Deck 11: Organizational Structure and Controls

Question 1

Organizational structures must be both stable and flexible.

Answer 1

True

Question 2

Research shows that structure has a more important influence on strategy than the reverse.

Answer 2

False

Question 3

The simple structure is used by owner-managed firms that are characterized by informal relationships, few rules, limited task specialization, and unsophisticated information systems.

Answer 3

True

Question 4

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

Question 5

A centralized structure does not provide information from local stores that would be useful in changing its technology quickly.This example illustrates the effect of structure on strategy.

Question 6

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

Question 7

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

Question 8

Strategic controls are largely subjective criteria intended to verify that the firm is using appropriate strategies for the conditions in the external environment and the company's competitive advantages.

Question 9

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.

Question 10

Companies and business units using the differentiation strategy should emphasize financial rather than strategic controls.

Question 11

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

Question 12

Organizational 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 13

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

Question 14

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

Question 15

To effectively use strategic controls in firms using related diversification strategies, the executives must have a deep understanding of the business-level strategies being implemented within individual strategic business units.

Question 16

There are three variations of the multidivisional structure.

Question 17

With a related diversification corporate-level strategy, financial controls are used by corporate leaders to verify the sharing of appropriate strategic factors such as knowledge, markets, and technologies across businesses.

Question 18

Companies and business units of large diversified firms using the cost leadership strategy should focus on strategic controls.

Question 19

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.

Question 20

Strategy has a more important influence on structure, although once in place, structure influences strategy.

Question 21

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 22

Firms implementing the multidomestic strategy often attempt to isolate themselves from global competitive forces by establishing protected market positions or by competing in industry segments that are most affected by differences among local countries.

Question 23

Dilly's Donuts is an active franchiser.It is reasonable to assume that one reason Dilly's pursues this corporate-level strategy is an attempt to create synergy.

Question 24

Highly formalized rules and procedures which often emanate from the centralized staff are a characteristic of the structure used to implement the cost leadership strategy.

Question 25

MirGold uses a related constrained strategy in order to share resources and activities across its many businesses.The multidivisional structure form that is best suited for MirGold is the cooperative form.

Question 26

The worldwide geographic area structure differs from the worldwide product divisional structure in the level of centralization of decision making.

Question 27

The cooperative form is an M-form structure in which horizontal integration is used to bring about interdivisional cooperation.

Question 28

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 corporate strengths.

Question 29

RueLim Industries has experienced tremendous growth recently.Two downsides to this expansion have been increased costs and negative environmental effects.If RueLim wants to reduce costs, it would make sense to purse a corporate-level strategy.But such a strategy could not be used to mitigate the environmental effects of the company's growth.

Question 30

The integrated cost leadership/differentiation strategy needs structural features that are partially centralized and partially decentralized, jobs that are semispecialized, and rules and procedures that call for some formal and some informal job behavior.

Question 31

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 32

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

Question 33

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

Question 34

The strategic business unit (SBU) structure consists of at least three levels: the top level, the corporate headquarters; the next level, the SBUs; and the final level, SBU divisions.

Question 35

ValCor's structure is made up of complex and flexible reporting relationships.The firm focuses on the marketing and product R&D functions.It is likely that ValCor employs the functional structure to implement the differentiation strategy.

Question 36

The divisions within each strategic business unit (SBU) are related in terms of shared products or markets, but the divisions of one SBU have little in common with the divisions of the other SBUs.

Question 37

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

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

Firms using the differentiation strategy need to respond quickly to environmental opportunities and threats.The structural features that are best for these requirements are centralization, specialization, and many rules and procedures.

Question 40

To implement a related linked strategy, a firm usually needs a strategic business unit structure.

Question 41

Arnold Schwartz, CEO and founder of Schwartz Engineering, has repeatedly rebuffed efforts by other firms in other countries 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.An advantage would be that Schwartz Engineering would gain assistance from those other firms in meeting other countries' regulatory requirements.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 42

A firm's __________ specifies the work to be done and how to do it given the firm's strategy or strategies.

