The strategy and structure of a firm change as the firm increases in size, diversifies into new product markets, and limits its geographic scope.

1.	The strategy and structure of a firm change as the firm increases in size, diversifies into new product markets, and limits its geographic scope.    FALSE The strategy and structure of a firm change as it increases in size, diversifies into new product markets, and expands its geographic scope.

AACSB: Analytic Blooms: Understand Learning Objective: 10-01 The growth patterns of major corporations and the relationship between a firm's strategy and its structure. Level of Difficulty: 2 Medium Topic: Traditional Forms of Organizational Structure

2.

A strategy of related diversification requires a need to reorganize around product lines and geographic markets. This leads to a divisional structure.    FALSE A strategy of related diversification requires a need to reorganize around product lines or geographic markets. This leads to a divisional structure.

AACSB: Analytic Blooms: Understand Learning Objective: 10-01 The growth patterns of major corporations and the relationship between a firm's strategy and its structure. Level of Difficulty: 2 Medium Topic: Traditional Forms of Organizational Structure

3.

When a firm has international operations, choosing the most appropriate structure depends upon the extent of international expansion, the type of strategy, and the degree of market diversity.    FALSE Deciding upon the most appropriate structure when a firm has international operations depends on three primary factors: the extent of international expansion, type of strategy (global, multidomestic, or transnational), and the degree of product diversity.

AACSB: Analytic Blooms: Understand Learning Objective: 10-01 The growth patterns of major corporations and the relationship between a firm's strategy and its structure. Level of Difficulty: 2 Medium Topic: Traditional Forms of Organizational Structure

4.	In a simple structure where the owner manager makes most of the important decisions, extensive rules and regulations are used to maintain order.    FALSE A simple structure may foster creativity and individualism since there are generally few rules and regulations.

AACSB: Analytic Blooms: Understand Learning Objective: 10-02 Each of the traditional types of organizational structure: simple; functional; divisional; and matrix. Level of Difficulty: 2 Medium Topic: Traditional Forms of Organizational Structure

5.

A small firm with a simple structure often fosters creativity and individualism because of its informal atmosphere.    TRUE The simple structure is highly informal and the coordination of tasks is accomplished by direct supervision. A simple structure may foster creativity and individualism since there are generally few rules and regulations.

AACSB: Analytic Blooms: Understand Learning Objective: 10-02 Each of the traditional types of organizational structure: simple; functional; divisional; and matrix. Level of Difficulty: 2 Medium Topic: Traditional Forms of Organizational Structure

6.

A simple organizational structure may lead to problems such as unclear boundaries of authority and few career advancement options.    TRUE In a simple structure, employees may not clearly understand their responsibilities, which can lead to conflict and confusion. Small organizations have flat structures that limit opportunities for upward mobility.

AACSB: Analytic Blooms: Understand Learning Objective: 10-02 Each of the traditional types of organizational structure: simple; functional; divisional; and matrix. Level of Difficulty: 2 Medium Topic: Traditional Forms of Organizational Structure

7.

As firms grow, owner managers often need to hire functional specialists to handle the increased information-processing burden.    TRUE As firms grow, excessive demands may be placed on the owner-manager in order to obtain and process all of the information necessary to run the business. Chances are the owner will not be skilled in all specialties (e.g., accounting, engineering, production, and marketing). Thus, he or she will need to hire specialists in the various functional areas.

AACSB: Analytic Blooms: Understand Learning Objective: 10-02 Each of the traditional types of organizational structure: simple; functional; divisional; and matrix. Level of Difficulty: 2 Medium Topic: Traditional Forms of Organizational Structure

8.

To enhance integration and control of related product market activities, the functional structure minimizes centralization.    FALSE By bringing together specialists into functional departments, a firm is able to enhance its coordination and control within each of the functional areas. Decision making in the firm will be centralized at the top of the organization.

AACSB: Analytic Blooms: Understand Learning Objective: 10-02 Each of the traditional types of organizational structure: simple; functional; divisional; and matrix. Level of Difficulty: 2 Medium Topic: Traditional Forms of Organizational Structure

9.

One disadvantage of a functional structure is that differences in functional orientation may impede organization coordination and communication.    TRUE The differences in values and orientations among functional areas may impede communication and coordination. Edgar Schein argued that shared assumptions form around functional units in an organization. This leads to stove pipes or silos, in which departments view themselves as isolated, self-contained units with little need for interaction and coordination with other departments.

AACSB: Analytic Blooms: Understand Learning Objective: 10-02 Each of the traditional types of organizational structure: simple; functional; divisional; and matrix. Level of Difficulty: 2 Medium Topic: Traditional Forms of Organizational Structure

10.

Operational decision making in a large business places excessive demands on top management of the firm.    TRUE Operational decision making in a large business with a divisional structure places excessive demands on top management of the firm. In order to attend to broader, longer-term organizational issues, top-level managers must delegate decision making to lower-level managers.

AACSB: Analytic Blooms: Understand Learning Objective: 10-02 Each of the traditional types of organizational structure: simple; functional; divisional; and matrix. Level of Difficulty: 2 Medium Topic: Traditional Forms of Organizational Structure

11.

