Exam 10: Organizing to Implement Corporate Diversification

Institutional owners are usually pension funds,mutual funds,insurance companies,or other groups of investors that have joined together to manage their investments.

One of the strengths of using a hurdle rate to measure the performance of divisions in a diversified firm is that if the corporation has a single hurdle rate,there is little ambiguity about the performance objectives of divisions.

Economic measures of divisional performance in a diversified firm compare a division's performance with a firm's cost of capital and these measures increase the potential for gaming,which is generally minimized by accounting measures.

In 1970,institutions owned 62 percent of the equity traded in the United States; by 1990,institutions owned 48 percent of this equity and by 2005,they owned only 32 percent of this equity.

Divisions in an M-form organization should be large enough to represent identifiable business entities but small enough so that a division general manager can manage each one effectively.

Most accounting measures of divisional performance focus on long-term benefits and minimize the possibility of a short-term bias.

Which role in the office of the president is responsible for strategy implementation?

Transfer pricing should equal

A board of directors typically consists of

The divided loyalties that divisional staff managers have between corporate staff managers and functional managers are potentially the most problematic in ________ staff functions.

The primary responsibility of the ________ is to provide information about the firm's external and internal environments to the firm's senior executive.

It is unusual for a diversified firm to change its transfer-pricing mechanisms every few years in an attempt to find the "right" transfer-pricing mechanism.

In 2005,what percentage of the equity traded in the United States was owned by institutional investors?

Most accounting measures of divisional performance have a common limitation in that they

SpandoCorp is a diversified firm that makes industrial, military and consumer products from Spandex. SpandoCorp manages each of the businesses that it operates in as a separate division and treats each as a true profit-and-loss center. In this organization, Grace McKenna is responsible for deciding which set of businesses SpandoCorp will operate in and for encouraging behavior that is consistent with this strategy, Wells Tucker provides information to McKenna about the internal and external environments that she uses in her decision making, and Kelly Rae is one of the individuals who is responsible for evaluating the firm's decision making to ensure that it is consistent with the interests of equity holders. -Which organizational structure is SpandoCorp using?

Identify the responsibilities of the senior executive in an M-form organization and discuss the three different roles in the office of the president and the responsibilities of each role.

In examining the question of whether the roles of CEO and chairman should be combined,empirical research on this question suggests

Discuss the role of division general managers in an M-form organization and compare and contrast this role with that of senior executives in U-form organizations.

Research on outside members of boards of directors tends to show that outside directors,as compared to insiders,tend to focus less on monitoring a firm's economic performance than on other measures of firm performance.

The divisions of an M-form organization are true