Chapter 6

Business Essentials, 9e (Ebert/Griffin)
Chapter 6 Organizing the Business

1) Organization charts are graphical representations of employee salary information.
Answer: FALSE
Explanation: Organization charts are graphical representations of the structures of an
organization and the relationships and relative ranks of its positions.
Page Ref: 141
Difficulty: Easy
Objective: 6.1
Learning Outcome: Discuss the factors that influence decisions about organizational structure
Skill: Concept
2) Job specialization is the process of eliminating unnecessary or undesirable jobs.
Answer: FALSE
Explanation: Job specialization is the process of identifying the specific jobs that need to be
done and designating the people who will perform them.
Page Ref: 142
Difficulty: Easy
Objective: 6.2
Skill: Concept
3) Departmentalization refers to the process of grouping jobs into logical units.
Answer: TRUE
Explanation: The practice of grouping jobs into units is called departmentalization.
Page Ref: 143
Difficulty: Easy
Objective: 6.2
Skill: Concept
4) Geographic departmentalization divides firms according to the areas of the country or the
world that they serve.
Answer: TRUE
Explanation: Geographic departmentalization divides firms according to the areas of the country
or the world that they serve.
Page Ref: 144
Difficulty: Easy
Objective: 6.2
Skill: Concept
1
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5) In a centralized structure, most decision-making authority is delegated to levels of

management at various points below the top.
Answer: FALSE
Explanation: In a centralized structure, most decision-making authority is delegated to levels of
management at the top.
Page Ref: 146
Difficulty: Easy
Objective: 6.3
Skill: Concept
6) Accountability refers to the liability of subordinates for accomplishing tasks assigned by
managers.
Answer: TRUE
Explanation: Accountability means that subordinates are responsible for accomplishing tasks
assigned by managers.
Page Ref: 148
Difficulty: Easy
Objective: 6.3
Skill: Concept
7) Divisional structure is the relationships between group functions and activities that determine
authority.
Answer: FALSE
Explanation: Divisional structure relies on product departmentalization.
Page Ref: 150
Difficulty: Easy
Objective: 6.4
Skill: Concept
8) International organizational structures are an approach to organizational structure developed in
response to the need to manufacture, purchase, and sell in global markets.
Answer: TRUE
Explanation: International organizational structures developed in response to the need to
manufacture, purchase, and sell in global markets.
Page Ref: 153
Difficulty: Easy
Objective: 6.4
Skill: Concept
2
9) The chain of command is depicted by solid lines on an organization chart.

Answer: TRUE
Explanation: These lines represent reporting relationships.
Page Ref: 141
Difficulty: Moderate
Objective: 6.1
Skill: Concept
10) Organizational structure is a function of the organization's mission and strategy.
Answer: TRUE
Explanation: Size of the company and aspects of the organization's environment also affect
organizational structure.
Page Ref: 141
Objective: 6.1
Skill: Concept
11) The building blocks of all organizations are specialization and centralization.
Answer: FALSE
Explanation: The building blocks of all organizations are specialization and departmentalization.
Page Ref: 142
Objective: 6.2
Skill: Concept
12) As organizations grow and become larger, jobs tend to become less specialized.
Answer: FALSE
Explanation: As organizations grow, jobs tend to become more specialized; job specialization is
a natural part of organizational growth.
Page Ref: 142
Objective: 6.2
Skill: Concept
3
13) Acme Oil Company has three divisions: Exploration, Extraction, and Refining. This is an
example of process departmentalization.
Answer: TRUE
Explanation: With process departmentalization, the firm is divided according to production
processes used to create a good or service.
Page Ref: 143
Objective: 6.2
Skill: Application
14) Firms with production, marketing, human resource, and finance departments have a process
form of organization.
Answer: FALSE
Explanation: Such firms have a functional form of departmentalization.
Page Ref: 144
Objective: 6.2
Skill: Concept
15) Firms typically use the same form of departmentalization at upper and lower levels.
Answer: FALSE
Explanation: Because different forms of departmentalization have different advantages, larger
companies, for example, tend to adopt different types of departmentalization for various levels.
Page Ref: 144
Objective: 6.2
Skill: Concept
16) Flat organizational structures are usually associated with centralized decision making.
Answer: FALSE
Explanation: Flat organizational structures are usually associated with decentralized decision
making.
Page Ref: 146
Objective: 6.3
Skill: Concept
4
17) Employees' abilities and the supervisor's managerial skills help determine whether span of
control is wide or narrow.
Answer: TRUE
Explanation: Other factors include job similarity and job difficulty.
Page Ref: 146
Objective: 6.3
Skill: Concept
18) When several employees perform the same simple task, a narrow span of control is most
appropriate.
Answer: FALSE
Explanation: Job simplicity typically leads to a wider span of control.
Page Ref: 146
Objective: 6.3
Skill: Concept
19) For the delegation process to work smoothly, responsibility and authority must be equivalent.
Answer: TRUE
Explanation: First, responsibility is assigned; then, authority is granted, followed by the creation
of accountability.
Page Ref: 148
Objective: 6.3
Skill: Concept
20) Line departments are linked directly to the production and sales of a specific product.
Answer: TRUE
Explanation: As the doers and producers, each line department is essential to an organization's
ability to sell and deliver finished goods.
Page Ref: 148
Objective: 6.3
Skill: Concept
5
21) The functional organizational structure is the approach to organizational structure used by
most small to medium-sized firms.
Answer: TRUE
Explanation: Functional organization is used by most small to medium-sized firms.
Page Ref: 150
Objective: 6.4
Skill: Concept
22) The matrix form of organizational structure was pioneered by NASA.
Answer: TRUE
Explanation: A matrix structure is organized along two dimensionsa "permanent" structure,
along with a temporary structure needed for project completion.
Page Ref: 151
Objective: 6.4
Skill: Concept
23) An international organization is one in which traditional boundaries and structures are
minimized or eliminated altogether.
Answer: FALSE
Explanation: Some companies perform operations in global structures without any regard for
national boundaries.
Page Ref: 154
Objective: 6.4
Skill: Concept
24) A virtual organization has little or no formal structure.
Answer: TRUE
Explanation: A virtual organization has the structure of a handful of employees and a modest
administrative facility.
Page Ref: 154
Objective: 6.4
Skill: Concept
6
25) Frequently, the informal organization effectively alters a company's formal structure.
Answer: TRUE
Explanation: This level, furthermore, is sometimes just as powerfulif not more powerful
than the formal structure.
Page Ref: 155
Objective: 6.5
Skill: Concept
26) The informal organization is not as powerful as the formal structure.
Answer: FALSE
Explanation: This level of organization is sometimes just as powerfulif not more powerful
than the formal structure.
Page Ref: 155
Objective: 6.5
Skill: Concept
27) Intrapreneuring attempts to create and maintain the innovation and flexibility found in large,
bureaucratic structures.
Answer: FALSE
Explanation: Many large firms support the intrapreneuring process to encourage individual
employees to innovate and maintain the organizational flexibility of a smaller firm.
Page Ref: 156
Objective: 6.5
Skill: Concept
28) After an organizational structure has been created, it is set in stone.
Answer: FALSE
Explanation: Even after an organizational structure has been created it is rarely set in stone.
Most organizations change their structures on an almost continuous basis.
Page Ref: 141
Objective: 6.1
Skill: Concept
7
29) Job specialization is a natural part of organizational growth.

