9. Strategy and structure

Question 1

Simple structure

Answer 1

Owner-managed

All decisions are made by the owner

Question 2

Functional structure

Answer 2

Outgrown simple structure

Organise business on a functional basis

Question 3

Divisionalised structure (product/ division based)?

Answer 3

Structured in accordance with product lines/ brands or divisions

Divisions are profit centres

Question 4

Divisionalised structure (geographically based)?

Answer 4

Structured in accordance with location

Question 5

Matrix structure?

Answer 5

Combines benefits of the divisional structure and the functional structure

Question 6

Advantages of matrix structure

Answer 6

Improves cross functional communication
Useful for projects and temporary teams
Flexibility

Question 7

Disadvantages of matrix structure

Answer 7

Dual command
Dilution of functional authority
Time-consuming meetings

Question 8

Flexible structures

Answer 8

Virtual
Hollow
Modular

Question 9

Virtual

Answer 9

Remote

Question 10

Hollow

Answer 10

Non-essential activities are outsourced

Question 11

Modular

Answer 11

Production processes become separate modules and are outsourced

Question 12

What does theHandy Shamrock do?

Answer 12

Analyses how companies can improve efficiency and cut costs by considering staffing issues more flexibly

Question 13

What are the components of the shamrock?

Answer 13

Professional core - main contact
Flexible labour force
Customers - eg airport checking in themselves
Contractual fringe - eg lighting crew

Question 14

What are Mintzbergs 6 component parts of an organisation?

Answer 14

Operating core
Strategic apex
Middle lin
Technostructure
Support structure
Ideology

Question 15

Operating core

Answer 15

People who do the work (doctors)

Question 16

Strategic apex

Answer 16

Higher management with the overall strategic long-term planning and control

Question 17

Middle line

Answer 17

Managers linking between the strategic apex and operating core

Question 18

Technostructure

Answer 18

Accountants etc whose role is to design procedures and standards

Question 19

Support structure

Answer 19

Services which support operations and are often outsourced (eg catering)

Question 20

Idealogy

Answer 20

Organisations values and beliefs that holds them together

Question 21

Tall organisations

Answer 21

More number of reporting levels to the CEO

Question 22

Flat organisations?

Answer 22

Less number of reporting levels to the CEO

Question 23

Decentralisation

Answer 23

Refers to the degree of decision making ability diffused through an organisation

Question 24

Burns and Stalker model?

Answer 24

State there are two types of extreme structure: mechanistic and organic

Question 25

Mechanistic

Answer 25

Rigid - suitable for stable environment

Question 26

Organic

Answer 26

Flexible - suitable for dynamic environment

Question 27

How to calculate return on investment?

Answer 27

Profit for the period/ average capital employed during the period

Question 28

Adv of return on investment?

Answer 28

Widely used and accepted
Allows comparison

Question 29

Disadv of return on investment?

Answer 29

Accounting policies can make comparisons difficult
ROI increases with the age of assets

Question 30

How to calculate residual income?

Answer 30

Controllable profit - (Capital employed x target % return)

Question 31

What is transfer pricing?

Answer 31

Price at which one division in group sells its products or services to another in the same group

Question 32

Which methods can be adopted when setting transfer prices?

Answer 32

Cost plus pricing
Opportunity cost
Negotiated cost

Question 33

What is corporate responsibility?

Answer 33

The activities and obligations of a business in achieving sustainability

Question 34

What is corporate governance?

Answer 34

The rules governing the structure and objectives of the organisation and the relationship between management, the board and shareholders