A major disadvantage of adopting a divisional structure is the tendency for managers to focus on short-term objectives.    TRUE Since each division is evaluated in terms of financial measures such as return on investment and revenue growth, there is often an urge to focus on short-term performance. If corporate management uses quarterly profits as the key performance indicator, divisional management may emphasize making the numbers and minimize activities, such as advertising, maintenance, and capital investments, which would detract from short-term performance measures.

AACSB: Analytic Blooms: Understand Learning Objective: 10-02 Each of the traditional types of organizational structure: simple; functional; divisional; and matrix. Level of Difficulty: 2 Medium Topic: Traditional Forms of Organizational Structure

12.

A major disadvantage of a divisional structure is that when divisions are separated to manage individual product markets, there is a separation of strategic and operational control.    FALSE By creating separate divisions to manage individual product markets, there is a separation of strategic and operating control. This is an advantage because divisional managers can focus their efforts on improving operations in the product markets for which they are responsible, and corporate officers can devote their time to overall strategic issues for the entire corporation.

AACSB: Analytic Blooms: Understand Learning Objective: 10-02 Each of the traditional types of organizational structure: simple; functional; divisional; and matrix. Level of Difficulty: 2 Medium Topic: Traditional Forms of Organizational Structure

13.

The strategic business unit (SBU) and holding company structure are variants of the functional form of structure.    FALSE One variation of the divisional form is the strategic business unit (SBU) structure. With a SBU structure, divisions with similar products, markets, and/or technologies are grouped into homogeneous units to achieve some synergies.

AACSB: Analytic Blooms: Remember Learning Objective: 10-02 Each of the traditional types of organizational structure: simple; functional; divisional; and matrix. Level of Difficulty: 1 Easy Topic: Traditional Forms of Organizational Structure

14.

One major advantage of the holding company form of organization structure is that it minimizes the duplication of functional activities between product lines.    FALSE The holding company structure is a variation of the divisional structure. Whereas the SBU structure is often used when similarities exist between the individual businesses (or divisions), the holding company structure is appropriate when the businesses in a corporation portfolio do not have much in common. The lack of synergy means that this duplication at the functional level exits.

AACSB: Analytic Blooms: Understand Learning Objective: 10-02 Each of the traditional types of organizational structure: simple; functional; divisional; and matrix. Level of Difficulty: 2 Medium Topic: Traditional Forms of Organizational Structure

15.

The matrix structure attempts to combine the advantages of the functional and product-oriented structure.    TRUE One approach that tries to overcome the inadequacies inherent in the other structures is the matrix organizational structure. It is a combination of the functional and divisional structures. Most commonly, functional departments are combined with product groups on a project basis.

AACSB: Analytic Blooms: Understand Learning Objective: 10-02 Each of the traditional types of organizational structure: simple; functional; divisional; and matrix. Level of Difficulty: 2 Medium Topic: Traditional Forms of Organizational Structure

16.	A matrix organization is organized strictly along product lines.    FALSE The matrix organizational structure is a combination of the functional and divisional structures. Most commonly, functional departments are combined with product groups on a project basis.

AACSB: Analytic Blooms: Remember Learning Objective: 10-02 Each of the traditional types of organizational structure: simple; functional; divisional; and matrix. Level of Difficulty: 1 Easy Topic: Traditional Forms of Organizational Structure

17.

A major disadvantage of the matrix structure is that it duplicates the use of specialized personnel, equipment, and facilities.    FALSE The matrix structure facilitates the use of specialized personnel, equipment, and facilities. Instead of duplicating functions, as would be the case in a divisional structure based on products, the resources are shared.

AACSB: Analytic Blooms: Understand Learning Objective: 10-02 Each of the traditional types of organizational structure: simple; functional; divisional; and matrix. Level of Difficulty: 2 Medium Topic: Traditional Forms of Organizational Structure

18.

A worldwide product division structure is used when global strategies require that each division be responsible for overall efficiency and performance.    TRUE Global strategies are driven by economic pressures that require managers to view operations in different geographic areas to be managed for overall efficiency. One structure consistent with the efficiency perspective is the worldwide product division structure.

AACSB: Analytic Blooms: Understand Learning Objective: 10-03 The implications of a firm's international operations for organizational structure. Level of Difficulty: 2 Medium Topic: Traditional Forms of Organizational Structure

19.	A global startup typically benefits from lower communication, coordination, and transportation costs.    FALSE There is no reason for every start-up to be global. Being global necessarily involves higher communication, coordination, and transportation costs.

AACSB: Analytic Blooms: Understand Learning Objective: 10-03 The implications of a firm's international operations for organizational structure. Level of Difficulty: 2 Medium Topic: Traditional Forms of Organizational Structure

20.

Global start-ups occur after a corporation has exhausted all other possibilities for domestic growth.    FALSE International expansion occurs rather late for most corporations, typically after possibilities of domestic growth are exhausted. Increasingly, we are seeing two interrelated phenomena. First, many firms now expand internationally relatively early in their history. Second, some firms are born global from the very beginning and many start-ups are global in their activities. A global start-up has been defined as a business organization that, from inception, seeks to derive significant competitive advantage from the use of resources and the sale of outputs in multiple countries. Right from the beginning, it uses in-puts from around the world and sells its products and services to customers around the world.

AACSB: Analytic Blooms: Understand Learning Objective: 10-03 The implications of a firm's international operations for organizational structure. Level of Difficulty: 2 Medium Topic: Traditional Forms of Organizational Structure