Strategic Management Concepts 4th Edition By Frank Rothaermel – Test Bank

Overview

True / False

Chapter 11
Organizational Design: Structure, Culture, and Control

1) Organizational design involves establishing a firm’s structure, culture, and control mechanisms.

Answer: TRUE
Explanation: Organizational design is the process of creating, implementing, monitoring, and modifying the structure, processes, and procedures of an organization. The key components of organizational design are structure, culture, and control.
Difficulty: 1 Easy
Topic: Organizational Design and Competitive Advantage
Learning Objective: 11-01 Define organizational design and list its three components.
Bloom’s: Remember
AACSB: Knowledge Application
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2) Once a firm finds success in a given organizational structure, it should seek to reinforce and maintain that structure for the life of the firm.

Answer: FALSE
Explanation: Inertia, a firm’s resistance to changing the status quo, can set the stage for the firm’s subsequent failure. Successful firms often plant the seed of subsequent failure: They optimize their organizational structure to the current situation. That tightly coupled system can break apart when internal or external pressures occur. To avoid inertia and possible organizational failure, the firm needs a flexible and adaptive structure to effectively translate the formulated strategy into action.
Difficulty: 2 Medium
Topic: Organizational Inertia and Avoiding Core Rigidities
Learning Objective: 11-02 Explain how organizational inertia can lead established firms to failure.
Bloom’s: Understand
AACSB: Knowledge Application
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3) A planned emergence approach to strategic planning is most likely to be found in a highly centralized firm.

Answer: FALSE
Explanation: Top-down strategic planning takes place in highly centralized organizations. Planned emergence is found in more decentralized organizations.
Difficulty: 2 Medium
Topic: Organizational Design and Competitive Advantage
Learning Objective: 11-03 Define organizational structure and describe its four elements.
Bloom’s: Understand
AACSB: Knowledge Application
Accessibility: Keyboard Navigation

4) Firms with a flat structure and a low degree of specialization tend to foster innovation better than firms with a tall structure and high degree of specialization.

Answer: TRUE
Explanation: Organic organizations have a low degree of specialization and formalization, a flat organizational structure, and decentralized decision making. Organic organizations typically exhibit a higher rate of entrepreneurial behaviors and innovation. Organic structures allow firms to foster R&D and/or marketing, for example, as a core competency.
Difficulty: 2 Medium
Topic: Organizational Structure and Controls
Learning Objective: 11-04 Compare and contrast mechanistic versus organic organizations.
Bloom’s: Understand
AACSB: Knowledge Application
Accessibility: Keyboard Navigation
5) A firm that successfully balances exploitation of current opportunities and exploration of future possibilities is considered ambidextrous.

Answer: TRUE
Explanation: Ambidexterity describes a firm’s ability to address trade-offs not only at one point but also over time. It encourages managers to balance exploitation—applying current knowledge to enhance firm performance in the short term—with exploration—searching for new knowledge that may enhance a firm’s future performance.
Difficulty: 2 Medium
Topic: Organizational Structure and Controls
Learning Objective: 11-05 Describe different organizational structures and match them with appropriate strategies.
Bloom’s: Understand
AACSB: Knowledge Application
Accessibility: Keyboard Navigation

6) A primary advantage of the matrix organizational structure is that it simplifies decision making and communication in geographically diverse organizations.

Answer: FALSE
Explanation: Though it is appealing in theory, the matrix structure does have shortcomings. It is usually difficult to implement: Implementing two layers of organizational structure creates significant organizational complexity and increases administrative costs. Also, reporting structures in a matrix are often not clear. In particular, employees can have trouble reconciling goals presented by their two (or more) supervisors. Adding an additional layer of hierarchy can also slow decision making and increase bureaucratic costs.
Difficulty: 2 Medium
Topic: Organizational Structure and Controls
Learning Objective: 11-05 Describe different organizational structures and match them with appropriate strategies.
Bloom’s: Understand
AACSB: Knowledge Application
Accessibility: Keyboard Navigation
7) Firms that pursue a closed approach to innovation typically enjoy first-mover advantages.

Answer: TRUE
Explanation: Firms in the closed innovation model are extremely protective of their intellectual property. This not only allows the firm to capture all the benefits from its own R&d, but also prevents competitors from benefiting from it. The mind-set of firms in the closed innovation model is that to profit from R&d, the firm must come up with its own discoveries, develop them on its own, and control the distribution channels. Strength in R&d is equated with a high likelihood of benefiting from first-mover advantages.
Difficulty: 2 Medium
Topic: Strategies for Innovation
Learning Objective: 11-06 Evaluate closed and open innovation, and derive implications for organizational structure.
Bloom’s: Understand
AACSB: Knowledge Application
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8) An open innovation model reduces a firm’s absorptive capacity.

Answer: FALSE
Explanation: One key assumption underlying the open innovation model is that combining the best of internal and external R&d will more likely lead to a competitive advantage. This requires that the company must continuously upgrade its internal R&d capabilities to enhance its absorptive capacity—its ability to understand external technology developments, evaluate them, and integrate them into current products or create new ones.
Difficulty: 2 Medium
Topic: Strategies for Innovation
Learning Objective: 11-06 Evaluate closed and open innovation, and derive implications for organizational structure.
Bloom’s: Understand
AACSB: Knowledge Application
Accessibility: Keyboard Navigation
9) A change in company culture is most commonly accompanied by a change in leadership.

Answer: TRUE
Explanation: The primary means of cultural change is for the corporate board of directors to bring in new leadership at the top, which is then charged to make changes in strategy and structure. After all, executives shape corporate culture in their decisions on how to structure the organization and its activities, allocate its resources, and develop its system of rewards.
Difficulty: 1 Easy
Topic: Organizational Culture
Learning Objective: 11-07 Describe the elements of organizational culture, and explain where organizational cultures can come from and how they can be changed.
Bloom’s: Remember
AACSB: Knowledge Application
Accessibility: Keyboard Navigation

10) Results-only-work-environments (ROWEs) are characterized by their use of extrinsic motivations such as promotions or the threat of layoffs.

Answer: FALSE
Explanation: ROWEs are output controls that attempt to tap intrinsic (rather than extrinsic) employee motivation, which is driven by the employee’s interest in and the meaning of the work itself. In contrast, extrinsic motivation is driven by external factors such as awards and higher compensation, or punishments like demotions and layoffs (the carrot-and-stick approach).
Difficulty: 1 Easy
Topic: The Role of Incentives and Rewards in Promoting Strategy Execution
Learning Objective: 11-08 Compare and contrast different strategic control-and-reward systems.
Bloom’s: Remember
AACSB: Knowledge Application
Accessibility: Keyboard Navigation