Slides 25 Flashcards
What does organizational structure describe?
The arrangements by which a firm:
* Divides up its critical tasks
* Specifies how decisions are to be made among managers and employees
* Establishes routines and information flows to support operations
These arrangements can be both formal and informal.
What is the Agency Problem?
Owners/shareholders do not manage the day-to-day company operations. Instead, they hire a professional manager to run the company on their behalf.
List the types of organizational structure.
- Functional Structure
- Divisional Structure
- Matrix Structure
- Flat Structure
- Network Structure
True or False: Strategy follows structure.
True
What are the key components of sustaining competitive advantage?
- Unique value proposition
- Strong brand recognition
- Efficient supply chain management
- Innovation and product development
What competitive advantages has Apple historically had?
- Strong brand loyalty
- Innovative product design
- Premium pricing strategy
- Ecosystem of products and services
Fill in the blank: The expected life of the factory and machines is _____ years.
10
What is the sales price of the laptop in Scenario 1?
€550
If Raya expects to sell 200,000 laptops per year, what are the total costs to make the batteries?
€122,000,000
What is the annual EBITDA for the ‘buy’ scenario in Scenario 1?
€8,400,000
What is the consumer surplus when the average consumer’s willingness-to-pay is €600?
€50.00
What should Raya do if the total costs to make the batteries are higher than to buy?
Buy the batteries
What is the EBIT for the ‘make’ scenario in Scenario 2?
€(9,500,000)
What is the expected annual maintenance cost for the factory?
€15,000,000
True or False: The total fixed costs are the same in both make and buy scenarios.
False
What could Raya do to try and increase their profitability?
- Reduce costs
- Increase sales price
- Expand product line
- Improve operational efficiency
In Scenario 2, if Raya lowers the price to €500, how many laptops could they sell per year?
300,000
What are the average costs to buy the laptop batteries in Scenario 2?
€521.33
What are the annual overhead costs for the ‘buy’ scenario in Scenario 1?
€7,000,000
Fill in the blank: The corporate tax rate is _____%.
25
What is the maximum capacity of the factory?
500,000
In which market is Raya trying to compete with its new factory?
European market
What is the Agency Problem?
Owners/shareholders do not manage day-to-day operations and hire professional managers to run the company on their behalf.
Why is organizational structure important for a firm?
It helps align employee goals with management and owners, and can maximize profit by making employees more efficient.
What are two key reasons for the importance of structure in a firm?
- Aligns employee goals with management
- Maximizes profit through efficiency
What does the term ‘Departmentalization’ refer to?
The choices managers make regarding the appropriate division of labor within the firm.
What are the types of departmentalization?
- Tasks (or functions)
- Inputs
- Outputs
- Geography
- Time of Work
What does coordination in organizational structure dictate?
How easily information flows throughout the company.
What is the role of control in organizational structure?
Determines who gets to make specific decisions.
What are Self-Contained Departments?
Autonomous work units where managers control operating decisions and provide summary financial data to headquarters.
What is Task Interdependence?
The extent to which two or more positions in an organization depend on each other to do their work.
Define Sequential Interdependence.
When one group depends on the other group’s outcome, but not vice versa.
What is Pooled Interdependence?
When two or more groups are not directly dependent on one another, but their financial success impacts each other.
What is the definition of Complex Hierarchy?
An organizational structure involving multiple groups and levels of grouping.
What does a Functional Structure (U-Form) entail?
Each department is responsible for a particular functional area such as finance or marketing.
What is the Multidivisional Structure (M-Form)?
Organized along dimensions such as product line, geography, or type of customers.
Why is the M-Form structure advantageous?
It is suitable for companies with a diversified portfolio of products or geographic markets.
Fill in the blank: A firm’s structure can help maximize profit by making employees more _______.
[efficient]
True or False: A firm’s organizational structure should logically fit the strategy the firm chooses to pursue.
True
What is the relationship between strategy and structure?
Strategy follows structure; the structure must support the strategy for effectiveness.
What are the four primary activities in a firm’s value chain?
- Inbound logistics
- Production operations
- Outbound logistics
- Marketing & Sales
What is the purpose of a hierarchy in an organization?
To coordinate and monitor the actions of others as firms become more complex.
What is the definition of ‘Technology’ in the context of organizational structure?
The scientific knowledge a firm possesses and its application to products and services.
What is the M-Form structure?
The M-Form structure is used when companies have a diversified portfolio of products or geographic markets, allowing for delegated operational and strategic decision-making to division managers.
It is considered as several U-Shape organizations operating under a single umbrella.
Why does the M-Form structure make sense for diversified companies?
It enables economies of scope and allows for more operational and strategic decision-making to be delegated from headquarters to division managers.
What is an example of a company that uses the M-Form structure?
Unilever, which has product types including:
* Beauty & Wellbeing
* Personal Care
* Home Care
* Nutrition (Food)
* Ice Cream
What organizational form did Apple have in the 1990s?
Apple had a different organizational form before Steve Jobs returned.
What organizational form did Apple take after Steve Jobs returned?
Apple adopted a new organizational form after Steve Jobs returned, focusing on innovation and product development.
What defines a Matrix Structure?
A Matrix Structure is organized along two (or more) dimensions, such as product line and geography.
What is a key feature of employees in a two-dimensional matrix?
Employees belong to two hierarchies and have two bosses.
What is an advantage of a Matrix Structure?
It allows a firm to economize on scarce human resources.
What is a potential problem with a Matrix Structure?
Coordination can become a problem when a single employee has multiple bosses.
When is a Matrix Structure most suitable?
It is most suitable when a single task performed by an employee can benefit two divisions.
What is an example of a company that uses a Matrix Structure?
Ford, where employees report to both functional managers and project managers.
What do functional departments at Ford include?
Functional departments include:
* Engineering
* Marketing
* Finance
What is a Network Structure?
A Network Structure involves workers or groups contributing to multiple organizational tasks, with work groups reconfigured into new teams as tasks change.
What is a major concern in a Network Structure?
Coordination costs will be a major concern.
What is an example of a Network Structure?
Management Consulting, where consultants are organized into project-based teams for specific client engagements.
What happens once project parameters are agreed upon in a Network Structure?
The team has significant authority to decide how to execute the work.
What is a feature of incentives in a Network Structure?
Bonuses or rewards are frequently tied to the team’s overall performance.
