Exam 11: Organizational Structure and Controls

Which of the following is TRUE?

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 ) What basic structural form would you recommend for both Pal and Mettolink? What must each firm be careful to avoid with this structure?

Toyota and its suppliers have a relationship in which Toyota encourages suppliers to modernize their facilities and provides them with technical and financial assistance to do so. It also promotes longer term contracts with suppliers, and enables engineers in the supplier company to have better communication with Toyota. This is an example of a(an):

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

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

Like Cisco, Hewlett-Packard moved away from its formerly _______ decentralized towards a ______ strategy using the __________ structure (chapter Strategic Focus).

Firms seeking to compete on the basis of cost leadership particularly need support from the ____ and ____ functions.

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

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

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

In the ____ structure hierarchy, the headquarters relies on strategic controls to set rate-of-return targets and financial controls to monitor divisional performance relative to those targets.

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

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.

In an SBU structure, ____ is/are evaluated using strategic controls, whereas ____ is/are evaluated using financial controls.

Airlines have forged a number of complementary strategic alliances, in part because many airlines are not profitable. Some airlines participate in several alliances simultaneously. This tends to

A firm pursuing an unrelated diversification strategy will utilize a ____ structure.

A worldwide geographic area structure is an organizational form in which

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

In Japan, the center firm in a strategic network of vertical relationships might be expected to undertake all of the following EXCEPT

According to the chapter Opening Case, to manage its expansion, Cisco will likely change its structure to a corporate M-form.