ESSENTIALS OF STRATEGIC MANAGEMENT, 3RD EDITION
CHAPTER 9
Implementing Strategy Through Organizational
Design
Name: __________________________ Date: _____________
1. T F Strategy is implemented through organizational design.
2. T F Organizational design means selecting the combination of organizational structure and
control systems that lets a company pursue its strategy most effectively.
3. T F The primary role of organizational structure is to coordinate employees activities to effectively
implement strategy and to motivate employees to achieve superior efficiency.
4. T F The role of organizational structure is to provide managers with specific feedback on how well
an organization and its members are performing and building competitive advantage.
5. T F Organizational structure and control shape the way people behave and determine how they
will act in the organizational setting.
6. T F Effective organizational design can simultaneously allow a company to obtain a competitive
advantage and create value.
7. T F The value creation activities of organizational members are meaningless unless some type of
structure is used to assign people to tasks and link the activities of different people and functions.
8. T F The basic building blocks of organizational structure are differentiation and integration.
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9. T F When corporate managers choose how to divide people and tasks into functions and divisions
to increase their ability to create value, they are making horizontal differentiation choices.
10. T F Span of control is the means by which a company seeks to coordinate people and functions to
accomplish organizational tasks.
11. T F Vertical integration refers to the number of subordinates a manager directly manages.
12. T F Flat organizational structures have few hierarchical levels relative to size.
13. T F As a company grows and diversifies the number of levels in its hierarchy decreases.
14. T F The principle of minimum chain of command states that an organization should choose a
hierarchy with the minimum number of levels of authority necessary to achieve its strategy.
15. T F Tall structures lead to information distortion when data are being sent either up or down the
hierarchy.
16. T F When companies become too tall and the chain of command too long, strategic managers tend
to lose control over the hierarchy and, subsequently, their strategies.
17. T F Authority is centralized when managers at upper levels of the organizational hierarchy retain
the authority to make the most important decisions.
18. T F Centralization promotes organizational flexibility.
19. T F Product structures arrange and group people on the basis of their common expertise and
experience or because they use the same resources.
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20. T F The degree of horizontal differentiation in the product structure is higher than in the
functional structure.
21. T F The product-team structure relies on the multi-divisional teams.
22. T F One advantage of the multi-divisional structure over a functional structure is that each
distinct product line or business unit is placed in its own self-contained unit or division, with all
support functions.
23. T F The costs of operating a multi-divisional structure are high compared to the functional
structure.
24. T F In a firm with a multi-divisional structure, corporate managers oversee the actions of
divisional managers.
25. T F The multi-divisional structure allows each division to adopt the structure that best suits its
needs.
26. T F In the multi-divisional structure day-to–day operations are the responsibility of corporate
headquarters.
27. T F The profitability of different business divisions is hard to ascertain in the multi-divisional
structure.
28. T F In a multi-divisional structure corporate managers can compare the performance of one
division against another in terms of its cost structure or the profit it generates.
29. T F Corporate managers must carefully control interactions with division managers to ensure that
both short- and long-term goals are being met.
30. T F Competition for resources is one of the advantages of the multi-divisional structure.
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31. T F Divisional battles may lead to battles over transfer pricing.
32. T F An organization that divides manufacturing and operations be regions uses geographic
structure.
33. T F A complex form of integrating mechanisms is needed when a company‘s structure is complex.
34. T F When more than two functions or divisions share a common problem, a task force may be the
appropriate integrating mechanism.
35. T F The implementation issue for managers is to match differentiation with the level of integration
to make organizational structure work efficiently.
36. T F Organizational control is the process by which managers monitor the ongoing activities of an
organization and its members to evaluate whether activities are being performed efficiently and
effectively.
37. T F Strategic control systems are the formal target-setting, measurement, and feedback systems
that enable strategic managers to evaluate whether a company is implementing its strategy
successfully.
38. T F The most common measures managers and other stakeholders use to monitor and evaluate a
company’s performance are financial controls.
39. T F Output controls exist when strategic managers establish goals and measures to evaluate
efficiency, quality, innovation, and responsiveness to customers.
40. T F Behavior control is a system of control based on the establishment of a comprehensive system
of rules and procedures to direct the actions or behavior of divisions, functions, and individuals.