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

Question 43

A strategic network can be characterized as a loose federation of partners participating in the network's operations on a flexible basis.

Question 44

One reason 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 that the firm undertake a multi-year restructuring period that will delay retirement.
D) suggests that the firm's previous choices were not the best ones.

Question 45

What are the two general types of measures that make up financial controls?

A) Operational and strategic
B) Return on investment and return on assets
C) Accounting-based and market-based
D) Evaluation and performance-based

Question 46

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

Question 47

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 48

The management team at Krandal Industries emphasizes financial controls over strategic ones.Accounting-based measures are used to evaluate the firm's performance based on its own history and on industry averages.It is most likely that Krandal uses what type of strategy?

A) Single business
B) Related constrained
C) Unrelated diversified
D) Vertical complementary

Question 49

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 50

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 51

Organizational structure specifies the firm's:

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

Question 52

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

Question 53

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

A) Functional
B) Simple
C) Vertically integrated
D) Multidivisional

Question 54

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

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

Question 55

Andermeyer Jewelers, which specializes in high-end jewelry, has been in existence since the 1870s and has served generations of wealthy families.Owned and managed by the Andermeyer family since its founding, it 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 56

Which of the following statements 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 57

For firms in a vertical complementary alliance (such as between Toyota and its suppliers), it is more difficult to identify the strategic center firm than in a horizontal complementary alliance (e.g., airline alliances).

Question 58

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) consistently and predictably manage its daily work routines.

Question 59

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 60

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 61

Walmart's effective strategy/structure configuration is:

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

Question 62

Successfully implementing a cost leadership strategy requires:

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

Question 63

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

A) ease of coordination within the organization.
B) the lack of a need for sophisticated information systems.
C) active involvement by the owner-manager.
D) the ability of specialists to develop deep expertise.

Question 64

Some experts consider the __________ structure to be one of the twentieth century's most significant organizational innovations because of its value to diversified firms.

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

Question 65

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 66

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) Facilitating comparison between divisions
D) Stimulating managers of poorly performing divisions to look for ways of improving performance

Question 67

Functional structures work best for firms for all of the following EXCEPT:

A) cost leadership strategy.
B) differentiation strategy.
C) related constrained diversification strategy.
D) single or dominant business corporate strategy.

Question 68

AviMin uses a differentiation strategy, delivering products that customers perceive as unique in ways that create value.AviMin likely focuses on what functions?

A) Finance and accounting
B) Manufacturing and process R&D
C) Product R&D and marketing
D) Process and product R&D

Question 69

How does structure affect strategy?

A) Structure does not affect the implementation of chosen strategies but it limits possible future strategies.
B) Structure affects the implementation of chosen strategies and expands the possible options for future strategies.
C) Structure affects the implementation of chosen strategies but does not impact possible future strategies.
D) Structure affects the implementation of chosen strategies and also limits possible future strategies.

Question 70

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 71

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 72

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

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

Question 73

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 high quality and low prices.
C) coordination and control problems.
D) a shift toward the global economy.

Question 74

Which of the following statements about organizational structures for implementing business-level strategies is true?

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 product 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 75

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

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

Question 76

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 and coordination are difficult among organizational functions.

Question 77

If an analysis were to show that a firm is benefitting from internal competition, it is probably using what type of strategy?

A) Cost leadership
B) Multidivisional
C) Differentiation
D) Unrelated diversification

Question 78

DovBid sells non-standardized products to customers with unique needs.Because DovBid uses a differentiation strategy, it is likely that it will:

A) use a hierarchical structure with many layers.
B) develop very formal reporting structures.
C) use cross-functional development teams.
D) establish a number of independent business units.

Question 79

Firms seeking to compete on the basis of cost leadership particularly tend to focus on the __________ and __________ functions.

A) finance; accounting
B) manufacturing; process R&D
C) product R&D; marketing
D) management information; finance

Question 80

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