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a.
multi-domestic
b.
transnational
c.
global
d.
focus
77. Firms seeking to differentiate particularly need support from the ______ and ______ functions.
a.
finance; accounting
b.
engineering; operations
c.
product R&D; marketing
d.
management information; finance
78. 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.
79. Ortiz is a manager of BRS Corp. Ortiz’s division did not meet financial targets this year. Ramirez, manager of another
division, has indicated that Ortiz’s division incurred significant costs which resulted in Ramirez’s division setting record
profits for the year. As a result, performance for BRS as a whole exceeded projections. Which pairing of organizational
structures for BRS and bonus for Ortiz is most plausible?
a.
Cooperative structure; no bonus due to failure to meet divisional target
b.
Competitive structure; no bonus due to failure to meet divisional target
c.
Cooperative structure; a bonus for increasing organizational performance
d.
Competitive structure; a bonus for increasing organizational performance
80. Typically, a successful firm pursuing a differentiation strategy will:
a.
have a very hierarchical structure.
b.
require a structure that is very formal.
c.
use cross-functional development teams.
d.
develop free-standing business units.
81. A worldwide geographic area structure is an organizational form in which:
a.
multiple alliances across the globe link complementary businesses.
b.
standardized products are offered across country markets.
c.
national interests dominate and management adapts to local or cultural differences.
d.
responsiveness to local demand is combined with economies of scale.
82. 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
83. The BEST multidivisional structure to use:
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a.
is the competitive form.
b.
is the SBU form.
c.
is the cooperative form.
d.
depends on the degree of diversification.
84. 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
85. The ______ structure is an organizational structure that combines both functional specialization and business product
or project specialization.
a.
functional
b.
worldwide geographic area
c.
network
d.
matrix
86. Which of the following is NOT a preliminary task of the strategic center firm in a strategic network?
a.
Strategic outsourcing
b.
Encouraging friendly rivalry among network members
c.
Allocating internal capital
d.
Supporting development of new core competencies
87. IKEA is a global furniture retailer with more than 300 outlets in 39 countries and regions. IKEA focuses on lowering
its costs as well as understanding customer needs, especially younger ones. IKEA’s international strategy is best described
as ______, and the appropriate organizational structure to implement this strategy is the ______ structure.
a.
transnational; combination
b.
global; worldwide product divisional
c.
multi-domestic; worldwide geographic area
d.
competitive; strategic business unit multidivisional
88. The ______ structure is best for implementing the related-constrained diversification strategy.
a.
functional
b.
competitive form of the multidivisional
c.
SBU form of the multidivisional
d.
cooperative form of the multidivisional
89. In most cases, the focus strategy is best managed using a ______ structure.
a.
simple
b.
functional
c.
multidivisional
d.
vertical
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90. 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.
91. The ______ structure is the most appropriate structure for implementing the integrated cost leadership/differentiation
strategy.
a.
simple
b.
functional
c.
multidivisional
d.
strategic business unit
92. ____ is the degree to which decision-making authority is retained at higher managerial levels.
a.
Formalization
b.
Centralization
c.
Specialization
d.
Unification
93. Toyota and its suppliers have a relationship in which Toyota encourages suppliers to modernize their facilities and
provides them with technical and financial assistance to do so. It also promotes longer-term contracts with suppliers and
enables engineers in the supplier companies to have better communication with Toyota. This is an example of a(n):
a.
worldwide product divisional structure.
b.
functional structure.
c.
SBU multidivisional structure.
d.
strategic network.
94. The 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.
95. Which of the following is NOT a variation of the multidivisional structure?
a.
Competitive form
b.
Regional form
c.
Cooperative form
d.
Strategic business unit form
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96. The three structural characteristics that differ among organizational structures include all of the following EXCEPT:
a.
centralization.
b.
formalization.
c.
specialization.
d.
intermediation.
97. Airlines have forged a number of complementary strategic alliances, in part because many airlines are not profitable.
