Deck 11: Organizational Design: Structure, Culture, and Control

Question 1

A firm that successfully balances exploitation of current opportunities and exploration of future possibilities is considered ambidextrous.

Answer 1

TRUE
Explanation: Ambidexterity describes a firm's ability to address trade-offs not only at one point but also over time. It encourages managers to balance exploitation-applying current knowledge to enhance firm performance in the short term-with exploration-searching for new knowledge that may enhance a firm's future performance.

Question 2

An open innovation model reduces a firm's absorptive capacity.

Answer 2

FALSE
Explanation: One key assumption underlying the open innovation model is that combining the best of internal and external R&d will more likely lead to a competitive advantage. This requires that the company must continuously upgrade its internal R&d capabilities to enhance its absorptive capacity-its ability to understand external technology developments, evaluate them, and integrate them into current products or create new ones.

Question 3

Once a firm finds success in a given organizational structure, it should seek to reinforce and maintain that structure for the life of the firm.

Answer 3

FALSE
Explanation: Inertia, a firm's resistance to changing the status quo, can set the stage for the firm's subsequent failure. Successful firms often plant the seed of subsequent failure: They optimize their organizational structure to the current situation. That tightly coupled system can break apart when internal or external pressures occur. To avoid inertia and possible organizational failure, the firm needs a flexible and adaptive structure to effectively translate the formulated strategy into action.

Question 4

Which of the following statements is true of strategy in an organization?

A) Strategy implementation is considered unsuccessful if it requires changes within an organization.
B) To implement a strategy successfully, an organization's structure must be rigid.
C) Strategy implementation does not affect resource allocation and power distribution within an organization.
D) Organizational structure must follow strategy in order for firms to achieve superior performance.

Question 5

Which of the following real-world scenarios best exemplifies formalization?

A) Zappos' focus on allowing its customer service employees to use their own approach rather than depend on scripts
B) McDonald's use of standard operating procedures across the world
C) W. L. Gore's associates organizing themselves in project-based teams that are led by sponsors, not bosses
D) Yahoo's decision to fire its CEO after incurring huge losses

Question 6

Tina is the inventor of a personal fitness tracking device, and she is in the process of hiring employees after receiving investment funding. When considering how to structure her company, she should

A) emulate the structure of the leading firm in the industry.
B) first establish a strategy and let that be her guide.
C) choose the structure that will give her the most control.
D) ask employees what structure they are most comfortable with.

Question 7

ValueHealth is a successful drug manufacturer. Because the pharmaceutical industry features a high rate of change and the threat of disruption is high, ValueHealth should

A) be prepared to restructure as the landscape changes.
B) stick with the structure that brought it success no matter what happens.
C) attempt to implement an unstructured organization.
D) switch to whichever structure is most common in the industry.

Question 8

Results-only-work-environments (ROWEs) are characterized by their use of extrinsic motivations such as promotions or the threat of layoffs.

Question 9

A firm's ________ determines how the work efforts of individuals and teams are orchestrated and how resources are distributed.

A) norm
B) culture
C) structure
D) control

Question 10

A primary advantage of the matrix organizational structure is that it simplifies decision making and communication in geographically diverse organizations.

Question 11

Why does strategy implementation often require changes within an organization?

A) Strategy implementation is less important than strategy formulation.
B) Strategy implementation transforms strategy into actions and business models.
C) Strategy always follows structure.
D) Strategy implementation does not affect resource allocation and power distribution within an organization.

Question 12

A planned emergence approach to strategic planning is most likely to be found in a highly centralized firm.

Question 13

Firms that pursue a closed approach to innovation typically enjoy first-mover advantages.

Question 14

________ refers to a firm's resistance to change the status quo that can set the stage for the firm's subsequent failure.

A) PESTEL factors
B) Formalization
C) Organizational inertia
D) Centralization

Question 15

Organizational design involves establishing a firm's structure, culture, and control mechanisms.

Question 16

Organizational design is

A) the process of creating, implementing, and modifying the structure of an organization.
B) primarily focused on replacing a firm's competitive advantage with competitive parity.
C) a process that always functions independently of strategy formulation.
D) primarily focused on formulating effective strategies, not implementing them.

