Deck 11: Organizational Structure and Controls

Question 1

RexMacDonald, Inc., uses a differentiation strategy that relies on cooperation, communication, and sharing of ideas among employees. In order to foster this behavior, RexMacDonald should emphasize strategic controls over financial controls.

Answer 1

True

Question 2

The three types of organizational controls are strategic, isomorphic, and financial.

Answer 2

False

Question 3

Firms using the differentiation strategy need to respond quickly to environmental opportunities and threats. The functional structure is effective for this strategy because of its centralization of decision-making.

Answer 3

False

Question 4

A simple structure is an organizational form in which the owner-manager makes all major decisions directly and monitors all activities, while the staff merely serves as an extension of the manager's supervisory authority.

Question 5

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

Question 6

A corporate-wide emphasis on sharing leads to a reliance on financial controls.

Question 7

Decisions about strategy and structure are interrelated.

Question 8

There are three primary forms of the multidivisional structure.

Question 9

Diversification controls guide the use of strategy, indicate how to compare actual results with expected results, and suggest corrective actions to take when the difference is unacceptable.

Question 10

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

Question 11

Organizational structures must be both stable and flexible.

Question 12

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

Question 13

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

Question 14

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

Question 15

Organizations should first change strategy and then determine a compatible structure as it is easy to change existing structure.

Question 16

In general, small firms, even if long-established, are best matched with simple structures.

Question 17

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

Question 18

High levels of formalization of procedures are generally found in firms following a cost leadership strategy.

Question 19

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

Question 20

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

Question 21

An SBU structure consists of at least three levels, with the top level being the corporate headquarters; the next level, SBU groups; and the final level, divisions grouped by relatedness within each SBU.

Question 22

The worldwide product divisional structure has centralized decision-making authority in the worldwide division headquarters to coordinate and integrate decisions and actions among business units.

Question 23

The selection of an organizational structure for an internationally diversified firm should consider the international corporate level strategy the firm is using.

Question 24

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

Question 25

Divisions within SBUs are typically more related to each other in terms of product or market than are divisions across SBUs.

Question 26

In the hybrid form of the combination structure, some divisions are oriented toward products while others are oriented toward market areas.

Question 27

Firms implementing the multidomestic strategy often attempt to isolate themselves from global competitive forces by establishing the cost leadership position in the industry in each country in which they operate.

Question 28

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

Question 29

When examining the firms in a horizontal strategic network, it is easy to identify the strategic center firm because it outsources and partners with more firms than any of the other network partners.

Question 30

If firms band together in a large number of vertical complementary strategic alliances, there is a danger that the government will suspect them of illegal collusive activities.

Question 31

To implement a related-linked strategy, a firm usually needs an SBU structure.

Question 32

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

Question 33

The three multidivisional structures that are used to implement a diversification strategy are the competitive form, the strategic business unit form, and the integrated form.

Question 34

Both the integrated cost-leadership differentiation strategy and the transnational strategy need structures that are formalized and nonformalized as well as centralized and decentralized.

Question 35

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

Question 36

The organizational structure for an internationally diversified firm requires trade-offs between global integration and local market responsiveness.

Question 37

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

Question 38

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.

Question 39

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.

Question 40

The worldwide geographic area structure varies from the worldwide divisional structure in the level of centralization of decision-making.

Question 41

Structural stability affects the organization's ability to:

A) resist organizational inertia.
B) cope with uncertainty about cause-and-effect relationships in the global economy.
C) develop new competitive advantages.
D) predictably manage its daily work routines.

Question 42

Strategic controls allow corporate-level managers to

A) evaluate business-level performance on objective criteria.
B) concentrate on day-to-day corporate operations.
C) assess performance of employees and managers in each business unit.
D) examine the fit between what the firm might do and what it can do.

Question 43

In most cases, the focus strategy is best managed using a ____ structure.

A) simple
B) functional
C) multidivisional
D) vertical

Question 44

Functional structures work best for firms with

A) diverse product lines.
B) a single product line in a single geographic market.
C) single or dominant business strategies.
D) conglomerate strategies.

Question 45

Alfred Chandler found that firms grow in a predictable pattern, and that the firm's growth patterns determine its structural form. Which form corresponds to the FINAL stage in Chandler's theory?

