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30 Cards in this Set

  • Front
  • Back
A major goal of most publicly held companies is the maximization of stockholder wealth.

True

Agency theory offers a way of understanding why managers do not always act in the best interests of stakeholders.

True

Strategic control systems are the primary governance mechanisms established within a company to reduce the scope of the agency problem between levels of management.

True

An effective governance arrangement exists when the CEO is also the chair of the board of directors

False

The purpose of organizational structure is to provide managers with specific feedback on how well an organization and its members are performing and building competitive advantage.

False

Organizational design has little effect on organizational culture

False

Organizational structure contributes to the implementation process by providing the framework of tasks and roles that reduces transaction difficulties and allows employees to think and behave in ways that allow a company to achieve superior performance

True

In the multidivisional structure, each division typically contains only a partial set of value chain activities.

True

It is important for corporate managers to be able to identify high-performing and underperforming divisions and to take corrective action as necessary

True

Vertical integration is a less expensive strategy to manage than is unrelated diversification

False

1. A company's stakeholders include which of the following?

a. Stockholders


b. Creditors


c. Employees


d. Customers


e. All of these choices

E. All of these choices

. Why should satisfying stockholder demands receive so much attention in many corporate mission statements

a. Stockholders are the most powerful stakeholder group that a company has to satisfy.


b. Stockholders are the legal owners of the company and are the providers of risk capital. c. Stockholders have been successful in blackmailing companies to get their interest satisfied before those of other claimants.


d. Typically, stockholders have the most invested in the company's continued survival. e. Managers feel obliged to pay lip service to stockholder demands.

B. Stockholders are legal owners of the company and are the providers of risk capital



3. Confronted with agency problems, which of the following is not one of the challenges for principals?

a. Shape the behavior of agents so that they act in accordance with the goals set by principals


b. Reduce the information asymmetry between agents and principals


c. Develop mechanisms for removing agents who do not act in accordance with the goals of principals3


d. Develop mechanisms for removing agents who mislead principals


e. All of these choices

E. All of these choices

Flat organizational structures are characterized by

a. few levels of management and a relatively narrow span of control.


b. few levels of management and a relatively wide span of control.


c. many levels of management and a relatively narrow span of control.


d. many levels of management and a relatively wide span of control.


e. none of these choices

B. Few levels of management and a relatively wide span of control

Which of the following is not one of the company levels where strategic control systems measure performance?

a. Board of directors


b. Corporate


c. Divisional


d. Functional


e. Individual

A. Board of Directors

Which of the following is required by a restructuring?

a. Eliminating business units


b. Rethinking business processes


c. Creating more business units


d. Flattening the organizational hierarchy


e. Broadening the span of control

D. Flattening the organizational hierarchy

7. A camera manufacturer that has separate divisions for making personal cameras, movie cameras, and film acquired a small film developer and a car battery supplier. Which of the following structures is most appropriate for this firm?

a. Functional


b. Matrix


c. Geographic


d. Multidivisional


e. Product team

D. Multidivisional

Which structure has been adopted by most large, complex U.S. companies?

a. Multidivisional


b. Product


c. Product team


d. Market


e. Functional

A. Multidivisional

A company pursuing unrelated diversification

a. relies more on output controls than on bureaucratic controls.


b. needs to create an internal transfer pricing scheme.


c. has a low need for integration among divisions.


d. should have a product team structure.


e. should use a centralized decision-making process.

C. Has a low need for integration among divisions

Which of the following strategies can companies use as they begin to market their products and establish production facilities overseas?

a. Localization


b. International


c. Global


d. Transnational


e. All of these choices

E. All of these choices

Principles of agency theory

One group relies on another to make decisions and take actions on their behalf. There is opportunity for mutual gain, but agents may act in their own best interests. Agents have more access to information of a situation, so the principal cannot fully monitor actions of agents and must trust the agent.

Ways to deal with agency problems

align the two parties goals to create more mutual gain and reduce one sided gain. reduce information asymmetry to the extent possible by overseeing or monitoring the principals actions closely

Organizational Structure

assigns employees to specific value creation tasks and roles and specifies how these tasks and roles are to be linked together in a way that increases efficiency, quality, innovation, and responsiveness to customer competencies that build competitive advantage.

Three Building blocks of organizational structure

Grouping tasks, functions and division


Allocating authority and responsibility


Integration and integrating mechanisms

Grouping tasks, functions and divisions

As companies grow, they may need to revisit structure so that these groupings are done to help create distinctive competencies

Allocating authority and responsibility

as companies address authority and responsibility, the day to day structure takes shape. Decisions must address the hierarchy of authority, span of control, tall or flat structure, chain of command, and degree of centralization or decentralization

Integration and integrating mechanisms

The greater the complexity of an organization's structure, the greater is the need for coordination among the people, functions, and divisions to make the organizational structure work efficiently. Tools of integration include direct contact, liaison roles, and teams.

Most common used entry mode to a new industry

Mergers and acquisitions

Mergers and Acquisitions

The main benefit is that companies employing this entry mode can move quickly, and as industry boundaries continue to blur and changes in the environment are happening at a rapid pace, companies often do not have the luxury of time on their side

Issues of mergers and acquisitions

issues of structure and how to establish new lines of authority and responsibility that will allow them to make the best use of both companies competencies. managers need to decide how to coordinate and integrate the merged companies to that cost are reduced and competencies are leveraged. There are also control issues and organizational culture issues.