Chapter 8 - Organisational design and strategy in a changing global environment

Question 1

Strategy

Answer 1

The specific pattern of decisions and actions that managers take to use core competences to achieve a competitive advantage and outperform competitors.

Question 2

Core competences

Answer 2

The skills and abilities in value-creation activities that allow a company to achieve superior efficiency, quality, innovation or customer responsiveness.

Question 3

There are two types of resources to provide an organisation with core competences to turn into a competitive advantage

Answer 3

Functional resources

Organisational resources

Question 4

Functional resources

Answer 4

The skills possessed by an organization’s
functional personnel.

Question 5

Organizational resources

Answer 5

The attributes that give an organization a
competitive advantage such as the skills of the top-management
team or possession of valuable and scarce resources.

Question 6

Coordination abilities

Answer 6

An organisation’s ability to coordinate its functional and organisational resources to create maximal value.

Effective coordination of resources leads to a
competitive advantage.

Question 7

There are four ways in which global expansion allows an organisation to create value for its stakeholders.

Answer 7

Transfer of core competences abroad

Establishment of a global network

Gaining access to global skills and resources

Use of global learning to enhance core competences

Question 8

Four levels of strategy

Answer 8

Functional- level strategy

Functional-level strategy and structure

Functional-level strategy and culture

Business-level strategy

Question 9

To gain an advantage, an organisation must be able to perform functional activities

Answer 9

At a lower cost compared to its rivals, to charge lower prices

In a way that allows it to differentiate its products from those of its rivals so they can charge higher prices

Question 10

The reason is that the coordination abilities that stem from an organization’s
culture emerge gradually and are a product of many factors:

Answer 10

An organisation’s property rights system

Its structure

Its ethics

The characteristics of its top management team

Question 11

To develop functional abilities and produce a core competence, it is necessary to choose:

Answer 11

Property rights

Functional structure

Functional managers

Question 12

Business-level strategy

Answer 12

A plan to combine functional core competences in order to position the organization so that it has a competitive advantage in its domain.

Question 13

The challenge of a business-level strategy

Answer 13

is for an organization to take the core competences created by its functions and combine them to take advantage of opportunities in the environment to create value.

Question 14

The organization needs a business-level strategy that does both of the following

Answer 14

Selects the domain the organisation will compete in

Positions the organisation so it can use its resources and abilities to manage its specific and general environments in order to protect and enlarge that domain.

Question 15

Two basis ways in which an organization can create value

Answer 15

By reducing costs of its value-creation activities

By performing those activities in a way that gives its products a differentiated appeal.

Question 16

Once an organisation has chosen its domain it has two bases on which it can position itself to compete with its rivals.

Answer 16

It can use its skills in low-cost value creation to produce for a customer group that wants low-prices goods and services

It can use skills at differentiation to produce for a customer group that wants and can afford differentiated products that command a high or premium price

Question 17

Low-cost business-level strategy:

Answer 17

A plan whereby an organisation produces low-priced goods and services for all customer groups.

Question 18

Differentiation business-level strategy

Answer 18

A plan whereby an organisation produces high-priced, quality products aimed at particular market segments.

Question 19

Another business-level strategy is the focus strategy

Answer 19

Specialising in one segment of a market and focusing all of the organisation’s resources on that segment

Question 20

Three factors affect an organization’s choice of a structure to create competitive advantage for itself:

Answer 20

1. As an organization produces a wider range of products, it will need greater control over the development, marketing, and production of these products.
2. As an organization seeks to find new customer groups for its products, it will need a structure that allows it serve the needs of its customers.
3. As the pace of new product development in an industry increases, an organization will need a structure that increases coordination among its functions.

Question 21

Related diversification

Answer 21

The entry into a new domain that is related in some way to an organization’s domain.

Question 22

Unrelated diversification

Answer 22

The entry into a new domain that is not relates in any way to an organization’s core domain.

Question 23

Corporate-level strategy and structure

Answer 23

Conglomerate structure and unrelated diversification

Structures for related diversification

Question 24

Conglomerate structure and unrelated diversification

Answer 24

Conglomerate structure, a structure in which each business is placed in a selfcontained division and there is no contract between divisions.

Question 25

Structures for related diversification

Answer 25

An organisation pursuing a strategy of related diversification tries to obtain value by sharing resources or by transferring functional skills from one division to
another – processes that require a great amount of coordination and integration.

Question 26

Global-level strategy

Answer 26

A plan that involves choosing the best strategy to expand into overseas markets to obtain scarce resources and develop core competences as discussed above

Question 27

Companies can use four principal principles as they begin to market their products and establish production facilities abroad:

Answer 27

1. Multi-domestic strategy
2. International strategy
3. Global strategy
4. Transnational strategy

Question 28

The choice of structure and control systems for managing a global business is a function of three factors:

Answer 28

1. The decision how to distribute and allocate responsibility and authority between managers at home and abroad so that effective control over a company’s global operations is maintained.
2. The selection of the organisational structure that groups divisions both at home and abroad in a way that allows the vest use of resources and serves the needs of foreign customers most effectively.
3. The selection of the right kinds of integration and control mechanisms and organisational culture to make the overall global structure function effectively.