Chapter 11—Organizational Structure and Controls
TRUE/FALSE
1. Decisions about strategy and structure are interrelated.
ANS: T PTS: 1 DIF: Easy REF: 308
OBJ: 11-01 TYPE: comprehension
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Strategy | Dierdorff & Rubin:
Knowledge of general business functions
2. Over time, large and complex organizations must customize their structure to fit their unique
strategic needs.
ANS: T PTS: 1 DIF: Easy REF: 308
OBJ: 11-01 TYPE: comprehension
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Strategy | Dierdorff & Rubin:
Managing administration & control
3. Organizational structures must be both stable and flexible.
ANS: T PTS: 1 DIF: Medium REF: 309
OBJ: 11-01 TYPE: comprehension
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Strategy | Dierdorff & Rubin:
Managing administration & control
4. Organizational inertia often prompts top management to initiate structural change when
organizational performance levels drop.
ANS: F PTS: 1 DIF: Easy REF: 309
OBJ: 11-01 TYPE: comprehension
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Strategy | Dierdorff & Rubin:
Managing administration & control
5. A corporate-wide emphasis on sharing leads to a reliance on financial controls.
ANS: F PTS: 1 DIF: Medium REF: 311
OBJ: 11-01 TYPE: comprehension
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Strategy | Dierdorff & Rubin:
Managing administration & control
6. The three types of organizational controls are strategic, isomorphic, and financial.
ANS: F PTS: 1 DIF: Medium REF: 311
OBJ: 11-01 TYPE: comprehension
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Strategy | Dierdorff & Rubin:
Managing administration & control
7. Diversification controls guide the use of strategy, indicate how to compare actual results with
expected results, and suggest corrective actions to take when the difference is unacceptable.
, ANS: F PTS: 1 DIF: Medium REF: 311
OBJ: 11-01 TYPE: comprehension
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Strategy | Dierdorff & Rubin:
Managing administration & control
8. To properly execute strategic controls in firms using related diversification, the executives must have
a deep understanding of each unit’s business-level strategy.
ANS: T PTS: 1 DIF: Medium REF: 311
OBJ: 11-01 TYPE: comprehension
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Strategy | Dierdorff & Rubin:
Managing administration & control
9. RexMacDonald, Inc., uses a differentiation strategy that relies on cooperation, communication, and
sharing of ideas among employees. In order to foster this behavior, RexMacDonald should emphasize
strategic controls over financial controls.
ANS: T PTS: 1 DIF: Medium REF: 311
OBJ: 11-01 TYPE: application
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Strategy | Dierdorff & Rubin:
Managing administration & control
10. Organizations should first change strategy and then determine a compatible structure as it is easy to
change existing structure.
ANS: F PTS: 1 DIF: Medium REF: 312
OBJ: 11-02 TYPE: comprehension
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Strategy | Dierdorff & Rubin:
Strategic & systems skills
11. In general, small firms, even if long-established, are best matched with simple structures.
ANS: T PTS: 1 DIF: Easy REF: 313-315 | 313 (Figure 11.1)
OBJ: 11-02 TYPE: comprehension
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Leadership Principles |
Dierdorff & Rubin: Managing administration & control
12. As a firm grows, it typically shifts from a simple structure to a functional structure.
ANS: T PTS: 1 DIF: Easy REF: 313 (Figure 11.1)
OBJ: 11-02 TYPE: comprehension
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Leadership Principles |
Dierdorff & Rubin: Managing administration & control
13. Research has consistently shown that there is one best way to structure all organizations, regardless
of competitive strategy.
ANS: F PTS: 1 DIF: Easy REF: 313-314
OBJ: 11-02 TYPE: comprehension
, NOT: AACSB: Business Knowledge & Analytical Skills | Management: Leadership Principles |
Dierdorff & Rubin: Managing administration & control
14. A simple structure is an organizational form in which the owner-manager makes all major decisions
directly and monitors all activities, while the staff merely serves as an extension of the manager’s
supervisory authority.
ANS: T PTS: 1 DIF: Easy REF: 314
OBJ: 11-02 TYPE: knowledge
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Leadership Principles |
Dierdorff & Rubin: Managing administration & control
15. Specialization refers to the extent to which authority for decision-making is retained at higher
managerial levels.
ANS: F PTS: 1 DIF: Easy REF: 314
OBJ: 11-02 TYPE: knowledge
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Leadership Principles |
Dierdorff & Rubin: Managing administration & control
16. There are three primary forms of the multidivisional structure.
ANS: T PTS: 1 DIF: Medium REF: 314 | 319 (Figure 11.4)
OBJ: 11-02 TYPE: knowledge
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Leadership Principles |
Dierdorff & Rubin: Managing administration & control
17. High levels of formalization of procedures are generally found in firms following a cost leadership
strategy.
ANS: T PTS: 1 DIF: Easy REF: 316
OBJ: 11-03 TYPE: comprehension
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Creation of Value | Dierdorff &
Rubin: Managing administration & control
18. Centralized and formalized procedures allow for greater flexibility, an important factor for firms using
a cost strategy.
