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3. What are the relative advantages and disadvantages of the types of organizational
structure—simple, functional, divisional, matrix—discussed in the chapter?
Response:
The simple structure has advantages of
Being very effective and efficient in the coordination of activities
The disadvantages of the simple structure include
Possible misunderstandings of tasks and responsibilities, because they are frequently not
Employees who may act out of self-interest due to the lack of clarity in boundaries and
The small size and flat structure that may limit potential upward mobility of employees,
The functional structure has the advantages of
Centralizing and coordinating activities within each functional area
Decision making that is centralized and clear
The disadvantages of the functional structure include
Difficult coordination due to the functional-specific perspectives in each department that
Short-term thinking based on what is best for the functional area and not the organization
Difficulties with establishing performance evaluation standards that are consistent across
The division structure has the advantages of
Enabling division managers to set strategies that are effective within the division’s business
Greater coordination and integration between all divisions and functional areas due to
The disadvantages of the division structure include
The expense of maintaining large numbers of general managers
Consistent manager evaluation that promotes distributive bargaining between divisions and
Inconsistent corporate image across various products and markets
The matrix structure has multiple lines of authority and some individuals report to at least two
managers. The advantages of the matrix structure include
Better use of specialized personnel, equipment, and facilities
Resource sharing enabling collaboration and more effective response to changes in the
Organizational flexibility that gives managers greater range of responsibility, which may
The disadvantages of the matrix structure include
Uncertainty of priorities due to dual-reporting structure
Possible power struggles and conflict over performance evaluations, resources, and
Complicated working relationships, with a possible over reliance on group processes
4. When a firm expands its operations into foreign markets, what are the three most
important factors to take into account in deciding what type of structure is most
appropriate? What are the types of international structures discussed in the text and what
are the relationships between strategy and structure?
Response:
The three factors to take into account are (1) the type of strategy that is driving the firm’s foreign
operations, (2) product diversity, and (3) the firm’s dependence on foreign sales. The text
discusses the following structures:
International division
Geographic-area division
Worldwide product division
Multidomestic strategies require firms to respond to unique conditions in each country, and are
consistent with the international division and geographic area division structures. These structures
Global strategies require firms to coordinate operations across countries, and are consistent with
the worldwide functional and the worldwide product division structures. Firms with low levels of
5. Briefly describe the three different types of boundaryless organizations: barrier-free,
modular, and virtual.
Response:
Boundaryless organizational designs have permeable boundaries, be they vertical, horizontal,
external, or geographic. Barrier-free organizations bridge real differences in culture, function, and
Modular organizations outsource non-vital functions, which benefits from the knowledge and
Virtual organizations are continually evolving networks of independent companies that are linked
6. What are some of the key attributes of effective groups? Ineffective groups?
Response:
Effective groups, or teams, are able to maximize the potential of organizational human capital.
Research indicates that effective teams have
Common culture and shared values
Horizontal organizational structures, which group similar and related business units under
Horizontal systems and processes, which break through barriers that often exist between
Communications and information technologies, which play an important role in bridging
Human resource practices, which upgrade human capital by providing training and skills to
Ineffective groups may respond to external pressures, resource scarcity, or declining performance
7. What are the advantages and disadvantages of the three types of boundaryless
organizations: barrier-free, modular, and virtual?
Response:
The advantages of barrier-free organizations include
Leverages talents of all employees
Bridging differences in culture, function, and goals to find common ground
Can lead to coordinated win-win initiatives with key suppliers, customers, and alliance
The disadvantages of barrier-free organizations include
Difficult to overcome political and authority boundaries inside and outside the
Lack of strong leadership and common vision, leading to coordination problems
Longer time to sort out responsibilities on projects
Lacks high levels of trust, which can impede performance
Possible high turnover of team members
The advantages of modular organizations include
Decrease in overall costs (stimulate new product development by incorporating talented
Focus scarce resources on the areas where firms hold competitive advantages (maintains
Tapping into the knowledge and expertise of specialized supply chain partners, which adds
The disadvantages of modular organizations include
Loss of critical skills and possible competitive advantage
Loss of flexibility to respond to market shifts by bringing back in to the firm specific
Loss of control over suppliers.
The advantages of virtual organizations include
Sharing of costs and skills
Increased market responsiveness
Encourages knowledge sharing and accelerates organizational learning
The disadvantages of virtual organizations include
Lack of boundaries between constituent firms, thus making it difficult to determine the
Loss of strategic control over emerging technologies
8. When are ambidextrous organizational designs necessary? What are some of their key
attributes?
