Exam 11: Organizational Structure and Controls

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 more than 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 obstacles is CI likely to encounter as it attempts to change its structure to support the transnational strategy?

Organizational inertia often prompts top management to initiate structural change when organizational performance levels drop.

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.

To implement a related constrained strategy,firms should use the cooperative form of the multidivisional structure.

The noted business historian Alfred Chandler viewed the multidivisional structure as an innovative response to

According to Michael Dell,an overemphasis on financial controls to produce attractive short-term results contributed to performance difficulties at Dell,Inc. This point emphasizes the importance of properly balancing the use of strategic and financial controls.

------------------ Controls are objective criteria that allow corporate managers to evaluate the returns earned by individual business units.

Jumbo Industrial Supply has grown from a one-location firm with a restricted product line to a multi-state organization with numerous product lines and a large sales staff. Sales have doubled every year for the last three years. It currently has a simple structure with Jared Smith,the owner-manager,making all major decisions. Jumbo is probably now experiencing or will soon experience

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

The competitive form of the M-form structure is characterized by complete independence among the form's divisions. Unlike the divisions included in the cooperative structure,divisions that are part of the competitive structure do not share common strengths.

IKEA is a global furniture retailer with more than 300 outlets in 39 countries and regions. IKEA focuses on lowering its costs as well as understanding customer needs,especially younger ones. IKEA's international strategy

The Structure is an organizational structure that combines both functional specialization and business Product or project specialization.

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.

Cisco implemented the related constrained strategy using the SBU form of the multidivisional structure.

Over time,large and complex organizations must customize their structure to fit their unique strategic needs.

Strategy has an important influence on structure,although once in place,structures influence strategy.

Describe the organizational structures used to implement cooperative strategies,giving attention to the role of the strategic center firm.

The BEST multidivisional structure to use

Which of the following is a TRUE statement about implementing corporate-level strategies and effective organizational structures?

The______structure is best for implementing the related-constrained diversification strategy.