Some airlines participate in several alliances simultaneously. This tends to:
a.
make the partners’ true loyalties and intentions unclear.
b.
make the role of the strategic center firms more critical to alliance success.
c.
distribute the alliances along several segments of the airline industry value chain.
d.
be most effective when the alliances are with airlines headquartered in different nations.
98. The most centralized and most costly form of the multidivisional structure is the:
a.
integrated.
b.
competitive.
c.
SBU.
d.
cooperative.
99. A private university is made up of various “schools,” such as the School of Journalism, the School of Business, the
School of Law, the School of Arts and Sciences, and so forth. The university is experiencing some financial problems, so
the administration has decided to have each school of the university become a profit center. This scheme is somewhat
parallel to the ______ organizational structure.
a.
network
b.
strategic business unit multidivisional
c.
functional
d.
matrix
100. 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
101. Icarus Aviation, Athena Instrumentation, and Hercules Miniaturization are strategic business units of Olympia
Industries. One can expect that Icarus, Athena, and Hercules:
a.
use integrative mechanisms to share core competencies.
b.
compete with one another in Olympia’s internal capital markets.
c.
are not necessarily related to one another in terms of products or markets.
d.
are network member firms while Olympia is the strategic center firm.
102. Functional structures work best for firms for all of the following strategies EXCEPT:
a.
cost leadership strategy.
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b.
differentiation strategy.
c.
related constrained diversification strategy.
d.
single or dominant business corporate strategy.
103. Which organizational structure will emphasize financial controls for headquarters’ evaluation of operating units while
the operating units will emphasize strategic controls within their units’ performance?
a.
Functional
b.
Cooperative M-Form
c.
SBU form
d.
Competitive M-Form
104. Organizational structure:
a.
specifies the firm’s formal reporting relationships, procedures, controls, and authority and decision-making
processes.
b.
specifies the firm’s informal reporting relationships, procedures, controls, and authority and decision-making
processes.
c.
specifies the firm’s formal value proposition, the markets it will serve, and how the firm will provide value in
those markets.
d.
specifies the firm’s control mechanisms, grievance procedures, reporting relationships, procedures, and
authority over decision-making processes.
105. In the ______ multidivisional structure there is complete independence among the firm’s divisions.
a.
cooperative
b.
matrix
c.
competitive
d.
SBU
106. Walmart’s effective strategy/structure configuration is:
a.
cost leadership/functional.
b.
differentiation/functional.
c.
related constrained/multidivisional.
d.
related linked/multidivisional.
107. Financial controls are most important in the ______ strategy.
a.
single business
b.
related constrained
c.
unrelated diversified
d.
vertical complementary
108. A firm pursuing a related constrained diversification strategy would typically need all of the following EXCEPT:
a.
centralization of some organizational functions for the sake of coordination.
b.
frequent, direct contact between division managers.
c.
division managers’ rewards based on division financial performance.
d.
temporary teams or task forces formed around specific projects.
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109. 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.
110. TheLG Company has units operating in significantly different industries and uses financial controls to manage its
portfolio. LG is most likely using the ______ structure.
a.
combination-matrix
b.
cooperative form of the multidivisional
c.
competitive form of the multidivisional
d.
strategic business unit multidivisional
111. Ichabod Industries has a Latin American Division, a European Division, an Industrial Lubricants Division, and a
Food Service Division. Ichabod Industries probably uses the ______ organizational structure.
a.
horizontal complementary strategic alliance
b.
competitive multidivisional
c.
strategic business unit multidivisional
d.
hybrid combination
112. 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.
113. After years of negotiating short-term contracts with its suppliers, Icon Images has decided to agree to longer-term
contracts. In doing this, Icon Images is hoping to:
a.
reduce transaction costs.
b.
increase negotiating leverage with suppliers.
c.
become less dependent on its suppliers.
d.
move toward horizontal alliances with its suppliers.
