Deck 13: The Structure of the International Firm

Question 1

An SBU is operated essentially like a separate business within the corporation.

Answer 1

True

Question 2

Organic structures are those that are focused on stability and hierarchical decision making.

Answer 2

False

Question 3

Maintaining some clear differences between divisions is an important component of proper multidivisional structure.

Answer 3

True

Question 4

The classic problem for an entrepreneur is when and how to move away from a simple organizational form to a more complex structure.

Question 5

A mechanistic structure is one that is more flexible, innovative, and able to adapt to its environment.

Question 6

The multidivisional is the most complicated of all the organizational structures.

Question 7

If a firm is involved in a set of countries that can also be subdivided into distinct cultures, then it may be best to have a divisional structure to address each one.

Question 8

A large organization with activities strongly related to each other is expected to have a matrix structure based either on customers or geography.

Question 9

If a firm wishes to obtain economies of scale and scope, it will need an organizational structure that more closely links its divisions so that it can employ a global strategy more effectively.

Question 10

As firms internationalize, they typically prefer spending the money to open in a foreign location initially rather than to export goods.

Question 11

A firm's structure is the official manner in which the various tasks and parts of the business are to interact, coordinate, and report with each other, and at what levels decisions are made.

Question 12

In an M-division structure, the firm is divided into different divisions, sometimes along product lines, each of which has its own internal set of functional areas.

Question 13

The benefits of a multidivisional structure include the fact that the firm can avoid duplicating activities and may benefit from scale economies in activities such as marketing and finance.

Question 14

Agency theory was developed principally by researchers in economics and finance to highlight the fact that individual employees will often act in the interest of their employer rather than in their own self-interest.

Question 15

An SBU results in an employee having two managers, which can lead to conflict.

Question 16

The matrix structure can work particularly well in settings where there are highly trained and highly skilled workers.

Question 17

In a differentiation strategy, the focus is more on effectiveness and less on cost as it builds the firm's structure.

Question 18

Increasing the administrative component decreases the time needed to make decisions.

Question 19

Typically, the functional structure is used by international firms that have operations in large numbers of countries.

Question 20

Economies of scope occur when cost savings result from performing two activities jointly.

Question 21

Process management rests on the assumption that over time businesses create and build up processes that no longer establish value for the firm and may even hinder its business.

Question 22

Which of the following statements about organizational structure is false?

A) A firm's structure changes to support expansion strategies in order to attain scale economies with multiple locations.
B) The strategy-structure relationship is a one-way street.
C) Strategy is central to choosing the appropriate organizational structure for a firm.
D) Firm structure needs to fit with the firm's degree of internationalization to be successful.

Question 23

If a firm has staked out a low-cost position, it:

A) needs to focus more on procuring low-cost labor.
B) needs to ensure that efficiency is the principal focus of its structure.
C) must focus on the 'one best method' of doing a particular task.
D) needs to focus more on the effectiveness of its structure.

Question 24

Which of the following statements about the typical organizational form of businesses owned by Overseas Chinese is false?

A) The complex structure works well for Overseas Chinese businesses due to the nature of the decisions that are required.
B) The head of the organization is typically the family patriarch who sits at the center of the organization.
C) Some organizations owned by Overseas Chinese are quite large, in contrast to entrepreneurial organizations.
D) Individuals in the organization typically look for direction from the organization's head.

Question 25

_____ was developed principally by researchers in economics and finance to highlight the fact that individual employees will often act in their own self-interest rather than in the interest of their employer.

A) Strategic choice theory
B) Institutional theory
C) Agency theory
D) Contract theory

Question 26

What is the benefit of a functional structure?

A) Each division can operate more efficiently in a given business area.
B) Employees become more engaged with the firm as a whole.
C) Employees focus more on their functional areas.
D) The firm can avoid duplicating activities.

Question 27

From Senge's perspective, success comes from an organic organization that fully engages individuals and permits experimentation.

Question 28

What is the risk of a functional structure?

A) The firm cannot avoid duplicating activities.
B) Employees begin to focus more on their functional areas.
C) The extra layer of management causes some divisions to work at cross purposes.
D) The firm does not achieve economies of scale in activities such as marketing.

Question 29

Individuals always make better decisions than teams in complex or ambiguous settings.

