Deck 10: Creating Effective Organizational Designs

Question 1

A major disadvantage of a divisional structure is that when divisions are separated to manage individual product markets, there is a separation of strategic and operational control.

Answer 1

False
Explanation: By creating separate divisions to manage individual product markets, there is a separation of strategic and operating control. This is an advantage because divisional managers can focus their efforts on improving operations in the product markets for which they are responsible, and corporate officers can devote their time to overall strategic issues for the entire corporation.

Question 2

A small firm with a simple structure often fosters creativity and individualism because of its informal atmosphere.

Answer 2

True
Explanation: The simple structure is highly informal and the coordination of tasks is accomplished by direct supervision. A simple structure may foster creativity and individualism since there are generally few rules and regulations.

Question 3

A new firm with a simple structure typically increases its sales revenue and volume of outputs over time. It may also engage in some vertical integration to secure sources of supply (backward integration) as well as channels of distribution (forward integration).

Answer 3

True
Explanation: A new firm with a simple structure typically increases its sales revenue and volume of outputs over time. It may also engage in some vertical integration to secure sources of supply (backward integration) as well as channels of distribution (forward integration).

Question 4

The strategic business unit (SBU) and holding company structure are variants of the functional form of structure.

Question 5

When evaluating structure and organizational design, managers must consider the appropriateness of the type of organizational structure and they need to assess the mechanisms, processes, and techniques that will be most helpful in enforcing internal and external boundaries.

Question 6

To enhance integration and control of related product market activities, the functional structure minimizes centralization.

Question 7

A firm that chooses to move into unrelated product areas, by acquiring existing businesses, is likely to find that the strategy requires relatively little integration across businesses and sharing of resources and therefore is would consider a using holding company structure.

Question 8

Operational decision making in a large business places excessive demands on top management of the firm.

Question 9

A new, simple-structure firm concentrates efforts only on increasing efficiency without regard to its actual products.

Question 10

One disadvantage of a functional structure is that differences in functional orientation may impede organization coordination and communication.

Question 11

The matrix structure attempts to combine the advantages of the functional and product-oriented structure.

Question 12

One major advantage of the holding company form of organization structure is that it minimizes the duplication of functional activities between product lines.

Question 13

A strategy of related diversification requires a need to reorganize only around product lines. This leads to a divisional structure.

Question 14

As firms grow, owner managers often need to hire functional specialists to handle the increased information-processing burden.

Question 15

When a firm has international operations, choosing the most appropriate structure depends upon the extent of international expansion, the type of strategy, and the degree of market diversity.

Question 16

A major disadvantage of adopting a divisional structure is the tendency for managers to focus on short-term objectives.

Question 17

In a simple structure where the owner manager makes most of the important decisions, extensive rules and regulations are used to maintain order.

Question 18

The strategy and structure of a firm change as the firm increases in size, diversifies into new product markets, and limits its geographic scope.

Question 19

The most appropriate type of organizational structure to select is dependent upon the product or service the company provides.

Question 20

A simple organizational structure may lead to problems such as unclear boundaries of authority and few career advancement options.

Question 21

An advantage of the barrier-free form of organizing is that internal cooperation and shared objectives are not required for it to work.

Question 22

With a functional organizational structure, firms initially tend to expand the overall scope of their operations by penetrating existing markets, introducing similar products in additional markets, or decreasing the level of vertical integration.

Question 23

One of the disadvantages of a divisional structure is that the divisions often perceive themselves as being in competition with each other and are therefore unwilling to share information to help other divisions improve. ArcelorMittal found a solution which twins an efficient steel mill with a struggling one.

Question 24

A major disadvantage of the matrix structure is that it duplicates the use of specialized personnel, equipment, and facilities.

Question 25

A major disadvantage of the functional organizational structure is that it often leads to silos in which departments view themselves as isolated, self-contained units with little need for interaction and coordination with other departments.

Question 26

Global start-ups occur after a corporation has exhausted all other possibilities for domestic growth.