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41. Each organizational function needs to develop a distinctive competency in a value creation activity in
order to increase
a) efficiency.
b) quality.
c) customer responsiveness.
d) innovation.
e) all of the above.
42. _______________ provides the vehicle through which managers can coordinate the activities of a
company’s various functions, divisions, and business units to take advantage of their skills and
competencies.
a) Organizational structure
b) Decentralization
c) Organizational culture
d) Span of control
e) Strategic control
43. Flat organizational structures are characterized by
a) few levels of management and a relatively narrow span of control.
b) few levels of management and a relatively wide span of control.
c) many levels of management and a relatively narrow span of control.
d) many levels of management and a relatively wide span of control.
e) None of these.
44. Tall organizational structures are characterized by
a) few levels of management and a relatively narrow span of control.
b) few levels of management and a relatively wide span of control.
c) many levels of management and a relatively narrow span of control.
d) many levels of management and a relatively wide span of control.
e) None of these.
45. The “minimum chain of command” principle states that firms should use the __________ levels of
hierarchy that are necessary, and often result in organizational structures that are __________.
a) most; taller
b) fewest; taller
c) minimum; ineffective
d) minimum; flatter
e) highest; flat
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46. Which of the following is not a problem in firms with a tall organizational structure?
a) Motivational problems
b) Wide spans of control
c) Information distortion
d) High managerial costs
e) Coordination problems
47. Authority is _________________ when managers at the upper levels of the organizational hierarchy
retain the authority to make the most important decisions.
a) decentralized
b) centralized
c) dispersed
d) universally effective
e) differentiated
48. When decision-making responsibilities are decentralized, benefits include all of the following except
a) increased motivation and accountability.
b) lower managerial costs from flattened hierarchy.
c) reduced information overload.
d) easier coordination of the organizational activities needed to pursue a company’s strategies.
e) All of these are benefits of decentralization.
49. As new, small firms grow and mature, which structure are they likely to choose?
a) Simple
b) Geographic
c) Product
d) Matrix
e) Functional
50. Which of the following is not one of the advantages of a functional structure?
a) Increasing specialization and productivity of workers
b) Sharing of task-specific knowledge
c) Easier for employees to monitor each other
d) Better focus on diverse customer needs
e) Greater ability for managers to exercise control
51. In the _________________, the manufacturing function is broken down into different product lines
based on the similarities and differences among products.
a) The product structure
b) The product team structure
c) The matrix structure
d) The product and product team structures
e) The matrix and product team structures
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52. In the ___________ structure activities are grouped by product line.
a) functional
b) product team
c) geographical
d) multi-divisional
e) product
53. In the ___________ structure activities are grouped by geographic region.
a) geographical
b) product
c) functional
d) multidivisional
e) product team
54. To best meet the needs of its customers, a nationwide home supply company, such as Home Depot,
should adopt a _______________ structure.
a) geographical
b) product
c) functional
d) multidivisional
e) product team
55. A camera manufacturer that has separate divisions for making personal cameras, movie cameras,
and film acquired a small film developer and a car battery supplier. Which of the following structures
is most appropriate for this firm?
a) Functional
b) Multidivisional
c) Geographic
d) Matrix
e) Product team
56. The two main innovations in a multidivisional structure (over a functional or product structure) are
a) a matrix structure at the divisional level and a flat structure at the corporate level.
b) a product structure at the divisional level and a functional structure at the corporate level.
c) the organization of business units into one or more divisions and the placement of corporate-
level positions to oversee the activities and financial control over each division.
d) self-contained divisions with operating responsibility and a group of divisional managers with
collective strategic responsibility.
e) a matrix structure at the divisional level and a functional structure at the corporate level.
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57. In a multidivisional structure
a) support functions, such as accounting, are centralized at the top of the organization.
b) corporate headquarters staff have operating responsibility.
c) divisional managers have overall corporate strategic responsibility.
d) corporate headquarters is responsible for overseeing the company’s long-term plans and
providing guidance to divisional managers.
e) financial controls are necessarily weak.
58. Which of the following structures results in the creation of an office of corporate headquarters staff?
a) Functional
b) Multi-divisional
c) Geographic
d) Matrix
e) Product team
59. The advantages of a multi-divisional structure do not include
a) enhanced corporate financial controls.
b) enhanced strategic controls.
c) reduced differentiation.
d) enhanced ability to overcome organizational limits to its growth.
e) stronger pursuit of internal efficiency.
