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Chapter 10 Creating Effective Organizational Designs Answer Key
True / False Questions
1.
The strategy and structure of a firm change as the firm increases in size, diversifies into new product
markets, and limits its geographic scope.
2.
A strategy of related diversification requires a need to reorganize only around product lines. This leads
to a divisional structure.
3.
When a firm has international operations, choosing the most appropriate structure depends upon the
extent of international expansion, the type of strategy, and the degree of market diversity.
4.
The most appropriate type of organizational structure to select is dependent upon the product or service
the company provides.
5.
When evaluating structure and organizational design, managers must consider the appropriateness of the
type of organizational structure and they need to assess the mechanisms, processes, and techniques that
will be most helpful in enforcing internal and external boundaries.
6.
A new firm with a simple structure typically increases its sales revenue and volume of outputs over
time. It may also engage in some vertical integration to secure sources of supply (backward integration)
as well as channels of distribution (forward integration).
7.
A new, simple-structure firm concentrates efforts only on increasing efficiency without regard to its
actual products.
8.
A firm that chooses to move into unrelated product areas, by acquiring existing businesses, is likely to
find that the strategy requires relatively little integration across businesses and sharing of resources and
therefore is would consider a using holding company structure.
9.
In a simple structure where the owner manager makes most of the important decisions, extensive rules
and regulations are used to maintain order.
10.
A small firm with a simple structure often fosters creativity and individualism because of its informal
atmosphere.
11.
A simple organizational structure may lead to problems such as unclear boundaries of authority and few
career advancement options.
12.
As firms grow, owner managers often need to hire functional specialists to handle the increased
information-processing burden.
13.
To enhance integration and control of related product market activities, the functional structure
minimizes centralization.
14.
One disadvantage of a functional structure is that differences in functional orientation may impede
organization coordination and communication.
15.
Operational decision making in a large business places excessive demands on top management of the
firm.
16.
A major disadvantage of adopting a divisional structure is the tendency for managers to focus on short-
term objectives.
17.
A major disadvantage of a divisional structure is that when divisions are separated to manage individual
product markets, there is a separation of strategic and operational control.
18.
The strategic business unit (SBU) and holding company structure are variants of the functional form of
structure.
19.
One major advantage of the holding company form of organization structure is that it minimizes the
duplication of functional activities between product lines.
20.
The matrix structure attempts to combine the advantages of the functional and product-oriented
structure.
21.
A matrix organization is organized strictly along product lines.
22.
A major disadvantage of the matrix structure is that it duplicates the use of specialized personnel,
equipment, and facilities.
23.
The simple organizational structure involves highly decentralized decision making.
24.
Functional structures are generally found in organizations in which there is a single or unrelated product
or service, high production volume, and some vertical integration.
25.
With a functional organizational structure, firms initially tend to expand the overall scope of their
operations by penetrating existing markets, introducing similar products in additional markets, or
decreasing the level of vertical integration.
26.
A major disadvantage of the functional organizational structure is that it often leads to silos in which
departments view themselves as isolated, self-contained units with little need for interaction and
coordination with other departments.
27.
One of the disadvantages of a divisional structure is that the divisions often perceive themselves as
being in competition with each other and are therefore unwilling to share information to help other
divisions improve. ArcelorMittal found a solution which twins an efficient steel mill with a struggling
one.
28.
A worldwide product division structure is used when global strategies require that each division be
responsible for overall efficiency and performance.
29.
A global start-up typically benefits from lower communication, coordination, and transportation costs.
30.
Global start-ups occur after a corporation has exhausted all other possibilities for domestic growth.
31.
The structure of a firm typically has almost no effect on its strategy.
32.
In the global marketplace, managers must ensure consistency between only their corporate level
strategies and the structure of their organization.
33.
Three major contingencies that influence the chosen structure of a company are: the type of strategy that
drives its foreign operations, its product diversity, and the extent to which the company is dependent on
foreign sales.
34.
Multidomestic strategies are driven by political and cultural imperatives requiring managers within each
country to respond to local conditions.
35.