Answer: TRUE
Explanation: Specialized jobs are learned more easily and can be performed more efficiently.
Page Ref: 142
Objective: 6.2
Skill: Concept
30) To avoid bureaucracy within the organization, most large organizations tend to adopt the
same types of departmentalization for all levels.
Answer: FALSE
Explanation: Larger companies tend to adopt different types of departmentalization for various
levels of the company.
Page Ref: 143
Objective: 6.2
Skill: Concept
31) Coordination across functional departments becomes more complicated in smaller firms than
in larger firms.
Answer: FALSE
Explanation: Coordination becomes more complicated across functional departments within
large organizations.
Page Ref: 143
Objective: 6.4
Skill: Concept
32) Decentralization works best in a complex, rapidly changing environment.
Answer: TRUE
Explanation: Decision-making authority is delegated to levels of management at various points
below the top; this allows the organization to be more adaptive to change.
Page Ref: 146
Objective: 6.3
Skill: Concept
8
33) For the delegation process to work smoothly, responsibility must slightly exceed one's level
of authority.
Answer: FALSE
Explanation: Responsibility and authority must be equivalent for the delegation process to work
smoothly.
Page Ref: 148
Objective: 6.3
Skill: Concept
34) Line, staff, and committee and team forms of authority are not likely to all be found within
the same organization.
Answer: FALSE
Explanation: Like departmentalization, all three forms of authority may be found in a given
company, especially a large one.
Page Ref: 148
Objective: 6.3
Skill: Concept
35) A divisional structure relies on functional departmentalization.
Answer: FALSE
Explanation: A divisional structure relies on product departmentalization.
Page Ref: 150
Objective: 6.4
Skill: Concept
36) A team organization typically does not utilize functional hierarchy.
Answer: TRUE
Explanation: People float from project to project as dictated by their skills and the demands of
those projects.
Page Ref: 154
Objective: 6.4
Skill: Concept
9
37) Which term refers to the specification of jobs to be done within an organization and the ways
in which those jobs relate to one another?
A) delegation
B) a mission statement
C) job specialization
D) role responsibility
E) organizational structure
Answer: E
Explanation: E) Organizational structure refers to the jobs undertaken within an organization
and how these jobs are related to one another.
Page Ref: 141
Difficulty: Easy
Objective: 6.1
Skill: Concept
38) Which of the following clarifies structure and shows employees where they fit into a firm's
operations?
A) delegation
B) departmentalization
C) organization charts
D) mission statement
E) job descriptions
Answer: C
Explanation: C) An organization chart is a diagram showing the structure and employee
placement in terms of operations.
Page Ref: 141
Difficulty: Easy
Objective: 6.1
Skill: Concept
39) What do the solid lines on an organization chart show in reporting relationships within a
company?
A) mission statement
B) chain of command
D) grapevine activity
E) market share
Answer: B
Explanation: B) The chain of command is shown on an organization chart as a solid line.
Page Ref: 141
Difficulty: Easy
Objective: 6.1
Skill: Concept
10
40) What is the process of designing specific jobs that need to be done and identifying the people
who will perform them called?
A) departmentalization
B) job specialization
C) group tasks
D) segmentation
E) team cohesion
Answer: B
Explanation: B) Job specialization is a result of identifying specific roles that need to be
undertaken within the organization.
Page Ref: 142
Difficulty: Easy
Objective: 6.2
Skill: Concept
41) Which term covers grouping jobs into logical units?
A) specialization
B) accountability
C) authorization
D) departmentalization
E) process management
Answer: D
Explanation: D) Departmentalization is the process of grouping jobs into logical units.
Page Ref: 143
Difficulty: Easy
Objective: 6.2
Skill: Concept
42) What kind of departmentalization happens when an organization is divided into operations
related to different products?
A) functional departmentalization
B) process departmentalization
C) customer departmentalization
D) geographic departmentalization
E) regional departmentalization
Answer: B
Explanation: B) Process departmentalization refers to organizational divisions based on product
process.
Page Ref: 143
Difficulty: Easy
Objective: 6.2
Skill: Concept
11
43) What is the main organizational characteristic of decentralized firms?

A) flat
B) tall
C) diverse
D) multi-layered
E) matrix
Answer: A
Explanation: A) Decentralized firms share the characteristic of a flat organizational structure.
Page Ref: 146
Difficulty: Easy
Objective: 6.3
Skill: Concept
44) Which feature characterizes the organization of centralized firms?
A) flat
B) tall
C) very large
D) responsive to change
E) well capitalized
Answer: B
Explanation: B) The main feature of centralized firms is their tall organizational structure.
Page Ref: 146
Difficulty: Easy
Objective: 6.3
Skill: Concept
45) What is an employee's duty to perform an assigned task?
A) delegation
B) authority
C) responsibility
D) accountability
E) specialization
Answer: C
Explanation: C) Within an organization, the duty to perform an assigned task is called
responsibility.
Page Ref: 148
Difficulty: Easy
Objective: 6.3
Skill: Concept
12
46) What is the power to make the decisions necessary to complete a task called?
A) delegation
B) specification
C) authority
D) responsibility
E) accountability
Answer: C
Explanation: C) Authority is defined as the power to make decisions that are necessary to ensure
the completion of a task.
Page Ref: 148
Difficulty: Easy
Objective: 6.3
Skill: Concept
47) What is authority that flows up and down the chain of command called?
A) staff authority
B) departmental authority
C) delegated authority
D) divisional authority
E) line authority
Answer: E
Explanation: E) Line authority is the term that describes the flow of authority along the chain of
command.
Page Ref: 148
Difficulty: Easy
Objective: 6.3
Skill: Concept
48) What type of departments are linked to the production and sales of specific products?
A) staff departments
B) matrix departments
C) line departments
D) organizational departments
E) entrepreneurial departments
Answer: C
Explanation: C) Line departments are defined as departments linked to the production and sales
of specific departments.
Page Ref: 148
Difficulty: Easy
Objective: 6.3
Skill: Concept
13
49) What is authority given to a special group of employees that play central roles in the firm's
daily operations called?
A) risk aversion
B) committee and team
C) line
D) matrix
E) product and labor
Answer: B
Explanation: B) Committee and team authority is the term given to the authority exercised by a
special group of employees.
Page Ref: 149
Difficulty: Easy
Objective: 6.3
Skill: Concept
50) What are everyday social interactions among employees that transcend formal jobs and job
interrelationships called?
A) traditional structure
B) informal organization
C) networking opportunities
D) production organization
E) community structure
Answer: B
Explanation: B) The informal organization of a company includes the everyday social
interactions among employees that go beyond the formal job-related interactions.
Page Ref: 155
Difficulty: Easy
Objective: 6.5
Skill: Concept
51) Which term describes creating and maintaining the innovation and flexibility of a small
business environment within the confines of a large, bureaucratic structure?
A) basic structuring
B) process organization
C) intrapreneuring
D) extrapolating
E) product innovation
Answer: C
Explanation: C) Intrapreneuring is the creation and maintenance of the innovation and flexibility
of a small business environment within the confines of a large, bureaucratic structure.
Page Ref: 156
Difficulty: Easy
Objective: 6.5
Skill: Concept
14
52) Which factor plays a key role in determining an organization's structure?

A) competition and technology
B) location and life-cycle stage
C) profitability and leverage
D) research and development
E) mission and strategy
Answer: E
Explanation: E) Many factors determine an organization's optimal structure, including mission,
strategy, company size, and the organization's environment.
Page Ref: 141
Objective: 6.1
Skill: Concept
53) What do managers do when the "job" of a firm is broken down into smaller jobs?
A) fragment the task
B) specialize the job
C) respond to the job
D) assign the task
E) control the job
Answer: B
Explanation: B) In a sense, all firms have one major job; to perform this one overall job,
managers actually break it down, or specialize it, into several smaller jobs.
Page Ref: 142
Objective: 6.2
Skill: Concept
54) At Chaparral Steel, some employees transport scrap steel while others operate shredding
equipment. What does this example demonstrate?
B) specialization
C) functionalization
D) responsibility
E) innovation
Answer: B
Explanation: B) When the overall job of the organization is broken down like this, workers can
develop real expertise in their jobs, and employees can better coordinate their work with that
done by others.
Page Ref: 142
Objective: 6.2
Skill: Application
15
55) Which of the following is a natural part of organizational growth?

