True / False
1. As shown in the Chapter 11 Opening Case, Borders was able to structure its operations in ways that allowed it to
manage the different businesses in each country and market effectively.
a. True
b. False
2. The Chapter 11 Opening Case about Borders shows that although strategy has an important influence on structure,
once a particular structure is in place, that structure influences strategy.
a. True
b. False
3. An overriding lesson from the Chapter 11 Opening Case about Borders is that failure to properly structure an
organization can contribute to poor strategic decisions and eventually bankruptcy.
a. True
b. False
4. Strategy has an important influence on structure, although once in place, structures influence strategy.
a. True
b. False
5. Over time, large and complex organizations must customize their structure to fit their unique strategic needs.
a. True
b. False
6. Organizational structures must be both stable and flexible.
a. True
b. False
7. Organizational inertia often prompts top management to initiate structural change when organizational performance
levels drop.
a. True
b. False
8. 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.
a. True
b. False
9. 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.
a. True
b. False
10. 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.
a. True
b. False
11. To properly execute strategic controls in firms using related diversification, the executives must have a deep
understanding of each unit’s business-level strategy.
a. True
b. False
12. 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.
a. True
b. False
13. Companies and business units of large diversified firms using the cost leadership strategy should use strategic
controls.
a. True
b. False
14. Companies and business units using the differentiation strategy should emphasize financial rather than strategic
controls.
a. True
b. False
15. 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.
a. True
b. False
16. Research shows that structure has a more important influence on strategy than the reverse and hence the emphasis
of the chapter on the subject of structure.
a. True
b. False
17. The centralized structure used by Borders (Chapter 11 Opening Case) did not provide information from local stores
that might have been useful in changing its technology strategy more quickly than it did. This example illustrates the
effect of structure on strategy.
a. True
b. False
18. Research has consistently shown that there is one best way to structure all organizations, regardless of competitive
strategy.
a. True
b. False
19. The simple structure is used by owner-managed firms which are characterized by informal relationships, few rules,
limited task specialization, and unsophisticated information systems.
a. True
b. False
20. As a firm grows, it typically shifts from a simple structure to a functional structure.
a. True
b. False
21. A simple structure is an organizational form in which the owner-manager makes all major decisions directly and
monitors all activities, while the staff merely serves as an extension of the manager’s supervisory authority.
a. True
b. False
22. Specialization refers to the extent to which authority for decision making is retained at higher managerial levels.
a. True
b. False
23. There are three variations of the multidivisional structure.
a. True
b. False
24. High levels of formalization of rules and procedures which often emanate from the centralized staff are a
characteristic of the structure used to implement the cost leadership strategy.
a. True
b. False
25. Centralized and formalized procedures allow for greater flexibility, an important factor for firms using a cost
leadership strategy.
a. True
b. False
26. The marketing and R&D functions are emphasized in the differentiation strategy’s functional structure.
a. True
b. False
27. 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.
a. True
b. False
28. The integrated cost leadership/differentiation strategy needs structural features that are partially centralized and
partially decentralized, jobs that are semi-specialized, and rules and procedures that call for some formal and some
informal job behavior.
a. True
b. False
29. 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.
a. True
b. False
30. 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.
a. True
b. False
31. The cooperative form is an M-form structure in which horizontal integration is used to bring about interdivisional
cooperation.
a. True
b. False
32. To implement a related constrained strategy, firms should use the cooperative form of the multidivisional structure.
a. True
b. False
33. Cisco implemented the related constrained strategy using the SBU form of the multidivisional structure.
a. True
b. False
34. The matrix organization has a dual structure combining functional specialization and business product or project
specialization.
a. True
b. False
35. To implement a related linked strategy, a firm usually needs an SBU structure.
a. True
b. False
36. An SBU structure consists of at least three levels: the top level, the corporate headquarters; the next level, the
strategic business units (SBUs); and the final level, SBU divisions.
a. True
b. False
37. The divisions within each 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.
a. True
b. False
38. 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 strengths.
a. True
b. False
39. Internal competition for corporate resources is effective for companies with an unrelated diversification strategy,
but dysfunctional for companies with a related constrained strategy.
a. True
b. False
40. The selection of an organizational structure for an internationally diversified firm should consider the international
corporate-level strategy the firm is using.
a. True
b. False
41. The organizational structure for an internationally diversified firm requires trade-offs between global integration and
local market responsiveness.
a. True
b. False
42. 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.
a. True
b. False
43. The worldwide geographic area structure differs from the worldwide product divisional structure in the level of
centralization of decision making.
a. True
b. False
44. 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.
a. True
b. False
45. In the hybrid form of the combination structure, some divisions are oriented toward products while others are
oriented toward market areas.
a. True
b. False
46. A strategic network can be characterized as a loose federation of partners revolving around a strategic center firm.
a. True
b. False
47. Arnold Schwartz, CEO and founder of Schwartz Engineering, has repeatedly rebuffed efforts by other firms 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. 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.
a. True
b. False
48. 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 (for example, airline alliances).
a. True
b. False
49. Alliances of organizations in the same position on the value chain are known as vertical alliances.
a. True
b. False
50. 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.
a. True
b. False
51. Distributed strategic networks are the organizational structure used to manage international cooperative strategies.
a. True
b. False
52. An important lesson from the Chapter 11 Opening Case about Borders is that
a. Borders did a good job of implementing its strategy but its structure was wrong.
b. structures rarely evolve in response to strategic change.
c. while a firm‘s structure usually follows the strategy, once in place, structure can have a significant effect on
strategy.
d. Borders‘ decentralized structure led to poor decision making.
53. Which of the following 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.
54. 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.
55. 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.
56. 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
57. 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.
58. 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.
59. One reason why 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.
60. 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.
61. Financial controls are most important in the strategy.
a. single business
b. related constrained
c. unrelated diversified
d. vertical complementary