Question 17

Firms with a flat structure and a low degree of specialization tend to foster innovation better than firms with a tall structure and high degree of specialization.

Question 18

A change in company culture is most commonly accompanied by a change in leadership.

Question 19

What most likely happens when a firm optimizes its organizational structure to its current situation?

A) It plants the seed of subsequent failure: the tightly coupled system can break apart when internal or external pressures occur.
B) It achieves superior performance.
C) It makes it difficult for managers to make the necessary changes due to its effects on resource allocation and power distribution.
D) It transforms strategy into actions and business models.

Question 20

InSeason Inc. started a chain of organic supermarkets that had initial success. The managers achieved a mastery of the firm's current environment, thereby filling a need in the market. However, InSeason defined and measured it success by financial metrics, with a focus on short-term performance. As a result, the firm put in place metrics and systems to accommodate and manage increasing firm size due to continued success. As a result of this tightly coupled system, InSeason developed a

A) resistance to change.
B) innovative approach.
C) significant value gap.
D) holacratic system.

Question 21

While working a night job at a call center, Eric creates an app called EatOut, which can be used to place orders at restaurants, rate the restaurants, and make reservations. Because he receives good responses for his app, he quits his current job to focus his efforts on EatOut. He creates a start-up called BestApps and hires three people to help him improve EatOut and maintain the servers that run it. In this scenario, BestApps most likely has a ________ structure.

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

Question 22

Which of the following is an advantage offered by a functional structure?

A) It allows for an efficient top-down communication chain and thus relies on a relatively tall structure.
B) It facilitates a lower division of labor, which is linked to higher productivity.
C) It allows for a higher degree of specialization and deeper domain expertise.
D) It facilitates a lower level of specialization.

Question 23

Burnley and Co., a graphic design firm, has offices in New York, Texas, California, New Mexico, and New Jersey. Each of these offices is headed by a president who reports directly to Emma Burnley, the CEO. The heads of the centralized HR, Finance, and Marketing teams report to Emma Burnley as well. Managers in the various offices also report to the CEO directly. Based on this information, which of the following statements is most likely to be true?

A) Emma Burnley has a wide span of control.
B) Burnley and Co. has a tall hierarchical structure.
C) Emma Burnley is underworked.
D) Burnley and Co. is a mechanistic organization.

Question 24

Uptown Office Systems recently underwent a reorganization. Based on customer feedback, the company eliminated many of its middle management positions and implemented a flatter structure. Which of the following is a possible drawback of this decision?

A) Employees will have less power and autonomy, resulting in a loss of morale.
B) Internal communications and decision-making processes will be slower.
C) The increased span of control for remaining managers may lead to higher levels of stress and possible burnout.
D) Employees will be forced to take on more specialized roles and may become bored by repetitive tasks.

Question 25

BioCure Inc. is a pharmaceutical company that has many breakthroughs in medicine to its credit. Unlike many other pharmaceutical companies, BioCure has a relaxed work environment where employees are free to discuss projects with each other. Employees are encouraged to choose the projects that interest them; communication between team members and their supervisors is open and easy. Because of the company's work culture, its employees feel motivated to work harder and display more entrepreneurial behaviors. In this scenario, BioCure Inc. is most likely an organization that is

A) formalized.
B) mechanistic.
C) centralized.
D) organic.

Question 26

Fine Lines Inc. is a notebook manufacturing company based in Ohio. Fine Lines' main market is Ohio. It aims at providing its products at better prices than its competitors. Which of the following structures is Fine Lines Inc. likely to use if it has functional setup?

A) organic
B) simple
C) matrix
D) mechanistic

Question 27

W. L. Gore & Associates is organized in such a way that it has no formal job titles, job descriptions, or chains of command. This implies that it has

A) a formalized structure.
B) a decentralized structure.
C) organizational inertia.
D) a top-down management style.

Question 28

Which of the following accurately describes an organic organization?