Question 27

Functional structures are generally found in organizations in which there is a single or unrelated product or service, high production volume, and some vertical integration.

Question 28

The simple organizational structure involves highly decentralized decision making.

Question 29

A worldwide product division structure is used when global strategies require that each division be responsible for overall efficiency and performance.

Question 30

Three major contingencies that influence the chosen structure of a company are: the type of strategy that drives its foreign operations, its product diversity, and the extent to which the company is dependent on foreign sales.

Question 31

In the global marketplace, managers must ensure consistency between only their corporate level strategies and the structure of their organization.

Question 32

A global start-up typically benefits from lower communication, coordination, and transportation costs.

Question 33

According to the text, boundaryless organizational structures are most effective when they replace rather than complement traditional organizational structures.

Question 34

In a barrier-free organization, differences in skills, authority, and talent disappear.

Question 35

Different types of boundaries place limits on organizations in order to foster high degrees of interaction with inside influences and varying levels of permeability.

Question 36

Logitech International is an example of a company that began as a global start-up, with headquarters in both California and Switzerland and operations in both countries.

Question 37

Jack Welch, former CEO of GE, believes that all internal and external organizational boundaries should vanish completely.

Question 38

Multidomestic strategies are driven by political and cultural imperatives requiring managers within each country to respond to local conditions.

Question 39

A matrix organization is organized strictly along product lines.

Question 40

The structure of a firm typically has almost no effect on its strategy.

Question 41

According to the text, the factor that most distinguishes a superior team from a good team is talent.

Question 42

The virtual organization is characterized by participating firms which pursue a collective strategy that enables them to cope with environmental uncertainty through cooperative efforts.

Question 43

One of the advantages of boundaryless structures is that they can be implemented without upgrading the skills of workers and managers.

Question 44

Firms that place too strong a priority on either adaptability or alignment can expect short term gains only.

Question 45

One of the challenges of an ambidexterity in a firm is that it must ensure that it remains proactive in expanding or modifying its product-market scope to anticipate and satisfy market conditions.

Question 46

The O'Reilly and Tushman study on ambidextrous organizational designs found that there was no relationship between organizational structure, management practices employed and performance of both the breakthrough initiative and the traditional business.

Question 47

According to author Jeffrey Pfeffer, the advantages of teams are that employees control themselves, develop more creative solutions to problems, and permit the absorption of administrative tasks previously performed by specialists.

Question 48

Outsourcing relieves companies of the requirement to maintain skill levels needed to manufacture essential components.

Question 49

Because the modular form of organizing involves outsourcing vital functions, modular firms often forfeit full strategic control.

Question 50

One of the risks of outsourcing is a loss of cross-functional skills.

Question 51

Ambidextrous organizational designs are useful for firms that wish to create modest, incremental innovations at the same time as dramatic, breakthrough innovation. This is done by maintaining adaptability and alignment of values and coordination across organizational activities.

Question 52

Outsourcing in noncore functions of modular companies offers the advantage of decreased overall costs, but the company will be unable to focus on scarce resources in the areas where it holds competitive advantage.

Question 53

Managing virtual structures requires new and difficult-to-acquire managerial skills.

Question 54

One of the challenges of an ambidexterity in a firm is that managers must effectively exploit the value of their existing assets and competencies to assure alignment between how value is being created in the short term and how activities are integrated and properly coordinated.

Question 55

Modular companies can achieve rapid growth because they do not require large investments in fixed assets.

Question 56

Horizontal organization structures facilitate resource sharing and help to create a sense of common purpose.

Question 57

Procter & Gamble used communities of practice and human resource practices to help it achieve effective collaboration and integration across its different business units. This effort resulted in the successful development of the Crest Whitestrips product and is an example of good use of boundary-constrained organizational design.

Question 58

Managers trained in rigid hierarchies do not find it difficult to transition to participative style required for effective teamwork.

Question 59

A barrier-free organization creates successful relationships between internal and external constituencies and sometimes with competitors as well.

Question 60

The virtual type of organization is a network of independent companies linked together to share skills, costs, and access to the markets of each other.

