World Of Business Chapter 7

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Organizing a business begins with:
A. acquiring the necessary resources.

B. choosing the best qualified employees.

C. developing an efficient plan of action.

D. determining the work to be done.


223. Dividing the required work among a group of employees is called:

A. departmentalization.

B. delegation of responsibility.

C. division of labor.

D. separation of control.


225. The process of setting up individual functional units of the business to do specialized tasks is called:

A. departmentalization.

B. division of labor.

C. job specialization.

D. delegation of authority.


226. Job specialization is known to:

A. minimize delegated authority and responsibility.

B. improve job performance.

C. create work teams and improve resource allocation.

D. establish procedures.


227. Which of the following is an example of a move to reorganize?

A. Reducing the labor force within your business

B. Revising plans by creating contingency plans

C. Managing by objectives and clearing pathways for success

D. Developing a way to monitor financial success
Reorganizations usually involve increasing or reducing the workforce within the business; adding or decreasing departments; opening or closing business units; and/or reallocating resources differently within the business.


232. The concept of ____________ suggests that as a firm produces more, the average cost of goods produced goes down.

A. natural growth

B. survival of the fittest

C. cost enhancement

D. economies of scale


233. Henri Fayol and Max Weber are best known for their contributions to:

A. production theory.

B. marketing theory.

C. organization theory.

D. finance theory.


234. Organization theorists emerged during the era of mass production, meaning:

A. the development of ways to produce a large quantity of product efficiently.

B. the development of ways to purchase raw materials in bulk.

C. the decline in the cost of production due to an increase in the cottage industry.

D. the era when most companies adopted very similar methods of producing goods and services, which led to standardization of organizational design.


235. Fayol’s _____________ principle states that each worker should report to one, and only one, boss.

A. division of labor

B. unity of command

C. esprit de corps

D. comparative advantage


237. Fayol’s ____________ principle says that workers’ attitudes can create an environment of pride and loyalty within an organization.

A. esprit de corps

B. hierarchy of loyalty

C. unity of command

D. equity


242. In Weber’s view of a bureaucratic organization, the organization demands:

A. a spirit of pride and loyalty among the workers.

B. cross-functional teams.

C. clearly established rules and guidelines that to be precisely followed.

D. self-managed teams.


246. In a bureaucratic organization:

A. departments communicate with each other on a regular basis.

B. employees follow strict rules and regulations.

C. customer satisfaction is the number one priority.

D. first-line workers are empowered to respond to the needs of customers.
Max Weber believed that as organizations grow, it is necessary to define strict rules and guidelines for workers. These rules are created for the purpose of making management’s job easier. The organization will realize more efficiency.


249. Economies of scale:

A. are available to small firms but not to large firms due to management inefficiencies.

B. are achieved when a firm reduces its average cost of production as it produces more.

C. can be avoided by purchasing supplies and raw materials in large quantities.

D. help explain the success of small businesses.
Mass production can allow a firm to increase its efficiency. As production volume increases, the per-unit cost of production decreases. This is explained, in part, by the purchase of supplies and raw materials in large quantities and by labor efficiencies.


258. Bill, a financial manager at Carlyle Bank and Trust, always strives to treat each subordinate with respect and fairness. Bill’s treatment of employees is an example of Fayol’s principle of:

A. unity of command.

B. equity.

C. empowerment.

D. order.
Fayol’s principle of equity says that employees and peers should be treated with respect and justice.


261. Fairview Community College is a multi-district college with four campuses. Each campus has one president, two vice presidents, five deans, 12 department chairs, over 100 faculty members, and several persons in support roles. The presidents from each campus report to four vice chancellors and the vice chancellors report to the chancellor. It is clear that Fairview has a well-defined ___________.

A. channel of academic culture

B. chain of command

C. responsibility environment

D. bureaucratic reallocation
The chain of command is the line of authority that moves from the top of the hierarchy to the lowest level.


263. The management at Patriot Mills works hard to ensure that no one in its organization has more than one boss and all workers are treated with fairness and respect. Additionally, the firm divides the work into areas of specialization so that everyone knows to whom they should report. The management of Patriot Mills reflects the ideas and principles of:

A. John M. Keynes.

B. Peter Drucker.

C. Karl Marx.

D. Henri Fayol.
The practices of Patriot Mills reflect Henri Fayol’s principles of unity of command, division of labor, hierarchy of authority, and equity.


266. Which of the following determines the degree of decentralization of a firm?

A. The degree to which lower-level management is empowered to make decisions.

B. The chain of command used to follow the flow of authority from top of the hierarchy to the lowest levels.

C. The geographical area served by the firm’s operations.

D. The degree of product standardization desired by the marketplace.


267. In a(n) _____________ organization, decision-making authority is concentrated at the top level of management.

A. bottom-up

B. decentralized

C. inverted

D. centralized


270. The span of control for a manager:

A. should never exceed 7 subordinates.

B. is no longer a relevant issue in today’s computerized offices.

C. depends on a number of factors, and can vary from one manager to another.

D. varies somewhat from manager to manager, but most managers operate best with a span of control of about 9 employees.


273. The ________ an organization’s structure, the ________ the span of control.

A. flatter; wider

B. flatter; narrower

C. taller; wider

D. taller; flatter


277. The traditional technique used to departmentalize an organization is by:

A. function.

B. customer group.

C. geographic area.

D. production process.


286. Lockdown Industries produces a variety of anti-crime and safety products such as burglar alarms, smoke detectors, surveillance cameras, and specialty locks. Lockdown sells to households, businesses, and government agencies. They have found that each market requires a different marketing strategy. Lockdown would probably benefit from departmentalization by:

A. function.

B. process.

C. customer type.

D. market opportunities.
Since each type of customer requires a different approach, Lockdown should establish a different department to serve the needs of each customer group.