A) retrenchment
B) entrepreneurship
D) outsourcing
E) team consolidation
Answer: C
Explanation: C) As an organization grows, the need to specialize jobs so that others can perform
them also becomes a priority.
Page Ref: 142
Objective: 6.2
Skill: Concept
56) Determining how people performing certain tasks can best be grouped together is called
what?
B) specialization
C) controlling
D) leadership
E) directing
Answer: A
Explanation: A) Departmentalized companies benefit from this division of activities; control and
coordination are narrowed and made easier, and top managers can see more easily how various
units are performing.
Page Ref: 143
Objective: 6.2
Skill: Concept
57) What type of departmentalization does Kraft Foods use by having separate divisions for
different types of foods?
A) customer
B) functional
C) geographic
D) product
E) brand
Answer: D
Explanation: D) In addition, a department can be treated as a profit center.
Page Ref: 143
Objective: 6.2
Skill: Application
16
58) Vlasic has separate departments to transform cucumbers into fresh-packed pickles, pickles
cured in brine, and relishes. What is this an example of?
E) centralized departmentalization
Answer: B
Explanation: B) With process departmentalization, the organization is divided according to
production processes used to create a good or service.
Page Ref: 143
Objective: 6.2
Skill: Application
59) What is dividing a store into a men's department, a women's department, and a luggage
department an example of?
A) product departmentalization
B) customer departmentalization
C) process departmentalization
E) international departmentalization
Answer: B
Explanation: B) Customer departmentalization is a form of organization in which departments
are created to offer products and meet needs for identifiable customer groups.
Page Ref: 144
Objective: 6.2
Skill: Application
17
60) A snack food firm has one division for the United States, one for Europe, and another for
Asia. How is this firm departmentalized?
A) by customer
B) by process
C) by geography
D) by function
E) by productivity
Answer: C
Explanation: C) With geographic departmentalization, an organization is divided according to
the areas of the country or the world that they serve.
Page Ref: 144
Objective: 6.2
Skill: Application
61) In what type of organization do most lower-level decisions need to be approved by upper
management before they can be implemented?
A) line
B) staff
C) decentralized
D) centralized
E) learning
Answer: D
Explanation: D) In a centralized organization, most decision-making authority is held by upperlevel managers.
Page Ref: 146
Objective: 6.3
Skill: Concept
62) At McDonald's, most advertising is handled at the corporate level, and any local advertising
must be approved by a regional manager. What kind of organization is McDonald's
demonstrating?
A) authoritarian
B) committee
C) decentralized
D) centralized
E) team
Answer: D
Explanation: D) McDonald's practices centralization as a way to maintain standardization.
Page Ref: 146
Objective: 6.3
Skill: Application
18
63) In what type of organization is decision-making authority delegated to levels of management

at various points below the top?
A) centralized
B) decentralized
C) point-of-sale
D) geographic
E) autocratic
Answer: B
Explanation: B) As a company gets larger, decision making tends to become more decentralized;
decentralization is typical in firms that have complex and rapidly changing environmental
conditions.
Page Ref: 146
Objective: 6.3
Skill: Concept
64) What kind of organization becomes more responsive to its environment by breaking the
company into more manageable units?
A) centralized
B) decentralized
C) geographic
D) process-oriented
E) brand conscious
Answer: B
Explanation: B) In doing so, the organization can operate more efficiently in complex, rapidly
changing environmental conditions.
Page Ref: 146
Objective: 6.3
Skill: Concept
65) With relatively few layers of managers, what do decentralized organizations tend to reflect?
A) tall organizational structure
B) short organizational structure
C) flat organizational structure
D) elliptical organizational structure
E) triangular organizational structure
Answer: C
Explanation: C) Delegation and authority are pushed downward in the organizational hierarchy.
Page Ref: 146
Objective: 6.3
Skill: Concept
19
66) Companies with centralized authority systems typically require multiple layers of
management. What type of organizational structures are these companies utilizing?
A) tall
B) short
C) flat
D) broad
E) oblique
Answer: A
Explanation: A) Decisions are made mostly by upper-level managers.
Page Ref: 146
Objective: 6.3
Skill: Concept
67) With its many organizational layers, what type of organizational structure does the U.S.
Army demonstrate?
A) tall
B) step
C) flat
D) broad
E) triangular
Answer: A
Explanation: A) The U.S. Army has a centralized, and tall, authority system.
Page Ref: 146
Objective: 6.3
Skill: Application
68) In tall organizations, which feature describes the span of control?
A) short
B) tall
C) wide
D) narrow
E) vertical
Answer: D
Explanation: D) Due to multiple layers of employees, different levels of employee skill levels,
job dissimilarities and job difficulties, tall organizations tend to lead to a narrower managerial
span of control.
Page Ref: 146
Objective: 6.3
Skill: Concept
20
69) What is the preferred span of control when jobs are more diversified or prone to change?
A) wide
B) narrow
C) tall
D) deep
E) authoritative
Answer: B
Explanation: B) Job difficulty and job dissimilarity can lead to a narrower span of control for
managers.
Page Ref: 146
Objective: 6.3
Skill: Concept
70) Which of the following begins when a manager assigns responsibility to a subordinate?
A) centralization
B) delegation
C) liability
D) authority
E) training
Answer: B
Explanation: B) The delegation process involves three steps: assigning responsibility, granting
authority, and creating accountability.
Page Ref: 148
Objective: 6.3
Skill: Concept
71) After responsibility for a task is assigned, which of the following comes next?
A) the centralization of the task
B) the liability of the task
C) the span of control is decided
D) the work team is created
E) the granting of authority
Answer: E
Explanation: E) The delegation process involves three steps: assigning responsibility, granting
authority, and creating accountability.
Page Ref: 148
Objective: 6.3
Skill: Concept
21
72) Which of the following best describes responsibility?

A) the power to make the decisions necessary to complete a task
B) the liability of subordinates for accomplishing tasks assigned by managers
C) the number of people supervised by one manager
D) the duty to perform an assigned task
E) the need to prove satisfactory work performance
Answer: D
Explanation: D) In contrast, authority is the power to make the decisions necessary to complete
the task.
Page Ref: 148
Objective: 6.3
Skill: Concept
73) Which of the following best describes authority?
B) the liability of subordinates for accomplishing tasks assigned by managers
C) the number of people supervised by one manager
D) the ability to take on new responsibility
E) the duty to perform an assigned task
Answer: A
Explanation: A) In contrast, responsibility is the duty to perform an assigned task.
Page Ref: 148
Objective: 6.3
Skill: Concept
74) Which of the following best describes accountability?
B) the obligation employees have to their manager for the successful completion of an assigned
task
C) the decision to communicate clear expectations related to assigned tasks
D) the number of people supervised by one manager
E) the duty to perform a financial task
Answer: B
Explanation: B) Creating accountability is the final step of the delegation process; for the
process to work smoothly, authority and responsibility must be equivalent.
Page Ref: 148
Objective: 6.3
Skill: Concept
22
75) What authority is based on special expertise and usually involves counseling and advising?
A) line authority
B) matrix authority
C) delegated authority
D) staff authority
E) divisional authority
Answer: D
Explanation: D) For example, a corporate attorney may be asked to advise the marketing
department as it prepares a new contract with the firm's advertising agency.
Page Ref: 149
Objective: 6.3
Skill: Concept
76) What are specialists in law, accounting, and human resource management commonly called?
A) profit centers
B) cost centers
C) staff members
D) line members
E) unit managers
Answer: C
Explanation: C) Staff members help departments in making decisions but do not usually have
the authority to make final decisions.
Page Ref: 149
Objective: 6.3
Skill: Concept
77) What are groups of operating employees called who are empowered to plan and organize
their tasks and to perform those tasks with a minimum of supervision?
A) task forces
B) standing committees
C) work teams
D) division committees
E) board members
Answer: C
Explanation: C) The organization will usually find it beneficial to grant special authority to work
teams so that they may function more effectively.
Page Ref: 149
Objective: 6.3
Skill: Concept
23
78) Which form of organization is used by most small to medium-sized firms?