Question 30

Which of the following statements about M-division firms is true?

A) The early M-division firms first emerged in the late 1900s.
B) The M-division structure is closely associated with Alfred Chandler.
C) In an M-division structure, the firm is divided into a few functional areas.
D) Using their size, M-division firms were able to cut costs.

Question 31

Increasing the administrative component:

A) facilitates communication among departments.
B) impedes planning, coordination, and training.
C) increases the time needed to make decisions.
D) increases commitment to the organization as a whole.

Question 32

Informal organizations are the unofficial connections that exist among individuals in a business.

Question 33

The _____ is the proportion of support staff to line workers.

A) organic component
B) operational component
C) mechanistic component
D) administrative component

Question 34

Which of the following argues that work expands to fill the time available?

A) Parkinson's Law
B) Hofstadter's Law
C) Chandler's Law
D) Sloan's Law

Question 35

Typically, the _____ structure is not used by international firms that have operations in large numbers of countries.

A) functional
B) matrix
C) multidivisional
D) SBU

Question 36

According to the text, the simple organizational structure is often associated with:

A) specialty businesses.
B) family-owned businesses.
C) state-owned businesses.
D) minority-owned businesses.

Question 37

As a firm grows it may find that the various parts of the business are too large to effectively coordinate with a simple functional structure. In this case, the firm develops a(n):

A) SBU.
B) matrix structure.
C) multidivisional structure.
D) entrepreneurial structure.

Question 38

What is the drawback of a divisional structure?

A) It duplicates many functional skills.
B) The close monitoring of items such as expenses may no longer occur.
C) It is difficult to achieve scale economies in activities such as marketing and finance.
D) It can often hinder growth because the founder is limited in his/her ability to address numerous firm details.

Question 39

A _____ organizational structure is typical of new ventures.

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

Question 40

In environments where change is rapid, an organizational structure needs to able to adapt and respond as quickly as the environment.

Question 41

_____ are cost savings that result from performing two activities jointly.

A) Returns to scale
B) Economies of scale
C) Economics of agglomeration
D) Economies of scope

Question 42

A(n) _____ organizational structure is a hybrid structure, combining different organizational forms.

A) matrix
B) divisional
C) spin-off
D) SBU

Question 43

A(n) _____ is a separate company made from a prior division.

A) merger
B) spin-off
C) shakeout
D) buyout

Question 44

_____ rests on the assumption that over time businesses create and build up processes that no longer establish value for the firm and may even hinder its business.

A) Process management
B) Six Sigma
C) Reengineering
D) Total quality management

Question 45

A _____ is a business division within a larger firm that is charged with managing a particular category of product or service.

A) spin-off
B) matrix structure
C) strategic business unit
D) functional structure

Question 46

_____ exist when the average unit costs of a good or service decline as the quantity produced increases.

A) Economics of agglomeration
B) Economies of scope
C) Economies of scale
D) Returns to scale

Question 47

What is a matrix organizational structure? What are the benefits and risks of a matrix structure?

Question 48

Write a short note on a learning organization.

Question 49

What is a functional organizational structure?

Question 50

Explain mechanistic structures and organic structures.

Question 51

A matrix structure is beneficial because:

A) the CEO is not an isolated entity but someone the employees know intimately.
B) it allows fast decision making by tying different aspects of the business together.
C) it can work particularly well in settings where there are moderately trained and moderately skilled workers.
D) it results in an employee having two managers, which can lead to better decision making.

Question 52

What is the benefit of an SBU?

A) Typically, the founder/CEO is not an isolated entity but someone the employees know intimately.
B) The CEO can closely monitor all actions to ensure that the business achieves all of its goals.
C) Most employees report to the CEO directly.
D) Greater ease and speed in decision making.

Question 53

Write a detailed note on a simple organizational structure.

Question 54

What is an SBU? What are the benefits and risks of an SBU?

Question 55

_____ are structures that are focused on stability and hierarchical decision making.

A) Mechanistic structures
B) Organic structures
C) Nonbureaucratic structures
D) Joint specialization structures

Question 56

A(n) _____ structure is one that is flexible, innovative, and able to adapt to its environment.

A) mechanistic
B) organic
C) bureaucratic
D) individualistic

Question 57

Explain economies of scale and economies of scope.