293. During the past six years, the marketing department manager at Creative Concepts International made a strong push to hire mover/shaker professionals that had superior performance records prior to joining this company. It didn’t take long for these enthusiastic marketers to recognize the many talents within their department. They marveled at how much they were like each other and how they seemed to agree with each other’s work styles and ideas. After a while, it became difficult for others in the organization to present to this group. If the idea did not originate within the marketing department, marketers did not give it much credence. Management counselors would describe this phenomenon as ____.

A. departmentalization clique

B. interoffice competition

C. forward thinking friction

D. groupthink
A disadvantage of departmentalization is that department members may engage in groupthink (they think alike) and may need input from outside to become more creative.


295. A ____________ organization is characterized by direct two-way lines of responsibility, authority, and communication running from the top to the bottom of the organization, with all people reporting to only one supervisor.

A. matrix

B. cross-functional

C. line

D. line-and-staff


297. Employees who perform functions that advise and assist line personnel are known as:

A. middle managers.

B. empowered workers.

C. secondary employees.

D. staff personnel.


298. Which of the organization models follows all of Fayol’s traditional management rules?

A. Line organization

B. Line-and-staff organization

C. Cross-functional team

D. Matrix


302. Matrix organizational structures were first developed in:

A. Japan.

B. the aerospace industry.

C. the dot-com Internet industry.

D. the chemicals industry.


303. Which of the following was created as a solution to the temporary nature of the matrix structure?

A. Line organizations

B. Cross-functional self-managed teams

C. Line-and-staff organizations

D. Network organizations


310. The main difference between a matrix-style organization model and a cross-functional team is:

A. the matrix model has a limit on the number of functional units who send an expert to join the team, whereas the cross-functional team does not.

B. the matrix model is a temporary arrangement, whereas the cross-functional team is a more permanent arrangement.

C. the matrix model shares leadership responsibilities within the group, whereas the cross-functional team does not.

D. the matrix model is a more permanent arrangement, whereas the cross-functional team is a temporary arrangement.
The matrix model is a temporary arrangement where participants report back to their functional unit once the project is complete. The cross-functional team is a more permanent arrangement where the same team works on several projects.


315. Julio is the owner of Celebration, Inc., a small party supply company. The company provides tents, tables, chairs, and related paraphernalia for wedding, Bar Mitzvah, Bat Mitzvah, graduation, birthday, and other celebratory events. As sales have increased, the organization has hired more personnel and departmentalized to more efficiently handle purchasing, sales, service, and accounting. Everyone is still responsible for achieving company goals. Upon seeing Celebration’s organization chart, you agree it uses a _____________.

A. line organization model

B. line-and-staff organization model

C. matrix organization model

D. cross-functional team organization model
Many small businesses begin as line organizations. In a line organization model everyone in the organization is responsible for achieving the company goals.

A (see image)

318. _____________ is using communications technology and other means to link organizations and allow them to work together on common objectives.

A. Networking

B. Structural linking

C. Functional sharing

D. Strategic planning


319. Which of the following describes an environment in which data is instantly available via the Internet to organizational partners?

A. Networking

B. Real time

C. Virtual business

D. E-commerce


322. The process of rating an organization’s practices, processes, and products against the best of the world is known as:

A. webworking.

B. outsourcing.

C. benchmarking.

D. core competencies.


323. Which of the following describes the activity of a firm that assigns specific functions, such as accounting or legal work, to other organizations rather than performing these functions themselves?

A. Functional sharing

B. Outsourcing

C. Benchmarking

D. Virtual distribution


332. In today’s competitive environment, cost containment is extremely important to survival. Which of the following increases efficiency in the production and distribution of goods?

A. Personal computers

B. Real-time data

C. Assembly lines

D. Self-managed teams
Real time simply means the present moment or the actual time in which an event takes place. Internet data is readily available between firms to help create efficiencies in production and distribution.


336. In an inverted organization, the job of management is to:

A. closely monitor employee performance.

B. establish rules and regulations to guide worker behavior.

C. make all of the basic decisions.

D. assist and support front-line people.
In an inverted organization, the most important people are the front-line personnel who are in direct contact with the customers. These employees are given the flexibility and decision-making authority to meet the needs of the customers. The job of management is to assist and support these contact people, not boss them around.


341. Global Cash Solutions hired 500 workers to build ATM machines and self-service check-out counters at a plant in Columbus, GA, with plans to hire several hundred more employees by 2018. In the past, these machines were built in Hungary, China, and Brazil. Both shipping costs and quality control were cited as the reasons these companies have elected to change production strategy to ____________.

A. competency control

B. benchmarking

C. insourcing

D. outsourcing
U.S. headquartered companies are slowly bringing production back closer to the U.S. consumer. Insourcing refers to the idea to re-think where goods are currently produced. When firms decide to eliminate the production of goods abroad, and start producing goods domestically, or when foreign firms operating in the U.S. decide to produce goods that are sold in the U.S., this is considered insourcing.


348. All organizations have two organizational systems:

A. the command system and the control system.

B. the formal organization and the informal organization.

C. the functioning system and backup system.

D. the primary organization and secondary organization.


351. The ___________ is the nerve center of the informal organization.

A. organizational database

B. intranet

C. grapevine

D. company newsletter


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