A) divisional
B) functional
C) matrix
D) international
E) stratified
Answer: B
Explanation: B) Functional structure is a form of organization in which authority is determined
by the relationships between group functions and activities; it is based on the use of functional
departmentalization at the highest level of the business.
Page Ref: 150
Objective: 6.4
Skill: Concept
79) Firms with what structure are structured around departments for each basic business action?
A) divisional structure
B) matrix structure
C) functional structure
D) international structure
E) regional structure
Answer: C
Explanation: C) Benefits of this structure include specialization within functional areas and
smoother coordination among them.
Page Ref: 150
Objective: 6.4
Skill: Concept
80) Which of the following structures relies on product departmentalization?
A) matrix
B) functional
C) divisional
D) international
E) regional
Answer: C
Explanation: C) The firm organizes itself around product-based divisions, each of which may
then be managed as a separate enterprise.
Page Ref: 150
Objective: 6.4
Skill: Concept
24
81) What are departments called that resemble separate businesses in that they produce and
market their own products?
A) regions
B) divisions
C) function centers
D) cost centers
E) work hubs
Answer: B
Explanation: B) Further, the head of each division may be a corporate vice president or, if the
organization is large enough, a divisional president.
Page Ref: 150
Objective: 6.4
Skill: Concept
82) The organization of the health care producer Johnson & Johnson includes consumer health
care products, medical devices and diagnostics, and pharmaceuticals. What kind of
organizational structure does this company use?
A) departments
B) regions
C) units
D) divisions
E) committees
Answer: D
Explanation: D) Johnson & Johnson can thus evaluate the performance of each division
independently.
Page Ref: 150
Objective: 6.4
Skill: Application
25
83) What style of organization relies almost entirely on employees working on a common
project, with little or no underlying functional hierarchy?
A) team
B) virtual
C) learning
D) flexible
E) stratified
Answer: A
Explanation: A) People float from project to project as dictated by their skills and the demands
of those projects.
Page Ref: 154
Objective: 6.4
Skill: Concept
84) What structure does an organization with little or no formal structure and with only a handful
of permanent employees use?
A) team structure
B) virtual structure
C) learning structure
D) flexible structure
E) balanced structure
Answer: B
Explanation: B) Typically, a virtual organization has only a handful of permanent employees, a
very small staff, and a modest administrative facility.
Page Ref: 154
Objective: 6.4
Skill: Concept
26
85) What type of organization seeks to integrate continuous improvements with continuous
employee development?
A) team
B) virtual
C) learning
D) flexible
E) evolving
Answer: C
Explanation: C) A learning organization works to facilitate the learning and personal
development of all of its employees while continually transforming itself to respond to changing
demands and needs.
Page Ref: 155
Objective: 6.4
Skill: Concept
86) Which of the following organizational systems is the part that can be seen and represented in
chart form?
A) networking
B) formal organization
C) informal organization
D) grapevine
E) sales forecasting
Answer: B
Explanation: B) The structure of a company, however, is by no means limited to the organization
chart and the formal assignment of authority.
Page Ref: 155
Objective: 6.5
Skill: Concept
27
87) What has Rubbermaid used to create and maintain the innovation and flexibility of a small
business environment within the large, bureaucratic structure?
A) formal organization
B) informal organization
C) intrapreneuring
D) entrepreneurship
E) capitalization
Answer: C
Explanation: C) The firm has one major division, the New Business Group. When a manager or
engineer has an idea for a new product or product application, the individual takes it to the New
Business Group and "sells" it. The managers in the group then help the innovator develop the
idea for testing.
Page Ref: 156
Objective: 6.5
Skill: Application
88) Which of the following is an advantage of job specialization?
A) Workers can develop expertise in their jobs.
B) Workers will not need to be trained.
C) Jobs become more interesting.
D) Workers derive more satisfaction from their jobs.
E) Jobs do not need to be redefined.
Answer: A
Explanation: A) However, jobs at lower levels of the organization are especially susceptible to
overspecialization. If such jobs become too narrowly defined, employees may become bored and
careless, derive less satisfaction from their jobs, and lose sight of their roles in the organization.
Page Ref: 142
Objective: 6.2
Skill: Synthesis
28
89) Procter & Gamble has Baby Care, Beauty Care, Health Care, and Home and Fabric Care
divisions in its U.S. operations. What is this an example of?
A) customer departmentalization
C) geographic departmentalization
D) functional departmentalization
E) product departmentalization
Answer: E
Explanation: E) With product departmentalization, the organization is divided according to the
specific product or service being created.
Page Ref: 143
Difficulty: Difficult
AACSB: Reflective thinking skills
Objective: 6.2
Skill: Application
90) American Wood Products has three divisions. The Lumberjack division is involved in
harvesting trees and transporting them to lumber mills. The Milling division transforms cut
timber into dimensional lumber for building. The Paper Products division makes paper and
cardboard from the remnants of the milling process. What type of departmentalization is this an
example of?
E) brand departmentalization
Answer: B
Explanation: B) With process departmentalization, the organization is divided according to
production processes used to create a good or service.
Page Ref: 143
Objective: 6.2
Skill: Application
29
91) Silver Designs is a high-end clothing manufacturer. They have three divisions producing
clothes for men, women, and teens. What is this an example of?
D) product departmentalization
E) geographic departmentalization
Answer: C
Explanation: C) Customer departmentalization follows specialization for certain types of
customers.
Page Ref: 144
Objective: 6.2
Skill: Application
92) Which statement about organizational structure is TRUE?
A) Decentralized firms tend to have many layers of management.
B) As a company gets larger, it tends to adopt a decentralized structure.
C) The purpose of centralization is to make a company more responsive to a changing, complex
environment.
D) In a centralized organization, most decision-making authority is held by lower-level
managers.
E) Decentralized companies must change to centralized structures in response to unpredictable
environments.
Answer: B
Explanation: B) In a decentralized structure, much decision-making authority is delegated to
levels of management at various points below the top.
Page Ref: 146
Objective: 6.3
Skill: Concept
30
93) Jack Welch, former CEO of General Electric, stated, "If you don't let managers make their
own decisions, you're never going to be anything more than a one-person business." What style
of management is Welch proposing?
A) authentic management
B) linear management
C) centralized management
D) group management
E) decentralized management
Answer: E
Explanation: E) In a decentralized structure, delegation of authority flows downward.
Page Ref: 146
Objective: 6.3
Skill: Application
94) What is the sequence of events in the delegation process?
A) assigning responsibility follows granting authority
B) granting authority follows creating accountability
C) granting authority follows assigning responsibility
D) assigning responsibility follows creating accountability
E) assigning accountability follows creating authority
Answer: C
Explanation: C) The steps in the delegation process, in order, include assigning responsibility,
granting authority, and creating accountability.
Page Ref: 148
Objective: 6.3
Skill: Concept
95) Which statement about line departments is TRUE?
A) They include those with special counseling and advising expertise.
B) They include those directly linked to the sales of products.
C) They include staff members who provide services to management.
D) They have little effect on the production of goods.
E) Customer preference has little effect on them.
Answer: B
Explanation: B) Line departments include those employees directly linked to the production and
sales of products.
Page Ref: 148
Objective: 6.3
Skill: Concept
31
96) Which of the following are the "doers" and producers in a company?
A) line employees
B) staff employees
C) matrix employees
D) the legal department
E) the finance department
Answer: A
Explanation: A) Line employees include those related to goods and services production.
Page Ref: 148
Objective: 6.3
Skill: Concept
97) Which statement about staff responsibility is TRUE?
A) It is likely to include those employees involved in the production of products.
B) It is not likely to include those who provide services to managers.
C) It is linked directly to delivery of a product.
D) It is clearly different from line authority.
E) It is not related to the work of managers.
Answer: D
Explanation: D) The separation between line authority and staff responsibility is clearly
delineated; staff responsibility is typically carried out by those employees who provide services
to managers.
Page Ref: 148
Objective: 6.3
Skill: Concept
98) Which feature will a committee have?
A) inclusion of only top managers from one specific area
B) mandate to change the corporate culture
C) some decision-making responsibility
D) ability to work together only for a short period of time
E) inclusion of employees from all company levels
Answer: C
Explanation: C) A committee will likely be comprised of top managers from several major
areas; the entire committee may be granted decision-making power.
Page Ref: 149
Objective: 6.3
Skill: Concept
32
99) At Ace Products, three vice presidents report to the CEO, including the VP for Finance, the
VP for Marketing, and the VP for Operations. What type of structure does Ace Products have?
A) divisional
B) matrix
C) regional
D) functional
E) international
Answer: D
Explanation: D) Functional structure is a form of business organization in which authority is
determined by the relationships between group functions and activities.
Page Ref: 150
Objective: 6.4
Skill: Application
100) What does functional structure foster?
A) competitiveness
B) centralization
C) decentralization
D) diversity
E) accountability
Answer: B
Explanation: B) This, in turn, makes accountability more difficult.
Page Ref: 150
AACSB: Analytic skills
Objective: 6.4
Skill: Concept
101) Thomas Corp. has three basic departments: children's books, games, and toys. What type of
structure does the company have?
A) divisional
B) matrix
C) functional
D) process
E) global
Answer: A
Explanation: A) A divisional structure relies on product departmentalization.
Page Ref: 150
Objective: 6.4
Skill: Application
33
102) Which of the following types of structure entails a second chain of command?
A) divisional
B) departmental
C) committee
D) matrix
E) team
Answer: D
Explanation: D) A matrix structure is often referred to as a "combination" structure.
Page Ref: 151
Objective: 6.4
Skill: Concept
103) To provide a state-of-the-art classroom and instructional technology, Shell Oil recently
purchased an executive conference center north of Houston. What type of organization does this
purchase reflect?
A) team
B) virtual
C) learning
D) acquisitive
E) traditional
Answer: C
Explanation: C) The facility boasts state-of-the-art classrooms and instructional technology,
lodging facilities, a restaurant, and recreational amenities.
Page Ref: 155
Objective: 6.4
Skill: Application
104) Why do most businesses use organization charts?
Answer: Organization charts clarify structure and show employees where they fit into a firm's
operations. The solid lines define the chain of command, or reporting relationship, within the
company.
Explanation: An organization chart is a graphical representation and therefore is able succinctly
to convey information about departmental and reporting structures.
Page Ref: 141
Difficulty: Easy
Objective: 6.1
Skill: Concept
34
105) Why is the structure typically found within a virtual organization different from the
structure of a large corporation?
Answer: A main feature of a virtual organization is that it has little or no formal structure.
Explanation: A typical virtual organization has only a handful of employees and a modest
administrative facility.
Page Ref: 154
Difficulty: Easy
Objective: 6.4
Skill: Concept
106) Describe a learning organization.
Answer: A learning organization works to facilitate the lifelong learning and personal
development of all of its employees while continually transforming itself to respond to changing
demands and needs.
Explanation: Generally a learning organization is characterized by five main features: systems
thinking, personal mastery, mental models, shared vision, and team learning.
Page Ref: 155
Difficulty: Easy
Objective: 6.4
Skill: Concept
107) Why is company size a critical factor in fostering intrapreneuring?
Answer: Historically, most innovations have come from individuals in small businesses. As
businesses increase in size, however, innovation and creativity tend to become casualties in the
battle for more sales and profits.
Explanation: Intrapreneuring is more commonly encouraged in larger companies.
Page Ref: 156
Difficulty: Easy
Objective: 6.5
Skill: Synthesis
108) Explain why retail stores are referred to by a generic name.
Answer: Retail stores actually derive their generic namedepartment storesfrom the manner
in which they are structured.
Explanation: Large retail stores utilize departmentalization in their organizational structure.
Page Ref: 143
Objective: 6.2
Skill: Concept
35
109) List three factors that may affect a manager's span of control.
Answer: Factors that may affect a manager's span of control include employees' abilities, the
similarity and simplicity of tasks, and the extent to which tasks are interrelated.
Explanation: Other factors may include the supervisor's management skills and the synergy
between the assigned tasks.
Page Ref: 146
Objective: 6.3
Skill: Concept
110) Briefly explain the steps in the delegation process.
Answer: The delegation process begins when responsibility is assigned. Then, authority is
granted. Finally, accountability is created.
Explanation: The delegation sequence includes assigning responsibility, granting authority, and
instigating accountability processes.
Page Ref: 148
Objective: 6.3
Skill: Concept
111) Discuss the difference between delegation and accountability.
Answer: Delegation is the process through which managers allocate work to subordinates.
Accountability, one of the steps in the delegation process, is the obligation employees have to
their managers for completion of the assigned task.
Explanation: Delegation is the overall process whereas accountability is a step in the process.
Page Ref: 148
Objective: 6.3
Skill: Concept
112) How do the job duties of line employees and staff employees differ?
Answer: Line employees are directly involved in the production and/or sales of goods or
services produced; staff employees generally provide services to management but are not directly
involved in goods and services production.
Explanation: Line employees are involved in core business while staff employees provide
support.
Page Ref: 148
Objective: 6.3
Skill: Concept
36
113) What is the difference between responsibility and authority?

