A positive thing about hierarchical organizational design is:
a.Hierarchy is often associated with reducing
costs of coordination in the organization, and thus might be a good choice for some cost leaders
b.Hierarchy is an excellent organizational design when the top management wants to avoid creating a loosely-coupled company: because tightly-coupled designs are more reliable when the industry undergoes rapid changes
c.When a company is organized as a tall hierarchy, it precludes excessive centralization of the managerial decision-making
d.There is nothing positive about hierarchies, so companies should strive to make their structures as flat as possible
Market failure in the Transaction Cost Economics is a situation in which:
a.There is a sharp drop (more than 5%) of the broad stock indices over the course of a single trading day on the New York Stock Exchange.
b.There is a willing seller of a product and there is a willing buyer of that product. The seller and the buyer can agree on price, but the threat of opportunistic behavior makes the transaction between them impossible.
c.Capital markets systematically underestimate the inherent level of risk present in securitized debt obligations and overinvest in them. This causes a financial crisis.
d.There is a willing buyer of a product, but the sellers’ industry is so fragmented that the price levels for their products remain too high. Therefore, the transaction cannot go forward.
When analyzing a company that diversifies by acquiring another firm, we consider that diversification related if:
a.The acquiring company and the target company are both operating in the same product market segment. If product lines across units are similar – e.g., soft drinks in one unit, wine in the other unit – then the diversification is always related; the capability overlap of the acquirer and target is irrelevant
b.The acquiring company and the target company are both operating in the same geographic area
c.The target has several capabilities that are valuable, rare and inimitable
d.The existing capabilities or core competences of the acquiring company are critically important in achieving success in the industry of the target company: the acquirer has skills that are highly relevant in the target’s industry