Logitech International is an example of a company that began as a global start-up, with headquarters in
both California and Switzerland and operations in both countries.
36.
According to the text, boundaryless organizational structures are most effective when they replace
rather than complement traditional organizational structures.
37.
Jack Welch, former CEO of GE, believes that all internal and external organizational boundaries should
vanish completely.
38.
Different types of boundaries place limits on organizations in order to foster high degrees of interaction
with inside influences and varying levels of permeability.
39.
In a barrier-free organization, differences in skills, authority, and talent disappear.
40.
An advantage of the barrier-free form of organizing is that internal cooperation and shared objectives
are not required for it to work.
41.
According to author Jeffrey Pfeffer, the advantages of teams are that employees control themselves,
develop more creative solutions to problems, and permit the absorption of administrative tasks
previously performed by specialists.
42.
According to the text, the factor that most distinguishes a superior team from a good team is talent.
43.
A barrier-free organization creates successful relationships between internal and external constituencies
and sometimes with competitors as well.
44.
Managers trained in rigid hierarchies do not find it difficult to transition to participative style required
for effective teamwork.
45.
Outsourcing in noncore functions of modular companies offers the advantage of decreased overall costs,
but the company will be unable to focus on scarce resources in the areas where it holds competitive
advantage.
46.
Because the modular form of organizing involves outsourcing vital functions, modular firms often
forfeit full strategic control.
47.
Modular companies can achieve rapid growth because they do not require large investments in fixed
assets.
48.
Outsourcing relieves companies of the requirement to maintain skill levels needed to manufacture
essential components.
49.
One of the risks of outsourcing is a loss of cross-functional skills.
50.
The virtual type of organization is a network of independent companies linked together to share skills,
costs, and access to the markets of each other.
51.
The virtual organization is characterized by participating firms which pursue a collective strategy that
enables them to cope with environmental uncertainty through cooperative efforts.
52.
Managing virtual structures requires new and difficult-to-acquire managerial skills.
53.
Horizontal organization structures facilitate resource sharing and help to create a sense of common
purpose.
54.
One of the advantages of boundaryless structures is that they can be implemented without upgrading the
skills of workers and managers.
55.
Procter & Gamble used communities of practice and human resource practices to help it achieve
effective collaboration and integration across its different business units. This effort resulted in the
successful development of the Crest Whitestrips product and is an example of good use of boundary-
constrained organizational design.
56.
Ambidextrous organizational designs are useful for firms that wish to create modest, incremental
innovations at the same time as dramatic, breakthrough innovation. This is done by maintaining
adaptability and alignment of values and coordination across organizational activities.
57.
One of the challenges of an ambidexterity in a firm is that it must ensure that it remains proactive in
expanding or modifying its product-market scope to anticipate and satisfy market conditions.
58.
One of the challenges of an ambidexterity in a firm is that managers must effectively exploit the value
of their existing assets and competencies to assure alignment between how value is being created in the
short term and how activities are integrated and properly coordinated.
Topic: Creating Ambidextrous Organizational Designs
59.
Firms that place too strong a priority on either adaptability or alignment can expect short term gains
only.
60.
The O'Reilly and Tushman study on ambidextrous organizational designs found that there was no
relationship between organizational structure, management practices employed and performance of both
the breakthrough initiative and the traditional business.
61.
One of the factors that explained the effectiveness of ambidextrous organizational designs in the
O'Reilly and Tushman study was the clear and compelling vision that the company senior management
team communicated.
62.
One of the factors that explained the effectiveness of ambidextrous organizational designs in the
O'Reilly and Tushman study was that the structure enabled cross-fertilization while avoiding cross
contamination in terms of sharing resources.
63.
One of the factors that explained the effectiveness of ambidextrous organizational designs in the
O'Reilly and Tushman study was that the reward systems emphasized traditional unit goals.
64.
In successful ambidextrous organizations, according to the O'Reilly and Tushman study, the traditional
and new units were shielded from each other so that they each focused attention and energy on its own
operations, products, and customers.
Multiple Choice Questions
65.
In large organizations, a strategy of diversification requires a need to reorganize around
______________ or _____________.