Answer: Responsibility is the duty to perform an assigned task, whereas authority is the power
to make the decisions necessary to complete the task.
Explanation: Responsibility relates to task assignment; authority relates to task completion.
Page Ref: 149
Objective: 6.3
Skill: Concept
114) What does a divisional structure rely on and why does it rely on this feature?
Answer: A division structure relies on product departmentalization. Organizations using this
approach are typically structured around several product-based divisions that operate like
separate businesses.
Explanation: Divisional structures can resemble separate businesses where each is responsible
for the production and marketing of their own products.
Page Ref: 150
Objective: 6.4
Skill: Synthesis
115) Because international organizational structures have emerged in response to the need to
manufacture, purchase, and sell in global markets, why do some companies adopt a truly global
structure?
Answer: Some companies adopt a truly global structure in which they acquire resources
(including capital), produce goods and services, engage in research and development, and sell
products in whatever local market is appropriate, without consideration of national boundaries.
Explanation: The advantage of an international organizational structure is that it allows the
company to function as one integrated global organization.
Page Ref: 154
Objective: 6.4
Skill: Concept
116) What is the informal organization and how does it relate to the formal structure?
Answer: The informal organization consists of the everyday social interactions among
employees that go beyond formal jobs and job interrelationships. It can affect the company's
formal structure by changing the way information is sourced and distributed.
Explanation: In certain cases the informal organization is sometimes just as powerful, if not
more powerful, than the formal structure.
Page Ref: 155
Objective: 6.5
Skill: Synthesis
37
117) What are the four basic forms of organizational structure? Briefly describe each.
Answer: The basic forms of organizational structure are functional, divisional, matrix, and
international. In a functional organization, authority is determined by the relationships between
groups and activities. Functional organizations tend to be structured around basic functions. In a
divisional organization, corporate divisions operate as autonomous businesses under the larger
corporate umbrella. Organizations with matrix structures form teams, and team members report
to two or more managers. International organizational structures have developed in response to
the need to manufacture, purchase, and sell in global markets.
Explanation: The basic forms of organizational structure are functional, divisional, matrix, and
international.
Page Ref: 141
Objective: 6.4
Skill: Concept
118) Briefly describe the five basic forms of departmentalization.
Answer: The five basic forms of departmentalization are customer, product, process, geographic,
and functional. Customer departmentalization occurs when the organization is divided according
to the types of customers they serve. An organization with product departmentalization groups
people and functions according to the specific products being created. Process
departmentalization occurs when the organization is divided according to production processes.
Organizations with geographic departmentalization create divisions to serve different geographic
areas. Finally, functional departmentalization occurs when departments are created around their
function or activity.
Explanation: The five basic forms of departmentalization are customer, product, process,
geographic, and functional.
Page Ref: 143
Objective: 6.2
Skill: Concept
38
119) What is delegation? Identify four reasons that managers have trouble delegating.
Answer: Delegation is the process by which managers allocate work to employees. Experts
pinpoint several reasons why managers may have trouble delegating effectively. Some managers
may be concerned that employees are less able to perform a job. Managers may also be
concerned that the employee will "show them up" in front of others by doing a superior job.
Managers may be hesitant to delegate because of a desire to keep as much control as possible
over operations. Finally, managers may lack the ability to effectively delegate.
Explanation: The four reasons that managers have trouble with delegation include perception of
employee ability to complete a task, concern about appearing inadequate, desire to exert control,
and lack of effective delegation skills.
Page Ref: 148
Objective: 6.3
Skill: Synthesis
120) List and describe the three forms of authority.
Answer: The three forms of authority are line authority, staff authority, and committee and team
authority. Line authority flows in a direct chain of command from the top of the company to the
bottom. Staff authority is based on expertise and usually involves counseling and advising
managers. Committee and team authority is granted to committees or work teams involved in a
firm's daily operations.
Explanation: The three forms of authority are line authority, staff authority, and committee and
team authority.
Page Ref: 148-149
Objective: 6.3
Skill: Concept
121) List and describe three advantages of a divisional structure.
Answer: In a divisional organization, corporate divisions operate as autonomous businesses
under the larger corporate umbrella. A divisional structure allows the corporation to evaluate the
performance of each division independently. Because the divisions are relatively autonomous, a
firm can sell or eliminate a single division with minimal disruption to the remaining business
operations. Finally, a divisional structure can create healthy competition. Divisions can share
certain corporate-level resources.
Explanation: Divisions operate as autonomous businesses. The advantages include independent
evaluation, ability to sell or disband with minimal disruption to the corporation, and the
opportunity to compete and share resources.
Page Ref: 150
Objective: 6.4
Skill: Concept
39
122) Why is it important for organizations to create and communicate their organizational
structure?
Answer: Each organization must develop an appropriate organizational structure: the
specification of the jobs to be done and the ways in which those jobs relate to one another. Most
organizations change structures almost continuously. Firms prepare organization charts to clarify
structure and to show employees where they fit into a firm's operations. Each box represents a
job, and solid lines define the chain of command, or reporting relationships. The charts of large
firms are complex and include individuals at many levels. Because size prevents them from
charting every manager, they may create single organization charts for overall corporate structure
and separate charts for divisions.
Page Ref: 145-146
Difficulty: Easy
Objective: 6.1
Skill: Concept
123) Explain specialization and departmentalization.
Answer: The process of identifying specific jobs and designating people to perform them leads
to job specialization. After they are specialized, jobs are grouped into logical unitsthe process
of departmentalization. Departmentalization follows one of five forms: (1) product
departmentalization, (2) process departmentalization, (3) functional departmentalization, (4)
customer departmentalization, or (5) geographic departmentalization. Larger companies take
advantage of different types of departmentalization for various levels.
Page Ref: 150
Difficulty: Easy
Objective: 6.2
Skill: Concept
124) Why are centralization and decentralization, delegation, and authority the key ingredients in
establishing the decision-making hierarchy?
Answer: After jobs have been specialized and departmentalized, firms establish decision-making
hierarchies. One major issue addressed through the creation of the decision-making hierarchy
involves whether the firm will be relatively centralized or relatively decentralized. Centralized
authority systems typically require multiple layers of management and thus tall organizational
structures. Decentralized firms tend to have relatively fewer layers of management, resulting in a
flat organizational structure. Delegation is the process through which a manager allocates work
to subordinates. In general, the delegation process involves three steps: (1) assigning
responsibility; (2) granting authority; and (3) creating accountability. As individuals are
delegated responsibility and authority in a firm, a complex web of interactions develops. These
interactions may take one of three forms of authority: line, staff, or committee and teams.
Page Ref: 148
Objective: 6.3
Skill: Concept
40
125) Explain the differences among functional, divisional, matrix, and international
organizational structures and describe the most popular new forms of organizational design.
Answer: Most firms rely on one of four basic forms of organizational structure: (1) functional,
(2) divisional, (3) matrix, or (4) international. Functional structure is a form of business
organization in which authority is determined by the relationships between group functions and
activities. A divisional structure relies on product departmentalization. A so-called matrix
structure is organized along two dimensions, instead of just one, by combining, for example, a
functional and a divisional structure. International organizational structures are developed in
response to the need to manufacture, purchase, and sell in global markets. As global competition
becomes more complex, companies may experiment with ways to respond. Some adopt truly
global structures, acquiring resources and producing and selling products in local markets
without consideration of national boundaries. Organizations also continue to seek new forms of
organization that permit them to compete effectively. The most popular new forms include (1)
team organization; (2) virtual organization; and (3) learning organization.
Page Ref: 150-153
Objective: 6.4
Skill: Synthesis
126) Describe the informal organization and the position of intrapreneuring within this structure.
Answer: The formal organization is the part that can be represented in chart form. The informal
organization, everyday social interactions among employees that transcend formal jobs and job
interrelationships, may alter formal structure. The impact on a firm may be positive, negative, or
irrelevant. Because it can be harnessed to improve productivity, some organizations encourage
the informal organization. Many firms also support intrapreneuring, creating and maintaining the
innovation and flexibility of a small business within the confines of a large, bureaucratic
structure.
Page Ref: 155-157
Objective: 6.5
Skill: Synthesis
41
Samantha Grant has assumed leadership of Ace Products after many years of loyal service. Ace
Products is an international manufacturer of copiers, printers, and fax machines. Historically, its
customers have fallen into four groups: hospitals, small businesses, airlines, and state and local
governments. After talking with her daughter, who has just completed her business degree,
Samantha is beginning to wonder if reorganizing would benefit Ace Products. The organization
chart shows that there is a Vice President of Manufacturing, Vice President of Accounting and
Finance, and a Vice President of Marketing; they all report to the President of Ace Products.
127) Describe the span of control likely to prevail at Ace Products.
Answer: In tall organizations, such as Ace, span of control tends to be relatively narrow.
Page Ref: 146
Difficulty: Easy
Objective: 6.3
Skill: Application
128) What are three factors that may impact span of control at Ace Products?
Answer: Job similarity, job simplicity, employees' skill levels, and other possible factors could
affect span of control.
Page Ref: 146-148
Objective: 6.3
Skill: Application
129) Based on the organization chart described in the scenario, how is Ace Products organized?
Answer: It appears that Ace Products is organized as a functional organization.
Page Ref: 150
AACSB: Analytic skills
Objective: 6.4
Skill: Application
130) Samantha's daughter has recommended that Ace Products be reorganized into a divisional
organization. Including only top layers of management, how might the organization chart differ
from what it looks like now?
Answer: Under the President, a vice president of various divisions could lead; for example, a
Vice President of Hospitals, a Vice President of Airlines, etc. could all report to the President.
Page Ref: 150-151
Objective: 6.4
Skill: Application
42
131) How might a divisional structure benefit Ace Products?