A) an inflexible organization that fosters slow decision making and high employee motivation
B) an inflexible organization that fosters fast decision making and high employee motivation
C) a flexible organization that fosters slow decision making and high employee motivation
D) a flexible organization that fosters fast decision making and high employee motivation

Question 29

Ruby, a recent fashion design school graduate, has received praise for her clothing designs from her peers and friends on social networking sites; this has inspired her to set up a store where she can design and sell apparel. After experiencing some success with sales, she recruits two employees to handle customers at the store. However, she handles other day-to-day affairs herself, while continuing to design clothes. Which of the following is likely to be a pitfall of this organizational structure established by Ruby?

A) Once the firm starts growing and attracting more customers she is likely to feel overloaded.
B) Hiring more employees will result in loss of intellectual property.
C) People are highly unlikely to buy clothes from a store run by a fashion design student.
D) The online admiration of her designs will not translate into sales.

Question 30

To effectively implement a differentiation strategy, managers rely on a functional structure that resembles an organization that is highly

A) formalized.
B) specialized.
C) organic.
D) mechanistic.

Question 31

Galaxy Toys Inc., a toy manufacturing company, encourages its employees to enjoy their work by taking on additional responsibilities or switching jobs with each other. It allows its employees immense flexibility in charting their own career path within the organization. Chris has worked at Galaxy Toys for eight years, but has never had a boss or supervised an employee. Which of the following is most likely true in this scenario?

A) Galaxy Toys Inc. is a mechanistic organization.
B) Galaxy Toys Inc. has a flat organizational structure.
C) Galaxy Toys Inc. has a high degree of centralization.
D) Galaxy Toys' organizational culture is governed by codified rules.

Question 32

Telescopic Inc., a web development firm, is headed by Rob Dennis, the CEO. Each functional department of the company-marketing, finance, and HR-has a president who reports to the CEO directly. Each department has various managers who manage teams. The managers report to the presidents, and the team leads report to the managers. Finally, the employees at the lowest level report to their team leads. It is rare for a lower-level employee to interact with the CEO of the company. In this scenario, Telescopic Inc. can be said to have a(n)

A) organic organizational structure.
B) decentralized organizational structure.
C) tall hierarchical structure.
D) flat hierarchical structure.

Question 33

Cheetah, a web development firm, wants to implement an organic structure to foster innovation and attract the most talented creative minds. Which of the following features will make it difficult to do so?

A) decision-making power distributed throughout the organization
B) a wide span of control for managers
C) dedication to a cost-leadership business strategy
D) flexible job descriptions for employees

Question 34

A high degree of formalization in an organization is most likely to

A) improve customer service.
B) slow down decision making.
C) produce inconsistent results.
D) increase creativity and innovation.

Question 35

Which of the following is an unintended side effect of a high degree of specialization in an organization?

A) decreased trade-off between breadth and depth of knowledge
B) decreased opportunities for the division of labor
C) reduced employee satisfaction due to repetition of tasks
D) reduced productivity

Question 36

Why does a functional structure rely on a flat organizational structure?

A) The work in the organization is centrally coordinated by the CEO.
B) It allows for a higher degree of specialization and domain expertise.
C) It allows for efficient bottom-up and top-down communication.
D) It allows for the implementation of a differentiation strategy.

Question 37

Tony's Tacos is a nationwide fast-food chain. Decision power resides at the top of the organization. Each job is documented in minute detail. The firm has many levels of supervision, including vice presidents and regional managers. Tony's headquarters provides detailed instructions to each of its franchisees so that they provide comparable quality and service across the board. Based on this scenario, which of the following is an accurate statement about Tony's?

A) Tony's has a low degree of specialization and formalization, a high degree of centralization, and relies on a flat hierarchy.
B) Tony's has a high degree of specialization and formalization, a low degree of centralization, and relies on a tall hierarchy.
C) Tony's has a high degree of specialization, formalization, and centralization and relies on a tall hierarchy.
D) Tony's has a low degree of specialization, formalization, and centralization and relies on a flat hierarchy.

Question 38

________ refers to the degree to which decision making is concentrated at the top of the organization.

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

Question 39

McDonald's operates Hamburger University that trains students to ensure consistent food quality across its outlets throughout the world. This indicates that McDonalds's

A) is organic in nature.
B) is mechanistic in nature.
C) has an informal structure.
D) has a decentralized structure.