A) functional
B) simple
C) vertically integrated
D) multidivisional

Question 46

Typically, an organization using a simple structure would be

A) large.
B) small.
C) of any size if the firm is privately held.
D) a family-owned-and-managed firm of any size.

Question 47

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

A) Strategic
B) Managerial
C) Financial
D) Environmental

Question 48

If General Electric were to divest its NBC or Money (consumer finance) divisions it would be a change in ____ level strategy, which we would expect to result in changes in its ____ as well.

A) business; scale
B) business; structure
C) corporate; scale
D) corporate; structure

Question 49

Andermeyer Jewelers has been in existence since the 1870s. It specializes in high-end jewelry using both colored precious stones and diamonds. Generations of wealthy families have patronized Andermeyer. Andermeyer has been owned and managed by the Andermeyer family since its founding, and has never had more than 20 designers and jewelers in its shop. Andermeyer Jewelers should use the ____ structure.

A) simple
B) functional
C) matrix
D) network

Question 50

Leslie is a newly-graduated certified public accountant with a specialty in corporate tax. She wishes to join an organization (not an accounting firm) that will allow her to concentrate on corporate tax and become deeply proficient in this area. Leslie should look for a position in a firm with a ____ structure.

A) simple
B) functional
C) multidivisional
D) network

Question 51

Which of the following is TRUE?

A) Organizations tend to change structure too frequently, which erodes their competitive advantage.
B) Large organizations can retain a simple structure as long as they have a focus strategy.
C) Flexibility in structure is more important than stability.
D) Strategy has a more important influence on structure than structure has on strategy.

Question 52

Financial controls are most important in the ____ strategy.

A) single business
B) related constrained
C) unrelated diversified
D) vertical complementary

Question 53

Best Buy has implemented a structural program within their Geek Squad labeled ROWE (Results-Only Work Environment). The program gives employees the freedom and responsibility to decide when and where they will work. At the same time, the company places greater emphasis on employee outcomes that are important to customers. The intent of this program is to

A) increase customer and employee turnover.
B) enhance both structural stability and flexibility.
C) give greater predictability to store staffing levels.
D) emphasize to customers that Best Buy is an innovative firm.

Question 54

Organizational structure

A) specifies the firm's formal reporting relationships, procedures, controls, and authority and decision-making processes.
B) specifies the firm's informal reporting relationships, procedures, controls, and authority and decision-making processes.
C) specifies the firm's formal value proposition, the markets it will serve, and how the firm will provide value in those markets.
D) specifies the firm's control mechanisms, grievance procedures, reporting relationships, procedures, and authority over decision-making processes.

Question 55

One reason why a long-tenured top-level manager may hesitate to conclude the firm's structure is a problem is that doing so

A) indicates to competitors that the firm is vulnerable to a hostile takeover.
B) will only lead to inefficiencies.
C) requires the firm undertake multi-year restructuring period that will delay retirement.
D) suggests that their previous choices were not the best ones.

Question 56

Distributed strategic networks are the organizational structure used to manage international cooperative strategies.

Question 57

Selecting the organizational structure and controls that effectively implement the chosen strategy is a challenge for managers because

A) firms must be flexible while retaining a degree of stability.
B) managers are never able to obtain all the information necessary to make the best selection.
C) the structure of a firm should not duplicate the structures of its competitors.
D) the environment changes too rapidly for corporations to maintain a consistent corporate structure.

Question 58

A firm's ____ specifies the work to be done and how to do it.

A) structure
B) controls
C) culture
D) strategy

Question 59

The Amos Ball Printing Company was established in 1866. Currently, Amos Ball V is the CEO and chairman of the board. The company has traditionally used a functional structure. Five years ago, the company branched into online publishing and small-batch printing in addition to its regular large-batch operations. Both new businesses are significantly different in technology and marketing from each other and from Ball's traditional business. Despite the hiring of experienced professionals in these new endeavors, performance continues to be poor and is affecting Ball's overall performance. Which of the following statements is TRUE?

A) Amos should consider adopting the multidivisional structure.
B) Mr. Ball has insufficient power to change the structure of the organization.
C) Restructuring must only be done from a position of strength, so it is necessary to wait until the company's overall performance improves before making radical changes.
D) These businesses are too disparate to coordinate within one corporate structure.

