Deck 8: Organizational Design and Strategy in a Changing Global Environment

Question 1

Typically, the sales function in an organization uses a tall, centralized structure to coordinate its activities.

Answer 1

False

Question 2

The bureaucratic costs associated with managing unrelated diversification are much greater than those associated with related diversification.

Answer 2

False

Question 3

A firm pursuing a low-cost strategy will likely have a mechanistic structure.

Answer 3

True

Question 4

Organizations following a low-cost business-level strategy typically produce a wide range of products to suit the needs of different groups of customers.

Question 5

The strategy of related diversification involves an organization entering a new domain in which it can use one or more of its existing core competences to create a low-cost or differentiated competitive advantage in that new domain.

Question 6

Typically, the manufacturing function in an organization uses an organic structure and decentralized decision-making.

Question 7

A corporate-level strategy is a plan of action to strengthen an organization's functional and organizational resources, as well as its coordination abilities, in order to create core competences.

Question 8

An organization's strategy is a specific pattern of decisions and actions that managers take to use core competences to achieve a competitive advantage and outperform competitors.

Question 9

Developing competitive advantage increases an organization's ability to obtain scarce resources.

Question 10

Organizations with a strategy of unrelated diversification are likely to use a conglomerate structure.

Question 11

A speedy response to market changes is not vital to the competitive success of an organization that is following a low-cost business-level strategy.

Question 12

The more an organization pursues vertical integration the larger it becomes, and the bureaucratic costs associated with managing the strategy rise sharply.

Question 13

A functional-level strategy is a plan to combine functional core competences in order to position the organization so that it has a competitive advantage in its domain.

Question 14

According to contingency theory, an organization's design should ensure that all the functions in the organization use the same organizational structure.

Question 15

Coca-Cola uses its marketing skills to defend its niche against PepsiCo. This is an example of a functional-level strategy.

Question 16

An organization's brand name is considered to be a functional resource.

Question 17

The plant equipment possessed by a company is considered to be an organizational resource.

Question 18

Organizations pursuing differentiation business-level strategy generally operate in a simple, stable, and slow-moving environment.

Question 19

Business-level strategy is the responsibility of the top-management team.

Question 20

A strategy in which an organization takes over and owns its distributors is known as backward vertical integration.

Question 21

Which of the following terms refers to the pattern of decisions and actions that managers take to use core competences to achieve a competitive advantage and outperform competitors?

A) product formation chain
B) PERT chart
C) strategy
D) value engineering

Question 22

The need to coordinate and integrate global activities increases as a company moves from a transnational strategy to a multidomestic strategy.

Question 23

________ strategy is a plan to use and combine an organization's functional core competences to position it so it has a competitive advantage in its domain or segment of its industry.

A) Functional-level
B) Corporate-level
C) Business-level
D) Environmental-level

Question 24

As companies change from a multidomestic to an international, global, or transnational strategy, they require a more complex structure, control system, and culture to coordinate the value-creation activities associated with implementing that strategy.

Question 25

________ are the skills and abilities in value creation activities that allow a company to achieve superior efficiency, quality, innovation, or customer responses.

A) Core competences
B) Environmental contingencies
C) Rites of enhancement
D) Organizational foundation skills

Question 26

The skills of Microsoft's software design group are an example of ________.

A) organizational resources
B) rites of integration
C) functional resources
D) rites of enhancement

Question 27

In order to strengthen an organization's technical and human resources, a manager trains and develops his subordinates. This is an example of a ________ strategy.

A) global expansion
B) corporate-level
C) business-level
D) functional-level

Question 28

Honda takes its strength in engine production and uses it to produce cars, motor bikes, and lawnmowers, creating value in different markets. This is an example of a ________ strategy.

A) supplier-level
B) business-level
C) corporate-level
D) functional-level

Question 29

Which of the following is an example of a functional resource?

A) plant equipment
B) corporate reputation
C) capital reserves
D) skills of a technical expert

Question 30

A global strategy is oriented toward local responsiveness and a company pursuing this strategy decentralizes control to subsidiaries and divisions in each country in which it operates to produce and customize products to local markets.

Question 31

Land is an example of a(n) ________.

A) liquid asset
B) organizational resource
C) deferred revenue asset
D) functional resource

Question 32

________ strategy is a plan to use and develop core competences so that the organization can not only protect and enlarge its domain but can also expand into new domains.

A) Functional-level
B) Business-level
C) Environmental-level
D) Corporate-level

Question 33

A U.S. auto manufacturer establishes plants in Europe and in Asia. This is an example of a (n) ________.

A) vertical integration
B) global expansion
C) horizontal integration
D) unrelated diversification

Question 34

Mercedes-Benz used its competences in R&D and product development to enter the household products and aerospace industries. This is an example of a(n) ________ strategy.

A) environmental-level
B) functional-level
C) business-level
D) corporate-level

Question 35

Coca-Cola uses its marketing skills to defend its niche against PepsiCo. This is an example of a ________ strategy.