114. In Japan, the center firm in a strategic network of vertical relationships might be expected to undertake all of the
following EXCEPT:
a.
reducing its transaction costs by promoting longer-term contracts with subcontractors.
b.
enabling engineers in upstream companies to have better communication with those companies with which it
has contracts for services.
c.
encouraging subcontractors to modernize their facilities and providing them with technical and financial
assistance to do so.
d.
decreasing communications between network members to reduce communication costs.
115. A multidomestic strategy would be associated with:
a.
high levels of coordination.
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b.
informal coordination among units.
c.
many integrative mechanisms.
d.
interdependent divisions.
116. The cooperative multidivisional firm:
a.
establishes profit centers based on products or markets.
b.
has a flat organizational structure which broadens jobs and empowers workers.
c.
has a structure organized around both functional specialization and business projects.
d.
has a structure requiring heavy use of horizontal integrative devices.
117. When a corporation pursues a related constrained diversification strategy, financial controls may not add value to
strategy implementation efforts because it is difficult to:
a.
use them without reducing cooperation among divisional managers.
b.
transfer capital between units.
c.
maintain an arms-length relationship between headquarters and the divisions.
d.
identify which objective criteria to monitor.
118. McDonald’s operates through a franchising system wherein the head office uses strategic and financial controls to
ensure that the franchises are creating the greatest possible value. This is an example of a(n):
a.
worldwide product divisional structure.
b.
strategic network.
c.
SBU multidivisional structure.
d.
simple structure.
119. It is easiest to identify the company that functions as the strategic center firm in:
a.
horizontal complementary strategic alliances.
b.
vertical complementary strategic alliances.
c.
corporate-level cooperative partnerships.
d.
international cooperative partnerships.
120. 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.
121. Megaline, Inc., with five divisions, follows the competitive form of the multidivisional structure. One division has
not met the rate-of-return goals for the past year. Another division has exceeded the rate-of-return goals. The other three
divisions met the rate-of-return goals. The headquarters office must decide where to allocate capital in the next year.
Which scenario is the MOST likely?
a.
The poorest-performing division will get the highest capital allocation so that it can fix its problems and
achieve the rate-of-return goal next year.
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b.
The highest-performing division will get the highest capital allocation because it has the best prospects for
creating more wealth for the shareholders next year.
c.
The average-performing divisions which met the rate-of-return goals will receive the highest allocation
because their performance exactly matched corporate requirements.
d.
All divisions will receive the same capital allocation for the next year because this organizational structure
rewards divisional managers based on achievement of strategic goals.
122. The fewest integrative devices are used in the ______ structure.
a.
simple
b.
competitive multidivisional
c.
SBU
d.
network
123. 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.
124. Which of the following is a TRUE statement about organizational structures for implementing business-level
strategies?
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.
125. 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.
126. The integrated cost leadership/differentiation strategy is difficult to implement mostly because:
a.
different primary and support activities are emphasized when using cost leadership and differentiation
strategies.
b.
this strategic approach demands more flexibility than most firms can manage.
c.
the dual reporting relationships required for this strategy slow organizational decision making.
d.
the cost leadership strategy requires less structured job roles than does the differentiation strategy.
127. One reason why a long-tenured top-level manager may hesitate to conclude the firm’s structure is a problem is that
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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.
128. 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
129. Describe the organizational structure associated with a firm that pursues an unrelated diversification strategy.
130. Discuss the organizational structures used to implement corporate-level strategies.
131. Describe the organizational structures used to implement cooperative strategies, giving attention to the role of the
strategic center firm.
132. Define the three major dimensions of organizational structure: specialization, centralization, and formalization. How
do these dimensions vary in organizations implementing the cost leadership, differentiation, and cost
leadership/differentiation strategies?