60. In a multidivisional structure, which form of control is used to compare the relative performances of
different divisions?
a) Output control
b) Bureaucratic control
c) Control through culture
d) Financial control
e) Adaptive control
61. Which of the following is not one of the problems in implementing a multidivisional structure?
a) Establishing the divisional-corporate authority relationship
b) Distortion of information
c) Long-term R&D focus
d) Competition for resources
e) Transfer pricing
62. Transfer pricing is used most commonly in a
a) multidivisional structure.
b) product team structure.
c) functional structure.
d) matrix structure.
e) geographic structure.
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63. The wasteful duplication of functional resources is most likely to arise with a
a) multidivisional structure.
b) product team structure.
c) matrix structure.
d) functional structure.
e) geographic structure.
64. Which structure uses self-contained divisions to perform all value creation functions to gain
competitive advantage?
a) Product team
b) Product
c) Multidivisional
d) Market
e) Functional
65. Which of the following integrating mechanisms consists of one member from each relevant function
or division assigned to an ad hoc committee?
a) Direct contact
b) Interdepartmental liaison
c) Temporary task force
d) Permanent team
e) The matrix structure
66. Strategic control systems
a) enable a company to evaluate whether it is successfully implementing its strategy.
b) help managers determine which generic strategy to pursue.
c) are used only at the business level.
d) allow firms to control the external environment.
e) are most effective for firms pursuing cost leadership.
67. Which of the following is not one of the company levels where strategic control systems measure
performance?
a) Functional
b) Corporate
c) Divisional
d) Board of directors
e) Individual
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68. Which of the following is not a benefit of strategic control systems?
a) They help managers obtain superior organizational structure.
b) They help managers establish ambitious goals and targets.
c) They help managers develop performance measures.
d) They help managers excel in their quest to raise performance.
e) They help managers stay focused on important problems confronting the organization.
69. Which of the following is not a type of organizational control system?
a) Output control
b) Span of control
c) Behavioral control
d) Financial control
e) All of these are types of organizational control systems.
70. Standardization is a form of
a) output control.
b) behavior control.
c) organizational inertia.
d) organizational culture.
e) financial control.
71. Standardization is employed to squeeze out costs in manufacturing. Standardization may be achieved
through standardization of
a) inputs.
b) work processes.
c) outputs.
d) both work processes and outputs.
e) inputs, conversion activities, and outputs.
72. A national oil company would be most likely to use __________ to control its chain stores.
a) ROIC
b) standardization
c) corporate goals
d) socialization
e) divisional goals
73. Bill Gates’ deliberate cultivation of values that encourage subordinates to perform in innovative and
creative ways is an example of
a) organizational culture.
b) output control.
c) integration.
d) behavior control
e) standardization.
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74. Control through organizational culture is so powerful because
a) it increases the costs of organizational control in a large company.
b) self-control develops through the establishment of an internal system of organizational values.
c) it results in maximum decentralization and the elimination of bureaucracy.
d) it achieves increased performance through the alignment of organizational goals with societal
expectations.
e) it achieves external control through motivated co-workers.
75. Control through organizational culture
a) is faster than output control.
b) reduces mutual adjustment.
c) reduces mutual adjustment and includes setting individual goals.
d) includes setting individual goals.
e) involves employees internalizing the norms and values of the organization.
76. Which form of control was transmitted by Walt Disney?
a) Bureaucratic control through rules and procedures
b) Control through norms and values
c) Financial control through accurate financial statements
d) Output control
e) Incentive systems
77. The virtue of shared values is that it
a) replaces the need for formal organizational cultures.
b) creates strong functional cultures.
c) increases integration and improves coordination among organizational members.
d) replaces strategic leadership.
e) controls the way employees think and behave.
78. Explain the benefits of the multidivisional structure for managing a firm that competes in several
industries.
79. Describe the roles that organizational structure, strategic control systems, and organizational culture
play in strategy implementation.
80. Give a real or a hypothetical organizational example of how structure, strategic control systems,
and culture interact with each other.
81. Consider the case of a family-run business that operates one small local retail shop and its
subsequent expansion into more locations and more stores. Describe the changes that are likely to
take place in that business’s organizational structure as it grows in size, geographic dispersion, and
complexity. Tell why the changes are beneficial for the business.