Organizational Structure

Question 1

Define Organizational Structure

Answer 1

Formal reporting procedures, controls, authority, and decision making

Question 2

Define structural stability

Answer 2

Structural stability allows firms to manage daily work routines and maintain existing operations

Question 3

Define structural flexibility

Answer 3

Structural flexibility allows firms to explore new possibilities and allocate resources to pursue new opportunities

Question 4

Describe the reciprocal relationship between strategy and structure

Answer 4

1. Strategy influences the structure used to that strategy
2. Structure influences current decisions, choices, and actions that affect future strategies
3. Strategy should match structure (but sometimes does not)

Question 5

Define organizational controls

Answer 5

Guide the use of strategy by allowing the comparison of actual results with expected results and suggesting corrective actions when necessary

Question 6

Define strategic controls

Answer 6

1. Largely subjective criteria that focus on communication, counsel, execution, and improvement
2. Require and contribute to a richer understanding of the firm’s resources, capabilities, competencies, and environment

Question 7

Define financial controls

Answer 7

1. Largely objective criteria tied to accounting-based and market-based measures of fiscal performance
2. May contribute to short-term focus and risk aversion

Question 8

As firms become larger and more diversified, financial controls tend to become more dominant

Answer 8

true

Question 9

Name 3 important structural characteristics

Answer 9

1. Specialization
2. Centralization
3. Formalization

Question 10

Define Specialization

Answer 10

the number and types of jobs

Question 11

Define Centralization

Answer 11

the locus of decision-making authority

Question 12

Define Formalization

Answer 12

prescribed rules and work procedures, perhaps in writing

Question 13

Both the firm’s formal structure and these structural characteristics much match the requirements of the firm’s strategy

Answer 13

true

Question 14

Describe the Owner-Manager structure

Answer 14

1. Owner-manager makes all major decisions directly and monitors all activities
2. The staff services as an extension of the manager’s authority

Question 15

Firms using the owner-manager structure often compete by offering a single product line in a single geo market

Answer 15

true

Question 16

List shortcomings of the owner-manager structure

Answer 16

1. Growth demands more knowledge, information processing, activities, and integration
2. Alone, owner-managers lack the ability and experience to manage increasing complexity as firms grow

Question 17

Describe Functional Structure

Answer 17

1. The firm is headed by a Chief Executive Officer (CEO) with a limited corporate staff
2. Firm is segmented into different functional areas, and executives heading these functions report to the CEO

Question 18

Firms using the Functional Structure often compete with business-level strategies and limited corporate-level strategies

Answer 18

true

Question 19

List the shortcomings of the functional structure

Answer 19

1. As the firm diversifies, internal communication, coordination, and resource/capability sharing may become increasingly important
2. Managers’ concern with their own functional areas can reduce such integration
3. The firm may need to reorganize to provide visibility and promote coordination among businesses

Question 20

Describe the Multidivisional Structure (M-Form)

Answer 20

1. Operating divisions function as separate profit centers (either product or geographic)
2. Allows monitoring, comparisons, and resource allocation among revenue and cost centers
3. Whereas some forms focus on cooperation (e.g., for related diversification), other forms focus on competition (e.g., for unrelated diversification)

Question 21

List the shortcomings of the Multidivisional Structure

Answer 21

1. Complicated to manage
2. May result in increasingly dispersed and/or tall hierarchies
3. May produce a mentality that discourages resources and capability sharing

Question 22

List 3 International Structures

Answer 22

1. Geographic Area Structure
2. Product Divisional Structure
3. Combination Structure

Question 23

Describe the Geographic Area Structure

Answer 23

1. Divisions correspond to specific countries or regions in the world
2. Emphasizes national differences and reflects an interest in satisfying local preferences

Question 24

Describe the Product Divisional Structure

Answer 24

1. Divisions correspond to business level product markets
2. Emphasizes coordination and integration among business units to exploit the benefits of scale and scope

Question 25

Combination Structure

Answer 25

1. Divisions correspond to either geographic or product areas
2. Decision-making authority may alternate among geographic areas and product areas (e.g., matrix and hybrid structures)