Question 40

Jen works as a front-line employee for a nationwide retail store. She reports to a floor manager, who reports to a departmental manager, who reports to a regional supervisor, who reports to a vice president, who reports to the CEO. Which of the following best describes this retail store?

A) flat structure
B) tall structure
C) centralized structure
D) decentralize structure

Question 41

Why does a firm use an organic organization combined with a functional structure when implementing a differentiation strategy?

A) It allows the firm to create incentives to foster process innovation in order to drive down cost.
B) It allows the firm to reduce its cost below that of competitors while offering acceptable value.
C) It allows the firm to constantly upgrade core competencies in R&D, innovation, and marketing.
D) It allows the firm to nurture and constantly upgrade necessary core competencies in manufacturing and logistics.

Question 42

Which of the following organizational structures matches best with an international strategy?

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

Question 43

ABX Inc. is an electronic appliances manufacturer that has many strategic business units (SBUs), among which, television and computers share a close relationship. These SBUs have to fight each other for R&D funding because there is a combined amount set aside for these two units. However, they share technological findings with each other and work together to ensure that their combined output is better that of the other SBUs. Such a relationship between SBUs in a business is referred to as

A) competition.
B) co-opetition.
C) exploitation.
D) exploration.

Question 44

Harvey's, a large and successful retail chain on the West Coast, decides to expand its operations across the U.S. Which of the following organizational structures should Harvey's use?

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

Question 45

Which of the following is a disadvantage of a functional strategy?

A) It frequently lacks the tools required to pursue a cost-leadership strategy.
B) It does not facilitate rich communication between members of the same department.
C) It cannot effectively address a higher level of diversification.
D) It does not allow organizations to be flexible or innovative.

Question 46

Which of the following is an advantage of using a functional structure when pursuing a cost-leadership strategy?

A) It allows a cost-leader to upgrade core competencies in manufacturing and logistics.
B) It enables a cost-leader to build products that are different from its competitors' offerings.
C) It enables a cost-leader to increase costs above that of its competitors.
D) It allows a cost-leader to operate in a decentralized organizational structure.

Question 47

Sunset Foods relies on a highly centralized functional structure to ensure consistency in the quality and taste of its products and to drive down costs via process innovations. However, as a consequence of its highly compartmentalized structure, the firm has found it difficult to transfer information and ideas from one department to the next. With the launch of its new line of breakfast foods coming up, how can Sunset improve its ability to collaborate without sacrificing the benefits of its current structure?

A) by establishing cross-functional teams
B) by switching to a simple structure
C) by switching to a competitive M-form structure
D) by decreasing managers' span of control

Question 48

Which of the following provides an example of a common drawback of a functional strategy?

A) Bert had a difficult time communicating efficiently with the manager of another department.
B) Marietta was surprised about the inflexibility of her firm when it rejected her marketing plan.
C) Juan's manager dismissed his idea because it was too innovative.
D) Mary did not accept the position with the firm because it has an ineffective cost-leadership strategy.

Question 49

When a firm diversifies into different product lines and geographies, a ________ structure is preferred.

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

Question 50

Keyhole Corporation is the parent company of Inspire.com and Roker Inc. To cut costs, Keyhole integrated InSpire.com's and Roker Inc.'s management functions with Keyhole's management, while keeping other functions such as product development independent. Keystone has encourage the senior teams at both Inspire and Roker to exploit the success of their existing products while exploring new products for the future. This scenario best exemplifies a(n)

A) multidivisional structure.
B) organic organization.
C) simple structure.
D) ambidextrous organization.

Question 51

Which of the following features helps match a cost-leadership strategy to a functional structure?

A) decentralization
B) process and product innovations
C) flexibility and mutual adjustment
D) focus on economies of scale

Question 52

Island Home Goods pursues a related diversification strategy, deriving less than 70 percent of revenues from its original business unit, Island Furniture, and maintaining several related units including Island Lighting and Island Hardware. Which of the following structures is most likely to support this strategy?

