Chapter 10

Question 1

Definition of organizational structure and its purpose

Answer 1

Refers to formalized patterns of interactions linking- Task, Technological, People

Purpose: To identify the executive, managerial, and administrative organization of a firm and indicates responsibilities and hierarchical relationships

Influences the flow of information

Question 2

Structure provides a balance between:

Answer 2

• The need for division of tasks into meaningful groupings

- The need to integrate these groupings for maximum efficiency and effectiveness

Question 3

What is a simple structure

Answer 3

It is the oldest and most common organizational form where:

• The organization is small, with a single or very narrow product line
• The owner-manager makes most of the decisions
• The staff serves as an extension of the top executives

Question 4

What is a functional structure

Answer 4

It is where the major functions of the firm are grouped internally:

• Organizations with a single or closely related product or service, high production volume, some vertical integration
• Owner-manager/CEO needs specialists in various functional areas
• CEO has responsibility for coordination and integration of the functional areas mainly related to product-market activities or multiple activities in the value chain

Question 5

What is a divisional structure

Answer 5

Also known as (Multi-division or M form) is where the units are grouped around products, projects, or product markets

• Divison are relatively autonomous, consisting of products and services that are different from those of other divisions
• Each division includes its own functional specialists
• Division executives: determine product-market and financial objectives as well as the division’s contribution to the corporation

Question 6

What is the SBU structure

Answer 6

Where multiple divisions with similar products, markets, or technologies are grouped into higher-level units to achieve synergy

• Variation on the divisional structure that is normally employed in highly diversified firms
• Similar divisions are grouped into homogeneous units to avoid a large span of control
• Synergies within SBUs are achieved through- leveraging core competencies, sharing infrastructure, using market power
• Each of the SBUs operate as a profit center

Question 7

What is a holding company structure

Answer 7

Also known as a conglomerate, is where businesses in a corporation’s portfolio are the results of unrelated diversification

• Verification on the divisional structure
• Similarities are few, so synergies are limited
• Operating divisions have very high autonomy
• Corporate offices are small and have limited involvement, relying on financial controls and incentive programs to obtain performance

Question 8

What is a matrix structure

Answer 8

Where functional departments are combined with product groups or (Geo units) on a project basis:

• Individuals have two managers
• Shared responsibility
• Product managers handle development, manufacturing and distribution of their own line
• Geographic managers responsible for profitability of the business in their regions
• Functional managers responsible for effective and efficient operations of their functions