Answer: Divisional structures are popular among larger organizations and enjoy a number of
benefits. Each division usually has its own identity and operates as a relatively autonomous
business under the larger corporate umbrella. Divisionalized companies are free to buy, sell,
create, and disband divisions without disrupting the rest of their operations. Divisions can
maintain healthy competition among themselves by sponsoring separate advertising campaigns
and fostering different corporate identities. They can also share certain corporate-level resources.
Page Ref: 150-151
Objective: 6.4
Skill: Application
132) How would you advise Samantha about the best organizational structure for Ace Products?
Why?
Answer: Answers will vary and will likely include some of the advantages listed in the textbook.
In addition, students may mention that coordination may become difficult in a functional
organization. In divisional structures, corporate managers may lose touch with daily operations if
too much control is delegated to division managers. In addition, competition between divisions
can become disruptive, and efforts in one division may be duplicated by those of another.
Page Ref: 150-153
Objective: 6.4
Skill: Application
133) Samantha has wondered about the informal organization at Ace. Describe how the informal
organization may negatively affect the organization.
Answer: The informal organization can reinforce office politics that put individuals' interests
ahead of those of the firm. Also, information can be distorted when communicated without
management input or review.
Page Ref: 155-157
Objective: 6.5
Skill: Application
43
At Appleson Publishing, products are produced by a team representing different functional