Response:
Ambidextrous organizations achieve both alignment, involving short-term coordination of
activities and modest incremental innovations, and adaptability, involving long-term proactive
Ambidextrous organizations have established traditional structures that maintain alignment, and
breakthrough efforts organized within structurally independent units that were integrated into the
existing senior management structure. Effective ambidextrous structures are related to:
A clear and compelling vision that is consistently communicated by senior management
Cross-fertilization among business units without cross-contamination
Tight coordination and integration of management that enabled sharing of resources such
Reward systems that pertain to overall company goals
Autonomy of the breakthrough effort
Experiential Exercise
Many firms have recently moved toward a modular structure. For example, they have
increasingly outsourced many of their information technology (IT) activities. Identify three
such organizations. Using secondary sources, evaluate (1) the firm’s rationale for IT
outsourcing and (2) the implications for performance.
Response:
You may get students responding with the following pattern. Note that these are just hypothetical
cases not similar to any real firm. These examples are merely illustrative.
Firm Rationale Implication(s) for
Performance
Firm A: outsourced
statistical process
Reduce costs Cost savings, but lower
quality, and some
Firm B: outsourced e-
Get better IT quality Got better IT, but had
Firm C: outsourced its IT
Focus on marketing, and
Improvement in
(Note to instructor) For each example, ask students to identify the activity(ies) that have been
outsourced, the firm’s rationale, and the implications for performance. It is interesting to also
Application Questions and Exercises
1. Select an organization that competes in an industry in which you are particularly
interested. Go on the Internet and determine what type of organizational structure this
organization has. In your view, is it consistent with the strategy that it has chosen to
implement? Why? Why not?
Response:
There are 2 challenges. First, firms do not advertise their strategies. So students will have to look
at the evidence and argue for one strategy or another. Use one of the 3 generic strategies or, for
After determining the strategy and structure, assess the fit. Is there another structure that should
go with this strategy? What if the firm adopted another structure? Would performance worsen?
Why?
(Note to instructors) Understanding the need to fit strategy and structure is a central concept that
is very important for the students to understand. We suggest that you first ask students to describe
The end result is to help students to understand that organizational structure determines what type
2. Choose an article from BusinessWeek, Fortune, Forbes, Fast Company, or any other well-
known publication that deals with a corporation that has undergone a significant change in
its strategic direction. What are the implications for the structure of this organization?
Response:
(Note to instructor) To guide classroom discussion, first ask students to identify the original
strategic direction and the reason for the change. Then ask students to identify the original
A possible extension of this exercise is to have students research firms that have strategies similar
3. Go on the Internet and look up some of the public statements or speeches of an executive
in a major corporation about a significant initiative such as entering into a joint venture or
launching a new product line. What do you feel are the implications for making the internal
and external barriers of the firm more flexible and permeable? Does the executive discuss
processes, procedures, integrating mechanisms, or cultural issues that should serve this
purpose? Or are other issues discussed that enable a firm to become more boundaryless?
Response:
(Note to instructors) The purpose of this exercise is to get students to identify the trend toward
boundaryless organizations. If students do not identify any tendency or methods for
4. Look up a recent article in the publications listed in question 2 above that addresses a
firm’s involvement in outsourcing (modular organization) or in strategic alliance or
network organizations (virtual organization). Was the firm successful or unsuccessful in this
endeavor? Why? Why not?
Response:
(Note to instructor) The exercise enables students to analyze a move toward boundaryless
organization. All such moves are characterized by potential costs and benefits. The first step is to
Ethics Questions
1. If a firm has a divisional structure and places extreme pressures on its divisional
executives to meet short-term profitability goals (e.g., quarterly income), could this raise
some ethical considerations? Why? Why not?
Response:
Any time there are such extreme pressures to meet profitability goals, there is a potential for
unethical behavior. In the divisional structure, the divisions are interdependent, which means that
the performance of each division depends in part on cooperating with other divisions. Self-
interested managers might try to be unethical by
Bargaining with other divisions for access to his or her division’s resources
Cutting costs by reducing headcount
Disagreeing with other divisions regarding allocation of resources or executive
These actions are unethical to the extent they are done in the self-interest of managers at the
2. If a firm enters into a strategic alliance but does not exercise appropriate behavioral
control of its employees (in terms of culture, rewards and incentives, and boundaries—as
discussed in Chapter 9) that are involved in the alliance, what ethical issues could arise?
What could be the potential long-term and short-term downside for the firm?
Response:
Without effective behavioral control, employees will tend not to have (a) shared values, (b) a
commitment to organizational success, (c) a clear understanding of the organizational mission,
and (d) an understanding of investments and activities that the organization will avoid. For the
In addition to the direct costs of employee misbehavior, additional problems occur because the
alliance partner will observe the behavior. The firm’s reputation in the industry could be affected,