A) functional-level
B) contingency-level
C) corporate-level
D) business-level

Question 36

Considerably more communication and coordination are needed to create value from related diversification than from the other corporate-level strategies.

Question 37

A multidomestic strategy is oriented toward cost reduction, with all the principal value-creation functions centralized at the lowest cost global location.

Question 38

3M and HP, invest heavily to improve their skills in R&D and product design. This is an example of a ________ strategy.

A) functional-level
B) business-level
C) supply-level
D) corporate-level

Question 39

To become core competences, the functional resources possessed by an organization should be ________.

A) plentiful and easily available
B) easily replaceable with alternative resources
C) unique and difficult to imitate
D) cheap

Question 40

Which of the following functions would be responsible for implementing a just-in-time inventory system?

A) manufacturing
B) R&D
C) marketing
D) materials management

Question 41

Walmart specialize in selling low-price clothing to customers who want or can afford to pay only a modest amount for their attire and Neiman Marcus specializes in selling high-priced clothing made by exclusive designers to wealthy customers who want prestige or status. Based on this information we can conclude that ________.

A) organizational structure of Walmart is taller than that of Neiman Marcus
B) Walmart and Neiman Marcus have chosen different domains in which to compete
C) Walmart has an organic structure and Neiman Marcus has a mechanistic structure
D) as compared to Walmart, Neiman Marcus operates in a more complex environment

Question 42

Which of the following structures is the most appropriate for an organization that pursues a low-cost strategy?

A) functional structure
B) product team structure
C) organic structure
D) matrix structure

Question 43

For a soft drinks company, which of the following will be considered forward vertical integration?

A) establishing a company that manufactures and sells snack foods
B) buying a bottling and trucking company that distributes soft drinks
C) buying sugar plantations
D) taking over a company that provides software services

Question 44

A core competence in ________ management can allow an organization quickly to discover and respond to customer needs.

A) financial
B) human resource
C) materials
D) marketing

Question 45

Typically, an organization that uses a low-cost strategy ________.

A) is not leaders in product development
B) produce a wide range of products to suit the needs of different groups of customers
C) operates in a complex, uncertain environment
D) responds quickly to the changes in the environment of the organization

Question 46

Typically, the manufacturing function in an organization uses ________.

A) a high level of standardization
B) an organic structure
C) a flat organizational structure
D) decentralized decision-making

Question 47

KFC specializes in the chicken segment of the fast-food market. This is an example of a ________ strategy.

A) market penetration
B) focus
C) vertical integration
D) conglomerate diversification

Question 48

Which of the following structures is the most appropriate for an organization that pursues a differentiation strategy?

A) functional structure
B) centralized structure
C) mechanistic structure
D) matrix structure

Question 49

A focus strategy is a(n) ________ strategy.

A) business-level
B) functional-level
C) supply-level
D) environmental-level

Question 50

Which of the following statements is true regarding an organization following a low-cost strategy?

A) Low-cost organizations typically use complex organizational structures.
B) Typically, low-cost organizations use centralized decision-making.
C) The organizational structure used by a low-cost organization generally has higher integration than that used by a differentiator.
D) An organic structure is more suitable for a low-cost organization than a mechanistic structure.

Question 51

According to ________ theory, an organization's design should permit each function to develop a structure that suits its human and technical resources.

A) strategic choice
B) contingency
C) resource dependence
D) transaction cost

Question 52

Typically, the R&D function in an organization uses ________.

A) centralized decision-making
B) a mechanistic structure
C) a high level of standardization
D) a flat organizational structure

Question 53

A ________ business-level strategy is a plan whereby an organization produces high-priced, quality products aimed at particular market segments.

A) differentiation
B) market penetration
C) lateral diversification
D) vertical integration

Question 54

Which of the following companies will most likely have a mechanistic structure?

A) a pharmaceutical company that has a core competence in R&D
B) a soft-drink company that has a core competence in marketing
C) a medical equipment manufacturer that has a core competence in manufacturing
D) a telecommunications company that operates in a dynamic environment

Question 55

Which of the following functions typically has the most organic structure?

A) sales
B) manufacturing
C) materials management
D) R&D

Question 56

McDonald's core competences in manufacturing, marketing, and materials management create a competitive advantage over rivals Burger King and Wendy's. This is an example of a ________ strategy.

A) business-level
B) global expansion
C) corporate-level
D) functional-level

Question 57

Typically, an organization that uses a differentiation strategy ________.

A) does not respond to market changes quickly
B) operates in a complex, uncertain environment
C) focuses its resources on producing one product
D) has a mechanistic structure

Question 58

Which of the following statements is true regarding an organization following a differentiation strategy?

A) Differentiators generally use simple organizational structures.
B) A speedy response to market changes is not vital to the competitive success of a differentiator.
C) An organic structure is more suitable for a differentiator than a mechanistic structure.
D) The organizational structure used by differentiators generally has lower integration than that used by a low cost organization.