groups, none of which have supervisory authority over any of the others. Represented
departments include Design, Production, and Marketing.
Design department members are skilled at identifying customer requirements and creating
product specifications. Their success is measured by return on product investment, which takes
into account both the money earned by a product and the money spent on that product.
Production department members are skilled at project execution. They are responsible for
creating products according to the Design department members' specification. The Production
department is considered successful when it completes projects according to schedule and project
spending does not exceed the project's budget.
Marketing department members are responsible for building profitable relationships with target
market segments. They are skilled at communicating a product's value and persuading customers
to make purchases. Marketing department members' success is measured by the revenue that the
products take in.
134) Which of the following questions would most likely lead to a conflict between Design
department members and Production department members?
A) Should Appleson invest in a new project that requires heavy initial investment but is expected
to lead to a large stream of revenue in the long run?
B) Should a project be launched later than planned in order to make changes that will make it
more attractive to customers?
C) Should product management focus on the needs that customers have already expressed or
should it try to anticipate unexpressed needs?
D) Is the team project process at Appleson more effective than it would be if it followed a more
traditional organizational structure?
E) When projects do not meet expectations, is the failure likely to be caused by faulty product
design or inadequate market development?
Answer: B
Explanation: B) The Design department gets rewarded when projects earn high returns, but
schedules don't matter. The Production department gets rewarded when projects are on time, but
the money that those projects earn doesn't matter. So the Design department members and
Production department members would most likely clash over Choice B. Choices A and C: The
Production department would have no special reason to have an opinion on these questions.
Choice D: We don't know if anyone thinks the system should be changed. Choice E is likely to
be a clash between Design and Marketing.
Page Ref: 142
Objective: 6.2
Skill: Critical Thinking
44
135) Executives claim that this division of labor keeps employees focused on the tasks that fit
their skills and leads to a better product. Which of the following, if true, would strengthen that
claim?
A) During every project, Design department members spend a large amount of time consulting
with Marketing department members to learn how the Marketing department will attempt to sell
the completed project.
B) When environmental changes that take place after the project has been launched make the
project unattractive to customers, the Production department attempts to complete the project
according to the original schedule and budget.
C) After a product specification is completed, knowledge of the thinking that went into the
product specification is not necessary to complete the project effectively.
D) The team process is based on the process that Appleson's executives used during the era of
print-only product development.
E) The reasoning behind the team process is presented to new employees as part of their initial
orientation.
Answer: C
Explanation: C) The Design department knows what customers want and come up with a plan.
Production executes the plan. But do they need to know what customers want in order to execute
the plan? If Choice C is true, then the answer is no, they don't. So Choice C strengthens the
argument by supporting the notion that the Production department has what they need to do their
job effectively. Choice A undermines the argument by suggesting that discussions need to take
place that would be unnecessary if the distinction between the Design department and the
Marketing department were eliminated. The fact that these discussions are necessary suggests
that splitting these functions is inefficient. Choice B undermines the argument by suggesting that
Production keeps spending resources on doomed projects. Choice D doesn't matter because this
is a new era, and we don't even know how effective the model was in that older era. Choice E
doesn't address the wisdom of the process; it doesn't help us decide if this is a good thing to try to
do.
Page Ref: 142
Objective: 6.2
45
136) Which of the following, if true, would weaken the claim that this division of labor keeps
employees focused on the tasks that fit their skills and leads to a better product?
A) Some employees who work in the Marketing department used to work in the Design
department.
B) Projects often fail to meet their revenue goals because the Design department develops
products for market segments that the Marketing department cannot reach.
C) Projects are often late because of product distribution problems that occur after the project is
completed.
D) The number of projects that fail because they do not meet their revenue goals is lower than
the number of projects that fail because they go too far over budget.
E) Projects often are unprofitable because of changes in the external environment that could not
have been predicted before the project started.
Answer: B
Explanation: B) Does this structure make sense? If Choice B is true, then Design is working in a
way that will not allow Marketing to do its job. Choice B suggests that a top-down approach
would be more effective in keeping everyone on the same page. Choices A and D are not
problems in and of themselves. So they aren't evidence of a structural problem. Choices C and E
are problems, but not ones that are related to the structural decisions here.
Page Ref: 142
Objective: 6.2
46
All American Burger is a nationwide fast food chain that competes with McDonald's, Burger
King, and Wendy's. Management at All American Burger is debating whether to have a more
centralized or a more decentralized organizational structure.
137) Which of the following, if true, would most strongly support the conclusion that All
American Burger should operate in a highly centralized manner?
A) All American Burger restaurants are spread over a large geographic area.
B) A greater number of managers have expressed an interest in making policy.
C) Entry-level workers at All American Burger are likely to be part-time or flex-time employees.
D) The organizations that choose more centralized operations are likely to be organizations in
crisis.
E) Customers choose All American Burger in large part because of the consistency of the dining
experience.
Answer: E
Explanation: E) Centralized operations make more sense when consistency is the goal. If Choice
E is true, then consistency is a critical success factor, and therefore strengthens the conclusion.
Choice A supports a decentralized approach. Choice B: The ambitions of the managers aren't
pivotal to this question, but if anything, their ambitions suggest that they would prefer a
decentralized approach. Choice C is irrelevant. Entry-level employees at a fast food chain aren't
managers, and the policy for handling them could just as easily be centralized or decentralized.
Choice D says nothing about All American Burger.
Page Ref: 146
Objective: 6.3
47
138) Which of the following, if true, would most strongly support the conclusion that All
American Burger should adopt a decentralized approach?
A) The value of a decentralized approach has been a popular topic in academic research.
B) A large percentage of All American Burger's revenue comes from a small number of menu
items.
C) The popularity of All American Burger's special menu items has varied greatly across
different regions.
D) All American Burger has been growing more quickly than most of its major competitors.
E) A well-publicized instance of discrimination at a single All American Burger can alter the
public's perception of the entire company.
Answer: C
Explanation: C) The varied reaction to All American Burger's special menu items (Choice C)
suggests that local tastes vary, which would argue against a "one size fits all" centralized
approach and for a more decentralized approach. Choice A is irrelevant. We don't even know
what that academic research says about decentralized approaches. Choice B suggests that
consistency in those few items is critical, which supports centralization. Choice D is vague, but if
anything it goes the other way. Increased size supports more centralization. Choice E says that a
single bad incident could be disastrous, which would weigh against tolerating any differences.
Page Ref: 146
Objective: 6.3
139) Which of the following decisions would likely be made by a centralized authority?
A) What are the procedures All American Burger should use to ensure food safety?
B) If All American Burger wishes to recruit current students for entry-level management
positions, which colleges and universities should All American Burger choose?
C) How should a regional division spend the money in its advertising budget?
D) What special menu items should be offered in order to encourage new customers?
E) Should marketing focus on bringing in new customers or taking customers from the
competition?
Answer: A
Explanation: A) It is always possible to come up with some argument for individual differences,
but that argument is hardest to make in the case of things like food safety, Choice A. Everyone
needs safe food, and it is hard to argue that the steps required for safety would be different for
different places. The other choices involve decisions that might be made at more local levels.
Page Ref: 146
Objective: 6.3
48
140) Which of the following questions would different All American Burger restaurants be most
likely to answer differently?
A) What color should All American Burger restaurants be?
B) What are the core values of All American Burger?
C) What price should All American Burger charge for its products?
D) What policies should be put in place to prevent sexual harassment in the workplace?
E) What ingredients should be used when making the food products that made All American's
Burger famous?
Answer: C
Explanation: C) Different areas have different costs of living, and so pricing is likely to vary
from restaurant to restaurant. Choices A, B, and E: The restaurants are not likely to change
anything essential to the brand, such as core values (Choice B), colors (Choice A), or "signature"
items (Choice E). Choice D: Companies need to have a uniform policy on preventing sexual
harassment. Having different policies in different places could be evidence that the company
does not take the issue seriously.
Page Ref: 146
Objective: 6.3
49
Tarnopol Learning Services (TLS) offers tutoring to high school students, college students, and
adults returning to school. TLS also bids on government-sponsored contracts. TLS's major
product offerings include academic tutoring, standardized test preparation, and admissions
consulting. Its operations spread over many geographic regions. Currently, the company is
deciding whether it should change from its current approach of organizing by geographical area.
A senior manager has predicted that if TLS is not profitable this year and fails to develop any
new products, the company will switch to either a functional approach or a product approach.
141) Which of the following, if true, would strengthen the argument that TLS should change its
organizational structure?
A) TLS values corporate social responsibility as well as profitability.
B) New product offerings have been neglected as divisions have focused on traditional revenue
sources.
C) TLS division managers have focused on short-term revenue at the expense of developing
profitable relationships with long-term customers.
D) The markets TLS serves have different requirements in different geographic areas.
E) The expected revenue of some of the regional divisions is higher than that of some of the
other divisions.
Answer: B
Explanation: B) A geographic organization has advantages, but it is not the best for focusing
attention on new products. If Choice B is true, then smaller products are not getting the attention
they deserve. Choices A and C: None of the choices available to TLS affects its ability to be
responsible (Choice A) or think long-term (Choice C). Choice D would support keeping the
current approach. Choice E says that some of the divisions are bigger than others, but that doesn't
suggest that the current approach isn't working.
Page Ref: 150
Objective: 6.4
50
142) Which of the following, if true, would most strongly suggest that TLS should change its
organizational structure to a product-based approach?
A) The largest growth area for TLS is governmental contracts, which have buying procedures
that are very different from those of other customers.
B) TLS currently maintains separate accounting departments in each of its regions.
C) To be effective, TLS managers need to be experts in at least one of the products that TLS
sells.
D) TLS hopes to build sustained relationships with customers, selling the same person academic
tutoring, standardized test preparation, and admissions consulting.
E) Communication between different marketing departments in different regions has been
substandard.
Answer: C
Explanation: C) A product-based approach helps to build the subject-matter expertise of the
managers. So if the managers need to know the products, as Choice C indicates, then the product
model looks a little better. Choice A favors an approach based on customer type. Choices B and
E would be no better in a product-based approach. Consolidation of those departments might
help, but the product-based approach would not require consolidation. Choice D would suggest
that a product-specific approach wouldn't be the way to go, because it might interfere with a
continuous relationship across products.
Page Ref: 150
Objective: 6.4
143) Which of the following, if true, would most strongly suggest that TLS should change its
organizational structure to a functional-based approach?
A) TLS currently maintains separate human resource departments in each of its regions.
B) Research suggests that product development failures happened because the product
developers were isolated from customers.
C) TLS earns large streams of revenue from services it offers to schools.
D) In the current regional structure, managers complain about having a limited view of
organizational goals.
E) Sales techniques that work in one region are often much less effective in other regions.
Answer: A
Explanation: A) One disadvantage of the geographic approach is the potential duplication of
functions. But the functional approach consolidates functions. So if Choice A is true then the
functional approach sounds a little better. Choices B and D would likely be worse under a
functional approach. Choice C suggests more an approach based around customer types. Choice
E would be better addressed by the current structure.
Page Ref: 150
Objective: 6.4
51
144) If the senior manager's prediction is accurate, which of the following is inferable?
A) If TLS does not change to either a product approach or a functional approach, then it will not
change its organizational approach at all.
B) If TLS is not profitable this year and fails to develop any new products, the company will first
switch to a functional approach and then to a product approach.
C) If TLS is profitable, then it could organize itself by customer groups.
D) If TLS does not change to either a product approach or a functional approach, then it could
not have been profitable this year.
E) If TLS does not change to either a product approach or a functional approach, then it could
not have developed any new products.
Answer: C
Explanation: C) The senior manager predicts what will happen if the company is not profitable
and if it fails to develop new products. However, the senior manager makes no prediction about
what would happen if TLS is profitable. So, according to the senior manager, if the company is
profitable, anything can happen, and so the scenario suggested in Choice C is possible. Choice A:
There may be other ways that TLS could organize itself. Choice B suggests that the company
will change twice, but the senior manager doesn't say that. Choices D and E have the same
problem. Together, failing to be profitable and failing to develop new products would be enough
to force TLS to go to one of those two organizational approaches, but the fact that it doesn't
adopt one of those approaches doesn't tell us what failed to happen. For example, if the company
is not profitable, then the company might not reorganize regardless of its success in developing
new products, so Choice E is not inferable. Similarly, if the company fails to develop any new
products, then the company might not reorganize whether or not it is profitable, so Choice D is
not inferable.
Page Ref: 150
Objective: 6.4
52
Wilson Communication Devices manufactures walkie-talkies for use in a business environment,