Question 60

The benefits of a simple structure include all of the following EXCEPT

A) ease of coordination within the organization.
B) no need for sophisticated information systems.
C) active involvement by the owner-manager.
D) specialists can develop deep expertise.

Question 61

Wal-Mart's effective strategy/structure configuration is

A) cost leadership/functional.
B) differentiation/functional.
C) related-constrained/multidivisional.
D) related-linked/multidivisional.

Question 62

____ is the degree to which decision making authority is retained at higher managerial levels.

A) Formalization
B) Centralization
C) Specialization
D) Unification

Question 63

One disadvantage of the functional structure is that

A) career paths and professional development are limited.
B) dual reporting relationships blur lines of authority.
C) the CEO cannot coordinate and control the efforts of functional level employees.
D) communication is difficult among organizational functions.

Question 64

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

A) an emerging professional management philosophy.
B) the increasing demand by consumers for both quality and low-price.
C) coordination and control problems.
D) a shift toward the global economy.

Question 65

To successfully implement a cost leadership strategy, there is a need for

A) freedom from constraining rules.
B) centralization of authority.
C) communication between functional silos.
D) sharing of competencies among divisions.

Question 66

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

A) coordination and control problems.
B) bureaucratic inefficiencies.
C) excessive competition among division managers.
D) limited communication among functional specialists.

Question 67

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

A) the primary and support activities required to implement the cost leadership and differentiation strategies conflict.
B) this strategic approach demands more flexibility than most firms can manage.
C) the dual reporting relationships required for this strategy slow organizational decision-making.
D) the cost leadership strategy requires less structured job roles than does the differentiation strategy.

Question 68

Which of the following does NOT cause a firm to move from a functional structure to a multidivisional structure?

A) increasing diversification
B) coordination and control issues
C) need for knowledge-sharing among specialists
D) greater amounts of data and information to process

Question 69

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

A) network
B) cooperative
C) multidivisional
D) functional

Question 70

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

A) centralization.
B) formalization.
C) specialization.
D) intermediation.

Question 71

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

A) simple
B) functional
C) multidivisional
D) strategic business unit

Question 72

Which of the following is NOT associated with an organizational structure that supports a cost leadership strategy?

A) centralization
B) specialization
C) formalization
D) integration

Question 73

The multidivisional structure was initially designed to produce three major benefits over the functional form. Which of the following is NOT one of the three benefits?

A) aligning the corporate structure with the demands of global expansion
B) more accurate monitoring of the performance of each business
C) facilitation of comparison between divisions
D) stimulating managers of poorly performing divisions to look for ways of improving performance

Question 74

Agatha Adams founded Insurance Specialists to process medical claims for physicians' practices. She plans to compete on the basis of cost, offering the lowest processing cost per claim in her market area. Ms Adams' company should

A) be the strategic center firm in a network structure.
B) have a specialized multidivisional structure.
C) develop alliances with firms with complementary competencies.
D) have a highly centralized, functional structure.

Question 75

Increasingly diversified firms that have decided to shift to a related-constrained strategy should change their organizational structure to the ____ structure.

A) combination
B) functional
C) network
D) multidivisional

Question 76

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

A) A cost leadership strategy requires a simple structure emphasizing high specialization, centralization, and structured job roles.
B) A differentiation strategy requires a functional structure with limited formalization, broad job descriptions, and an emphasis on the R&D and marketing functions.
C) An integrated cost leadership/differentiation strategy requires a multidivisional structure using high formalization, decentralized decision-making, and vertical coordination.
D) A focused strategy requires a functional structure featuring high levels of both specialization and formalization.

Question 77

Firms seeking to differentiate particularly need support from the ____ and ____ functions.

A) finance, accounting
B) engineering, operations
C) product R&D, marketing
D) management information, finance

Question 78

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

A) Formalization
B) Centralization
C) Specialization
D) Unification

Question 79

Successful implementation of the differentiation strategy requires a structure that

A) has specialized jobs.
B) decentralizes decision-making.
C) focuses on the finance function.
D) is dominated by the operations function.

Question 80

Typically, a successful firm pursuing a differentiation strategy will

A) have a very hierarchical structure.
B) require a structure which is very formal.
C) use cross-functional development teams.
D) develop free-standing business units.