Ch9

Question 1

Name the 6 components of Mintzberg’s structural configurations

Answer 1

1) Operating core - the basic work of the organization - e.g. the shop floor
2) Strategic apex - Higher management
3) Middle line - Managers linking the operating core and the strategic apex
4) Technostructure - Accountants, tech, etc
5) Support structure - Catering, legal, etc
6) Ideology - Values and beliefs

Question 2

Disadvantages of RoI (3)

Answer 2

1) Relative measure
2) Different accounting policies can make comparison difficult
3) ROI Increases with the age of assets:
- May discourage investment in assets
- NBV may lead to assets being kept for too long
- May lead to inappropriate leasing/outsourcing in order to keep assets off the Statement of Financial Position

Question 3

Advantages of ROI (2)

Answer 3

1) Widely used and accepted

2) Should facilitate comparisons - especially between divisions of different sizes

Question 4

Formula for ROI

Answer 4

ROI = (Annual profit controlled by manger) / (Capital employed in the division)

ROI = (CP) / (CE)

Question 5

What is the formula for RI (Residual income)?

Answer 5

RI = Controlled profit - (Capital employed * target % return)

Question 6

What are the general principle of good corporate governance covered by the UK Corporate Governnce Code?

Answer 6

1) Appropriate balance of power
2) Use of Independent NEDs
3) Established committees - Audit Committee, remuneration committee and nomination committee
4) Effective risk management

Question 7

General principle for governance for Not-for-profits? (5)

Answer 7

1) Accountability
2) Consideration for Stakeholders
3) Openness and transparency
4) Appropriate board structure
5) Monitoring of performance

Question 8

Common transfer pricing options (4)

Answer 8

1) Cost plus pricing
2) Market price
3) Opportunity Cost
4) Duel Pricing (supplying division credited a different amount to the one charged to the buyer division)

Question 9

Pros of decentralization? (5)

Answer 9

1) Senior management free to concentrate on strategy
2) Better local decisions due to local expertise
3) Better motivation
4) Quicker responses / flexibility
5) Training / career path

Question 10

Cons of decentralization? (5)

Answer 10

1) Loss of control
2) Dysfunctional decisions due to a lack of goal congruence
3) Poor decisions made by inexperience managers
4) Training costs
5) Duplication

Question 11

Types of organization structures?

Answer 11

1) Entrepreneurial Structure
2) Functional structure
3) Divisional structure (Product based / Geography based)
4) Matrix structure
5) Flexible structure (Virtual / Hallow / Modular)