133. Describe the three major types of organizational structure and their appropriate use.
134. Discuss the organizational structures used to implement the different business-level strategies.
135. Describe the organizational structures used to implement the three international strategies.
136. Discuss the difference between strategic controls and financial controls.
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Answer Key
1. True
2. True
3. True
4. True
5. True
6. True
7. True
8. True
9. True
10. True
11. True
12. False
13. False
14. True
15. True
16. True
17. True
18. False
19. True
20. True
21. True
22. True
23. True
24. False
25. False
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26. True
27. False
28. False
29. True
30. True
31. True
32. True
33. False
34. True
35. True
36. False
37. True
38. True
39. False
40. False
41. True
42. True
43. False
44. True
45. False
46. True
47. True
48. False
49. True
50. a
51. c
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52. c
53. b
54. a
55. d
56. b
57. c
58. b
59. c
60. a
61. c
62. a
63. c
64. d
65. b
66. d
67. a
68. a
69. d
70. b
71. c
72. d
73. d
74. a
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77. c
78. d
79. c
80. c
81. c
82. a
83. d
84. a
85. d
86. c
87. a
88. d
89. a
90. d
91. b
92. b
93. d
94. a
95. b
96. d
97. a
98. d
99. b
100. b
102. c
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103. c
104. a
105. c
106. a
107. c
108. c
109. b
110. c
111. d
112. a
113. a
114. d
115. b
116. d
117. a
118. b
119. b
120. a
121. b
122. b
123. d
124. b
125. d
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128. c
129. An unrelated diversification strategy seeks to create value through the efficient internal allocation of capital or
through the buying, restructuring, and selling of businesses. Therefore, the unrelated diversified firm employs the
competitive form of the multidivisional structure, which emphasizes competition between separate units for corporate
capital. To realize the benefits of the efficient allocation of capital, the businesses must have separate and identifiable
profit performances. In this structure, the corporate headquarters sets rate-of-return expectations and maintains an arms-
length relationship with the divisions. Headquarters audits operations and disciplines managers in divisions that do not
meet those rate-of-return standards. Thus, financial controls are heavily used and integrating devices are not needed.
130. Corporate-level strategies involve multidivisional structures, which have three forms. The cooperative form of the
multidivisional structure is used to implement a related constrained strategy. The cooperative form emphasizes integrating
mechanisms, such as liaisons, temporary teams, and task forces. The intent is to share divisional competencies and create
economies of scope. A centralized corporate office facilitates cooperation among divisions. Rewards are linked to overall
corporate performance and divisional performance. The SBU form of the multidivisional structure is used to implement a
related linked strategy. Each strategic business unit is a profit center, and divisions within an SBU are organized to
achieve economies of scope and, perhaps, economies of scale. The SBUs are fairly independent, but the divisions within
each SBU may be integrated to share competencies. The corporate headquarters is mainly involved in strategic planning
for the whole portfolio of businesses, although it also provides strategic help and training to the SBUs. The competitive
form of the multidivisional structure is used to implement an unrelated diversification strategy. The structure is highly
decentralized. Controls emphasize competition between divisions for internal capital allocations. No integrating
mechanisms are used. Objective financial criteria are used to evaluate each unit’s performance. Corporate headquarters
focuses on long-range planning.
131. Generally, cooperative strategies are implemented through organizational structures framed around strategic
networks (a grouping of organizations that has been formed to create value through participation in an array of
cooperative arrangements such as joint ventures and alliances). There are two types of business-level complementary
alliances, vertical and horizontal. Vertical alliances group firms with competencies in different stages of the value chain.
Horizontal alliances group firms with competencies at the same stage of the value chain. Vertical alliances are much more
common than horizontal alliances. To facilitate the effectiveness of a strategic network, a strategic center firm may be
necessary. The strategic center firm performs four critical functions. First, it uses strategic outsourcing to partner with
firms other than just network members. The strategic center firm also requires the alliance members to find opportunities
for the network to create value through cooperative work. The second function concerns competencies. The strategic
center firm seeks ways to support each member’s efforts to create core competencies that can benefit the network. Third,
the strategic center firm focuses on technology, managing the development and sharing of technology-based ideas among
network partners. Finally, in a race to learn, the strategic center firm guides participants in efforts to form network-
specific competitive advantages through friendly rivalry to develop skills needed to form capabilities that create value for
the network.