ANS: F PTS: 1 DIF: Easy REF: 316
OBJ: 11-03 TYPE: comprehension
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Strategy | Dierdorff & Rubin:
Managing administration & control
19. The marketing and R&D functions are emphasized in the differentiation strategy’s functional
structure.
ANS: T PTS: 1 DIF: Easy REF: 317
OBJ: 11-03 TYPE: comprehension
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Creation of Value | Dierdorff &
Rubin: Managing administration & control
, 20. Firms using the differentiation strategy need to respond quickly to environmental opportunities and
threats. The functional structure is effective for this strategy because of its centralization of decision-
making.
ANS: F PTS: 1 DIF: Hard REF: 317-318
OBJ: 11-03 TYPE: comprehension
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Strategy | Dierdorff & Rubin:
Knowledge of general business functions
21. Both the integrated cost-leadership differentiation strategy and the transnational strategy need
structures that are formalized and nonformalized as well as centralized and decentralized.
ANS: T PTS: 1 DIF: Hard REF: 318 | 328
OBJ: 11-03 | 11-05 TYPE: comprehension
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Strategy | Dierdorff & Rubin:
Knowledge of general business functions
22. The functional structure is most appropriate for large firms with very high levels of diversification.
ANS: F PTS: 1 DIF: Medium REF: 318
OBJ: 11-02 TYPE: comprehension
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Strategy | Dierdorff & Rubin:
Knowledge of general business functions
23. Firms switch from a functional structure to a multidivisional structure because greater levels of
environmental complexity and uncertainty make it necessary for the firm to develop cooperative
relationships with its stakeholders.
ANS: F PTS: 1 DIF: Hard REF: 318-319
OBJ: 11-04 TYPE: comprehension
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Strategy | Dierdorff & Rubin:
Knowledge of general business functions
24. The three multidivisional structures that are used to implement a diversification strategy are the
competitive form, the strategic business unit form, and the integrated form.
ANS: F PTS: 1 DIF: Hard REF: 319 (Figure 11.4)
OBJ: 11-04 TYPE: comprehension
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Strategy | Dierdorff & Rubin:
Knowledge of general business functions
25. The matrix organization has a dual structure combining functional specialization and business
product or project specialization.
ANS: T PTS: 1 DIF: Easy REF: 320
OBJ: 11-04 TYPE: comprehension
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Strategy | Dierdorff & Rubin:
Managing administration & control
TRUE/FALSE
1. Decisions about strategy and structure are interrelated.
ANS: T PTS: 1 DIF: Easy REF: 308
OBJ: 11-01 TYPE: comprehension
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Strategy | Dierdorff & Rubin:
Knowledge of general business functions
2. Over time, large and complex organizations must customize their structure to fit their unique
strategic needs.
ANS: T PTS: 1 DIF: Easy REF: 308
OBJ: 11-01 TYPE: comprehension
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Strategy | Dierdorff & Rubin:
Managing administration & control
3. Organizational structures must be both stable and flexible.
ANS: T PTS: 1 DIF: Medium REF: 309
OBJ: 11-01 TYPE: comprehension
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Strategy | Dierdorff & Rubin:
Managing administration & control
4. Organizational inertia often prompts top management to initiate structural change when
organizational performance levels drop.
ANS: F PTS: 1 DIF: Easy REF: 309
OBJ: 11-01 TYPE: comprehension
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Strategy | Dierdorff & Rubin:
Managing administration & control
5. A corporate-wide emphasis on sharing leads to a reliance on financial controls.
ANS: F PTS: 1 DIF: Medium REF: 311
OBJ: 11-01 TYPE: comprehension
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Strategy | Dierdorff & Rubin:
Managing administration & control
6. The three types of organizational controls are strategic, isomorphic, and financial.
ANS: F PTS: 1 DIF: Medium REF: 311
OBJ: 11-01 TYPE: comprehension
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Strategy | Dierdorff & Rubin:
Managing administration & control
7. Diversification controls guide the use of strategy, indicate how to compare actual results with
expected results, and suggest corrective actions to take when the difference is unacceptable.
, ANS: F PTS: 1 DIF: Medium REF: 311
OBJ: 11-01 TYPE: comprehension
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Strategy | Dierdorff & Rubin:
Managing administration & control
8. To properly execute strategic controls in firms using related diversification, the executives must have
a deep understanding of each unit’s business-level strategy.
ANS: T PTS: 1 DIF: Medium REF: 311
OBJ: 11-01 TYPE: comprehension
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Strategy | Dierdorff & Rubin:
Managing administration & control
9. RexMacDonald, Inc., uses a differentiation strategy that relies on cooperation, communication, and
sharing of ideas among employees. In order to foster this behavior, RexMacDonald should emphasize
strategic controls over financial controls.