A) M-Form with centralized decision-making power (cooperative multidivisional)
B) M-Form with decentralized decision-making power (competitive multidivisional)
C) functional with centralized decision-making power
D) functional with decentralized decision-making power

Question 53

Why should managers using the M-form organizational structure to support a related-diversification strategy ideally concentrate decision making at the top of the organization?

A) It allows a high level of integration.
B) It helps contain the core competencies within a strategic business unit (SBU).
C) It leads to competition between SBUs.
D) It helps evaluate each SBU as a stand-alone profit-and-loss center.

Question 54

Which of the following types of organizations best helps match a differentiation strategy to a functional structure?

A) ambidextrous organization
B) mechanistic organization
C) organic organization
D) rigid organization

Question 55

Which of the following global strategies best matches with a multidivisional structure?

A) international
B) multidomestic
C) global-standardization
D) transnational

Question 56

An organization that is organized according to strategic business units (SBUs) and also along organizational structures is most likely using a ________ structure.

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

Question 57

Why is the optimal organizational structure a multidivisional structure?

A) Its focus is on driving down costs.
B) Its focus is on producing differentiated products.
C) Its focus is on retaining activities within a single geographic area.
D) Its focus is on establishing a flat hierarchy operated in a decentralized fashion.

Question 58

Avalanche operates as a strategic business unit (SBU) under Snowfall Inc., a home-furnishings manufacturer. From this information, it may be reasonable to infer that

A) Avalanche does not have its own profit and loss responsibility.
B) Avalanche is dependent on the other SBUs in Snowfall Inc.
C) Avalanche has a matrix organizational structure.
D) Avalanche is led by its own CEO (or equivalent general manager).

Question 59

A functional structure is recommended when a firm

A) has a broad focus in terms of its product/service offerings.
B) has a low level of diversification.
C) has a low degree of specialization.
D) diversifies into different product lines and geographies.

Question 60

A firm that uses a structure that is organized along different business functions such as HR, R&D, Sales, and Marketing and also along different geographical areas such as different countries of the world is most likely using a ________ structure.

A) global matrix
B) multidivisional
C) functional
D) simple

Question 61

A company that is using extrinsic motivation as an output control mechanism will most likely

A) organize training sessions for employees.
B) cut budgets during recessions.
C) implement a peer review system.
D) threaten to lay off employees if they do not achieve targets.

Question 62

________ define appropriate employee attitudes and behaviors.

A) Values
B) Artifacts
C) Appraisals
D) Norms

Question 63

What is most likely to happen if a firm relies too long on a competency without honing, refining, and upgrading as the firm and the environment change?

A) The firm's original core competency can turn from a liability into an asset.
B) The firm's organizational inertia can turn into its core rigidity.
C) The firm's competitive parity can turn into its competitive advantage.
D) The firm's culture can turn from a core competency into a core rigidity.

Question 64

Which of the following best exemplifies the use of input controls?

A) McDonald's use of standard operating procedures
B) GM's use of the multidivisional strategy
C) Zappos' use of monitoring-free customer service calls
D) Southwest Airline's use of employee friendliness

Question 65

In which of the following ways does Zappos achieve organizational control?

A) It continually changes the organizational values that guide its employees.
B) It refrains from monitoring its employees' calls.
C) It encourages employees to be creative and innovate and to go the extra mile to deliver a wonderful customer experience.
D) It enforces that each group member's compensation depends in part on the group's overall productivity.

Question 66

Butterfly Technologies produces touch-enabled wearable devices. Its research and development team recently became aware of a new, open-source technology produced by a firm overseas that would improve the processing speed and battery life of all Butterfly devices. In this scenario, Butterfly would be best served to embrace

A) open innovation.
B) closed innovation.
C) disruptive innovation.
D) radical innovation.

Question 67

Two leading home appliance companies, Redwood Inc. and Boxer Technologies, are in competition for market share. In their quest for exciting new products, Redwood employs an open innovation model, while Boxer pursues a closed innovation model. Which of the following statements is most likely true?

A) Redwood has a greater chance of capturing market share.
B) Boxer has a superior absorptive capacity.
C) Boxer will protect its intellectual property with patents and trade secrets.
D) Redwood is most concerned with securing first-mover advantages.