Question 59

Which of the following statements is true regarding organizational culture?

A) A competitor can easily imitate another organization's culture.
B) Culture is easy to control and manage.
C) Culture is embedded in the day-to-day interactions of functional personnel.
D) Culture cannot be a source of competitive advantage.

Question 60

________ strategy involves specializing in one segment of a market and concentrating all of the organization's resources on that segment.

A) Vertical integration
B) Diversification
C) Horizontal integration
D) Focus

Question 61

Which of the following core competences is most likely to be used by a company to create value while pursuing unrelated diversification?

A) engineering expertise
B) core competences in material management
C) top-management's ability to efficiently control a group of organizations
D) control over a scarce resource

Question 62

Which of the following strategies is most likely to have the highest bureaucratic costs?

A) unrelated diversification
B) backward vertical integration
C) related diversification
D) forward vertical integration

Question 63

Which of the following is the primary disadvantage of backward and forward vertical integration?

A) increased bureaucratic costs
B) decreased product quality
C) decreased environmental richness
D) loss of control over inputs

Question 64

For a soft drinks company, which of the following will be considered backward vertical integration?

A) buying a bottling and trucking company that distributes soft drinks
B) establishing a company that manufactures and sells snack foods
C) taking over a company that provides software services
D) buying sugar plantations

Question 65

The strategy of ________ involves an organization entering a new domain in which it can use one or more of its existing core competences to create a low-cost or differentiated competitive advantage in that new domain.

A) cost leadership
B) related diversification
C) vertical integration
D) market penetration

Question 66

Which of the following corporate-level strategies is most likely to have the lowest bureaucratic costs?

A) related diversification
B) forward vertical integration
C) unrelated diversification
D) backward vertical integration

Question 67

Which of the following terms refers to a strategy in which an organization takes over and owns its suppliers or its distributors?

A) unrelated diversification
B) market penetration
C) vertical integration
D) product differentiation

Question 68

Which of the following structures is characterized by a small corporate headquarters staff?

A) mechanistic structure
B) conglomerate structure
C) matrix structure
D) functional structure

Question 69

Which of the following statements is true regarding unrelated diversification?

A) The bureaucratic costs associated with managing unrelated diversification are much greater than those associated with related diversification.
B) An organization pursuing a strategy of unrelated diversification tries to obtain value by sharing resources or by transferring functional skills from one division to another.
C) Organizations with a strategy of unrelated diversification are likely to use a conglomerate structure.
D) Considerably more communication and coordination are needed to create value from unrelated diversification than from related diversification.

Question 70

A shoe manufacturer acquires the retail stores that sell its shoes. This is an example of a(n) ________.

A) forward vertical integration
B) unrelated diversification
C) market penetration
D) sequential horizontal integration

Question 71

In the context of global expansion strategies, which of the following strategies has the highest need to coordinate and integrate global activities?

A) transnational strategy
B) global strategy
C) international strategy
D) multidomestic strategy

Question 72

Which of the following strategies is most likely to help a company to avoid the problem of opportunistic suppliers?

A) vertical integration
B) product differentiation
C) related diversification
D) market penetration

Question 73

Which of the following statements is true regarding related diversification?

A) The bureaucratic costs associated with managing related diversification are much greater than those associated with unrelated diversification.
B) Considerably more communication and coordination are needed to create value from unrelated diversification than from related diversification.
C) A functional structure is most suitable for an organization that is pursuing a strategy of related diversification.
D) If unrelated diversification is to provide the gains comparable to those obtained from related diversification, a much larger corporate headquarters staff is required to coordinate interdivisional activities.

Question 74

In a ________ structure, each business is placed in a self-contained division and there is no contact between divisions.

A) conglomerate
B) mechanistic
C) functional
D) matrix

Question 75

A computer manufacturer uses its competence in product design to produce laser printers. Which of the following strategies is being pursued by this company?

A) vertical integration
B) product development
C) market penetration
D) related diversification

Question 76

Which of the following structures is a variant of the multidivisional structure?

A) matrix structure
B) conglomerate structure
C) functional structure
D) mechanistic structure

Question 77

In the context of global expansion strategies, which of the following strategies involves R&D and marketing being centralized at home and all the other value-creation functions being decentralized to national units?

A) multidomestic strategy
B) vertical integration strategy
C) market penetration strategy
D) international strategy

Question 78

A retail clothing chain buys a real estate business and an investment banking firm. Which of the following structures is most appropriate for this organization?

A) matrix structure
B) product team structure
C) mechanistic structure
D) conglomerate structure

Question 79

In the case of related diversification, when the coordination problems become very severe, which of the following organizational structures is most likely to be used to increase integration?

A) functional structure
B) conglomerate structure
C) multidivisional matrix structure
D) product team structure

Question 80

Which of the following strategies involves entering a completely new domain?

A) market penetration
B) product development
C) unrelated diversification
D) vertical integration