Question 61

One of the factors that explained the effectiveness of ambidextrous organizational designs in the O'Reilly and Tushman study was the clear and compelling vision that the company senior management team communicated.

Question 62

One of the factors that explained the effectiveness of ambidextrous organizational designs in the O'Reilly and Tushman study was that the structure enabled cross-fertilization while avoiding cross contamination in terms of sharing resources.

Question 63

When an organization with a functional structure diversifies into related product-markets, it generally

A)maintains its functional structure.
B)develops a divisional structure.
C)develops a matrix structure.
D)develops a worldwide product-division structure.

Question 64

Which of the following is not a primary factor that a large firm with international operations should consider when choosing the appropriate structure for its organization?

A)the extent of international expansion
B)the type of strategy (global, multidomestic, or transnational)
C)the degree of product diversity
D)the degree of market diversity

Question 65

Which of the following statements about simple organizational structures is false?

A)Small firms with a narrow product-market scope will adopt such a structure.
B)Decision making authority is highly centralized.
C)There is little specialization of tasks.
D)Creativity and individualism are rare.

Question 66

Successful organizations create ______ boundaries among the _____ activities as well as between the organization and its external customers, suppliers, and alliance partners.

A)impermeable; external
B)impermeable; internal
C)permeable; external
D)permeable; internal

Question 67

Which of the following activities is not identified structure?

A)managerial
B)executive
C)social responsibility
D)administrative

Question 68

Organizational structure refers to the formalized patterns of interactions that link company ___________, ___________, and _____________.

A)processes; mechanisms; techniques
B)tasks; mechanisms; techniques
C)processes; people; mechanisms
D)tasks; technologies; people

Question 69

In large organizations, a strategy of diversification requires a need to reorganize around ______________ or _____________.

A)product lines; geographic markets
B)product lines; competition
C)competitor lines; geographic markets
D)distribution lines; competitor markets

Question 70

In successful ambidextrous organizations, according to the O'Reilly and Tushman study, the traditional and new units were shielded from each other so that they each focused attention and energy on its own operations, products, and customers.

Question 71

Organizations that make it to the growth stage design strategies to

A)reduce the tendency to increase operational scope.
B)leave exiting product-market domains.
C)increase the overall scope of operations.
D)reduce the commitment to new product-market domains.

Question 72

Structures help to ensure that ____________ are used effectively in accomplishing the mission of the organization.

A)strategies
B)relationships
C)resources
D)boundaries

Question 73

The two vital ongoing activities necessary for creating boundaryless organizations that managers today must concern themselves with are

A)financial returns and marketplace value.
B)market share and shareholder value.
C)type of structure, mechanisms, processes, and techniques for enhancing permeability.
D)product marketability and capital structure.

Question 74

A simple structure is characterized by

A)high specialization and low centralization.
B)low specialization and high centralization.
C)low formality and low creativity.
D)high formality and low centralization.

Question 75

The appropriateness of the type of organizational structure depends upon the ___________ and _______ of growth.

A)nature; magnitude
B)definition; accessibility
C)accessibility; nature
D)nature; definition

Question 76

As illustrated in the opening case for Chapter 10, Boeing lost a lot of control and therefore incurred high operating costs for its build out of the 787 Dreamliner, because it ____________ design and manufacturing.

A)on-shored
B)internalized
C)outsourced
D)internationalized

Question 77

Functional structures are usually found in organizations where there

A)is high volume production.
B)are unrelated product lines or service offerings.
C)is very little vertical integration.
D)there exists a strong need to decentralize decision making.

Question 78

When an organization with a simple structure increases its sales revenue and volume of outputs, it is most likely to develop a ______________ structure.

A)divisional
B)functional
C)product-market
D)geographic

Question 79

A strategy of related diversification requires most firms to organize around geographical areas or product lines. This type of organizational growth leads to a(n) ______________ structure.

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

Question 80

One of the factors that explained the effectiveness of ambidextrous organizational designs in the O'Reilly and Tushman study was that the reward systems emphasized traditional unit goals.