Question 68

Which of the following types of groups is most susceptible to groupthink?

A) a diverse group
B) a cohesive group
C) a heterogeneous group
D) a decentralized group

Question 69

________ describes the collectively shared values and norms of an organization's members.

A) Competitive advantage
B) Organizational structure
C) Organizational culture
D) Core competency

Question 70

GM's insistence on sticking to a bureaucratic culture combined with its M-form structure and its subsequent failure to adapt to changing customer preferences for more fuel-efficient cars, produce higher quality, and create innovative designs best exemplifies

A) decentralization.
B) founder imprinting.
C) groupthink.
D) core rigidity.

Question 71

Why is it difficult to imitate the organizational culture of firms like Southwest Airlines and Zappos?

A) Their culture reflects complex relationships with their employees, customers, and suppliers.
B) They produce products that cannot be copied easily because of their complex designs.
C) The employees in the organization themselves are unaware of the factors contributing to their organizational culture.
D) It is not commercially viable for other companies to implement the same culture.

Question 72

Organizational culture can help a firm gain and sustain competitive advantage only if the culture makes a positive contribution to the firm's economic value creation and

A) eventually gives way to core rigidity.
B) obeys the VRIO principles.
C) does not demonstrate causal ambiguity.
D) displays an absence of social complexity.

Question 73

Spiderweb Inc. is an apparel manufacturer. The management at Spiderweb prefers moderate control over the operations of the different departments such as R&D, design, marketing, and sales. It allocates a budget to each function at the beginning of each quarter. This is an example of implementing control through

A) output controls.
B) input controls.
C) multidivisional strategy.
D) centralization.

Question 74

One of Waterfall Apparel's core values is to provide unbeatable customer service, a commitment introduced to the company by its founder more than 10 years ago. This value is expressed in the company's "True to You" campaign, which promises a no-questions-asked returns policy and an offer to stitch the customer's initials onto any item for free using a patented sewing technique, two features that are not offered by any of Waterfall's competitors. Although the campaign has resulted in a 10 percent decline in profits, Waterfall has decided to continue to pursue its founder's vision to reward customers and maintain employees' sense of purpose. Why does Waterfall's culture, exemplified by the "True to You" campaign, fail to support a competitive advantage?

A) It does not increase economic value creation for the firm.
B) It is not a rare resource.
C) Waterfall lacks founder imprinting.
D) The culture is not difficult to imitate.

Question 75

The most important yet least visible element of organizational culture is

A) values.
B) norms.
C) laws.
D) artifacts.

Question 76

Why are controls like budgets and operating procedures that McDonald's implements known as input controls?

A) They are independent of an organization's culture.
B) They are implemented by corporate headquarters.
C) They are considered before employees make any decisions.
D) They are ad hoc and not codified.

Question 77

Which of the following statements best describes groupthink?

A) It is a process by which the founder defines and shapes an organization's culture, which can persist for decades after his or her departure.
B) It is a situation in which organizations compete with one another for resources, but they also need to cooperate to share competencies.
C) It is a process whereby employees internalize an organization's values and norms through immersion in its day-to-day operations.
D) It is a situation in which opinions coalesce around a leader without individuals critically challenging and evaluating that leader's opinions and assumptions.

Question 78

Which of the following real-world scenarios best exemplifies the use of organizational culture to build competitive advantage?

A) W. L. Gore & Associates organizes its employees into project-based teams.
B) Apple develops high-tech products that are preferred by consumers across the world.
C) Southwest Airlines pilots sometimes help load baggage, which results in quick turnaround time.
D) GM offers compensation if its products do not meet a consumer's expectations.

Question 79

Employees learn about an organization's culture through the process of

A) socialization.
B) exploitation.
C) co-opetition.
D) acculturation.

Question 80

Which of the following statements is true of organizational culture?

A) Changes in culture are too frequent to have any impact on strategic implementation.
B) It is better for founder CEOs to create a relevant culture, structure, and strategy in the early stages.
C) It is always better to focus on output control and performance than on organizational culture.
D) According to research, more than 50 percent of firms change culture successfully.