Exam 11: Organizational Structure and Controls

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

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.

After years of negotiating short-term contracts with its suppliers, Icon Images has decided to agree to longer-term contracts. In doing this, Icon Images is hoping to

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

Strategic controls allow corporate-level managers to

Typically, a successful firm pursuing a differentiation strategy will

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

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

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

Which of the following is a TRUE statement about organizational structures for implementing business-level strategies?

Describe the three major types of organizational structure and their appropriate use.

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

Case Scenario : 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 the above Case Scenario) How would the implementation of this structure differ for Mettolink?

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

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

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

Case Scenario : 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 the above Case Scenario) What obstacles is CI likely to encounter as it attempts to change its structure to support the transnational strategy?

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).

The ____ structure is the most appropriate structure for implementing the integrated cost leadership /differentiation strategy.

In the competitive form of the multidivisional structure, the focus of headquarters is on all the following EXCEPT