ANS: T PTS: 1 DIF: Medium REF: 311
OBJ: 11-01 TYPE: application
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Strategy | Dierdorff & Rubin:
Managing administration & control
10. Organizations should first change strategy and then determine a compatible structure as it is easy to
change existing structure.
ANS: F PTS: 1 DIF: Medium REF: 312
OBJ: 11-02 TYPE: comprehension
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Strategy | Dierdorff & Rubin:
Strategic & systems skills
11. In general, small firms, even if long-established, are best matched with simple structures.
ANS: T PTS: 1 DIF: Easy REF: 313-315 | 313 (Figure 11.1)
OBJ: 11-02 TYPE: comprehension
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Leadership Principles |
Dierdorff & Rubin: Managing administration & control
12. As a firm grows, it typically shifts from a simple structure to a functional structure.
ANS: T PTS: 1 DIF: Easy REF: 313 (Figure 11.1)
OBJ: 11-02 TYPE: comprehension
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Leadership Principles |
Dierdorff & Rubin: Managing administration & control
13. Research has consistently shown that there is one best way to structure all organizations, regardless
of competitive strategy.
ANS: F PTS: 1 DIF: Easy REF: 313-314
OBJ: 11-02 TYPE: comprehension
, NOT: AACSB: Business Knowledge & Analytical Skills | Management: Leadership Principles |
Dierdorff & Rubin: Managing administration & control
14. A simple structure is an organizational form in which the owner-manager makes all major decisions
directly and monitors all activities, while the staff merely serves as an extension of the manager’s
supervisory authority.
ANS: T PTS: 1 DIF: Easy REF: 314
OBJ: 11-02 TYPE: knowledge
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Leadership Principles |
Dierdorff & Rubin: Managing administration & control
15. Specialization refers to the extent to which authority for decision-making is retained at higher
managerial levels.
ANS: F PTS: 1 DIF: Easy REF: 314
OBJ: 11-02 TYPE: knowledge
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Leadership Principles |
Dierdorff & Rubin: Managing administration & control
16. There are three primary forms of the multidivisional structure.
ANS: T PTS: 1 DIF: Medium REF: 314 | 319 (Figure 11.4)
OBJ: 11-02 TYPE: knowledge
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Leadership Principles |
Dierdorff & Rubin: Managing administration & control
17. High levels of formalization of procedures are generally found in firms following a cost leadership
strategy.
ANS: T PTS: 1 DIF: Easy REF: 316
OBJ: 11-03 TYPE: comprehension
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Creation of Value | Dierdorff &
Rubin: Managing administration & control
18. Centralized and formalized procedures allow for greater flexibility, an important factor for firms using
a cost strategy.
ANS: F PTS: 1 DIF: Easy REF: 316
OBJ: 11-03 TYPE: comprehension
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Strategy | Dierdorff & Rubin:
Managing administration & control
19. The marketing and R&D functions are emphasized in the differentiation strategy’s functional
structure.
ANS: T PTS: 1 DIF: Easy REF: 317
OBJ: 11-03 TYPE: comprehension
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Creation of Value | Dierdorff &
Rubin: Managing administration & control
, 20. Firms using the differentiation strategy need to respond quickly to environmental opportunities and
threats. The functional structure is effective for this strategy because of its centralization of decision-
making.
ANS: F PTS: 1 DIF: Hard REF: 317-318
OBJ: 11-03 TYPE: comprehension
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Strategy | Dierdorff & Rubin:
Knowledge of general business functions
21. Both the integrated cost-leadership differentiation strategy and the transnational strategy need
structures that are formalized and nonformalized as well as centralized and decentralized.
ANS: T PTS: 1 DIF: Hard REF: 318 | 328
OBJ: 11-03 | 11-05 TYPE: comprehension
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Strategy | Dierdorff & Rubin:
Knowledge of general business functions
22. The functional structure is most appropriate for large firms with very high levels of diversification.
ANS: F PTS: 1 DIF: Medium REF: 318
OBJ: 11-02 TYPE: comprehension
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Strategy | Dierdorff & Rubin:
Knowledge of general business functions
23. Firms switch from a functional structure to a multidivisional structure because greater levels of
environmental complexity and uncertainty make it necessary for the firm to develop cooperative
relationships with its stakeholders.
ANS: F PTS: 1 DIF: Hard REF: 318-319
OBJ: 11-04 TYPE: comprehension
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Strategy | Dierdorff & Rubin:
Knowledge of general business functions
24. The three multidivisional structures that are used to implement a diversification strategy are the
competitive form, the strategic business unit form, and the integrated form.
ANS: F PTS: 1 DIF: Hard REF: 319 (Figure 11.4)
OBJ: 11-04 TYPE: comprehension
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Strategy | Dierdorff & Rubin:
Knowledge of general business functions
25. The matrix organization has a dual structure combining functional specialization and business
product or project specialization.
ANS: T PTS: 1 DIF: Easy REF: 320
OBJ: 11-04 TYPE: comprehension
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Strategy | Dierdorff & Rubin:
Managing administration & control