primarily in the industrial manufacturing industry. The walkie-talkies are small and lightweight
and do not interfere with Wi-Fi or radio signals that the companies may use for other purposes.
Wilson's walkie-talkies typically are used for communication between workers in high noise
environments, such as automobile manufacturing, welding shops, and construction sites. They
can be used to talk or text, depending on the noise level, and also contain a feature that allows
the worker to input information and store it for later use.
145) Since Wilson sells its walkie-talkies only to businesses, it needs to take into account factors
that affect business buying centers, such as organizational influences and individual factors. Two
salespeople for Wilson are arguing over which set of factors is more important to consider when
making a sale. Bill argues that organizational influences such as company goals and operating
environment are more important. Aubrey argues that individual factors of the buyer are more
important. Which of the following statements, if true, would support Bill's stand for
organizational influences?
A) Company V has liquid assets and a firm financial standing, even during the economic
downturn. It determines it can afford to buy new equipment like Wilson walkie-talkies in order to
upgrade its manufacturing process.
B) Kirk, the buyer for Company W, cannot stand Bill, and therefore refuses to buy any Wilson
walkie-talkies from him. However, he will order them from Aubrey.
C) Carl authorizes purchases for Company X, but he is very concerned about making a large
purchase without the input of his CEO.
D) The buyer at Company Y is motivated to advance his career as quickly as possible. Therefore,
he completes a thorough research project on Wilson walkie-talkies: He compares other available
walkie-talkies, researches price comparisons, and analyzes their use in his company.
E) Company Z has never purchased Wilson walkie-talkies because the secretary has never passed
along the information from any of the sales calls made by Wilson reps.
Answer: A
Explanation: A) Choice A is the only answer that supports Bill's argument for the importance of
organizational influences on sales. The finances of the company, along with its goals and
operating environment, are all organizational influences. Choices B, C, D, and E are all examples
of individual influences on business buying centers, and thus would more accurately support
Aubrey's argument. Personality, roles, motivation, level of power, risk, level of involvement, and
personal objectives are types of individual influence.
Page Ref: 156
Objective: 6.5
53
146) In the business-to-business buying process, the buyer goes through a variety of steps before
making a purchase. Included in these steps are identifying needs and vendors, evaluating
vendors, and negotiating terms. Hollis, a salesman for Wilson, understands this process and
provides a detailed precontract PowerPoint program for each company that he approaches.
Which of the following statements, if true, would he NOT consider putting in his presentation?
A) There is a variety of ways that Wilson walkie-talkies can be used to maximize the
communications of the business, as well as reduce overhead by eliminating communication
errors.
B) Next I'll identify competitors' products and detail why Wilson walkie-talkies are superior.
C) I'm including here an audit report and licensing credentials for Wilson.
D) Shown here are a variety of ways that Wilson walkie-talkies can also be used in a home
situation.
E) Displayed is a table detailing the cost per unit and how the unit costs decrease with order size.
Answer: D
Explanation: D) Choice D, demonstrating how the walkie-talkies can be used at home, would
not be an appropriate choice when selling business-to-business, as it would not have an
application directly related to the business. Choices A, B, C, and E all reflect aspects of a
business-to-business buying process which includes identification of business needs (Choice A),
identification of competitors (Choice B), vendor evaluation (Choice C), and negotiation of terms
(Choice E).
Page Ref: 156
Objective: 6.5
54

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Business Essentials, 9e (Ebert/Griffin)

Chapter 6 Organizing the Business

5) In a centralized structure, most decision-making authority is delegated to levels of

9) The chain of command is depicted by solid lines on an organization chart.

29) Job specialization is a natural part of organizational growth.

43) What is the main organizational characteristic of decentralized firms?

52) Which factor plays a key role in determining an organization's structure?

55) Which of the following is a natural part of organizational growth?

63) In what type of organization is decision-making authority delegated to levels of management

72) Which of the following best describes responsibility?

78) Which form of organization is used by most small to medium-sized firms?

113) What is the difference between responsibility and authority?

131) How might a divisional structure benefit Ace Products?

At Appleson Publishing, products are produced by a team representing different functional

Wilson Communication Devices manufactures walkie-talkies for use in a business environment,

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