performance targets. An additional, but smaller part of their compensation is derived from stock options. -(Refer to Case Scenario 3) Jewell's divisional incentive compensation can be described as

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.

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) What type of organizational structure will likely be needed for its transnational strategy? What impact will this have on the location of particular value chain activities?