132. Specialization is concerned with the number and types of jobs required to complete the work of the organization.
Centralization is the extent to which authority for decision making is retained at higher managerial levels in the
organization. Formalization is the degree to which formal rules and procedures govern work in the organization. Cost
leadership strategies are best implemented with high specialization, centralization, and formalization. This results in
efficiency. The differentiation strategy is best implemented with decentralized organizations, unspecialized jobs, and low
formalization. This allows employees to interact frequently and develop new ideas for products. The cost
leadership/differentiation strategy is difficult to implement because it requires decision making that is centralized and
decisions and monitors all activities. Informal relationships, few rules, limited task specialization, and unsophisticated
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information systems are characteristic of simple structures. A simple structure is appropriate for firms offering a single
product line in a single geographic market. It is well-matched with focus strategies and business-level strategies. As firms
grow larger and more complex, the functional structure is adopted. A professional CEO with a limited corporate staff and
functional line managers are required. This allows for specialization of organizational functions such as accounting,
production, and human resources. Coordination and communication systems are more complex in the functional structure
than in the simple structure. As firms diversify in products and/or geographic areas, they evolve to the multidivisional
structure and one of its related forms (cooperative, competitive, SBU). The cooperative multidivisional structure, used to
implement the related constrained corporate-level strategy, has a centralized corporate office and extensive integrating
mechanisms. Divisional incentives are linked to overall corporate performance. The related linked SBU multidivisional
structure establishes separate profit centers within the diversified firm. Each profit center may have divisions offering
similar products, but the centers are unrelated to each other. The competitive multidivisional structure used to implement
the unrelated diversification strategy is highly decentralized and makes little use of integrating mechanisms. It employs
objective financial criteria to evaluate each unit’s performance. All units compete for corporate resources.
134. Business-level strategies are usually implemented through the functional structure. The cost leadership strategy
requires a centralized functional structure, one in which manufacturing efficiency and process improvements are
emphasized. Jobs are specialized, and rules and procedures are formal. The differentiation strategy’s functional structure
focuses on marketing and research and development. Decision making and authority are decentralized. Jobs are not highly
specialized and procedures are informal. These characteristics allow employees to exchange ideas and to be more creative.
The organizational structure supporting the integrated cost leadership/differentiation strategy must be simultaneously
centralized and decentralized. Jobs are semi-specialized and procedures call for some formal and some informal job
behavior.
135. A multi-domestic strategy is implemented with a worldwide geographic area structure. This structure uses no
integrating mechanisms, and it emphasizes decentralization, low formalization, and informal coordination among units.
This facilitates the strategic objective of responding to local market differences. The worldwide product divisional
structure is used to implement a global strategy. Because the type of firm that uses this structure offers standardized
products across the globe, this organizational structure emphasizes centralization to achieve economies of scale and scope.
Decision making is centralized. Integrating mechanisms, such as liaison roles and teams, are important. The transnational
strategy is implemented with a combination structure. Because it must be simultaneously centralized and decentralized,
integrated and nonintegrated, formalized and nonformalized, the combination structure is difficult to organize. There is a
strong emphasis on cultural diversity. There are two combination structures, the global matrix structure and the hybrid
global design. The matrix structure involves multiple reporting relationships and promotes flexibility and responsiveness
to customer needs. The hybrid global design combines some divisions which are product oriented and some which are
oriented to particular geographic markets.
136. Strategic and financial controls are both types of organizational controls that guide the use of strategy, indicate how
to compare actual results with expected results, and suggest corrective actions if there is an unacceptable difference.
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. Strategic controls are concerned with
the fit between what the firm might do (opportunities) and what it can do (competitive advantages). Financial controls are
largely objective criteria used to measure the firm’s performance against previously established quantitative standards.
Accounting-based measures, such as return on investment and return on assets, and market-based measures, such as
economic value added, are examples of financial controls.