Chapter 4

Section A: True or False Question

1. F
2. T
3. F
4. T
5. T
6. F
7. F
8. T
9. T
10. F
11. T
12. T
13. F
14. T
15. T
16. F
17. F
18. T
19. F
20. T

Section B: Essay Questions

Answer the following questions in the space provided.

1. SMART is an acronym that can be used to ensure that effective objectives or goals are
set. Elaborate what SMART is.
 Specific Objectives set must be specific and clear.

Objectives should be expressed in quantitative

Measurable
terms so that success or failure is easily measured.

Objectives set should be achievable and

Achievable
attainable.

Objectives should be realistic and within reach

Realistic
with the resources we have.

Objectives set must have a time limit when it

Time frame
should be accomplished.

2. Ali is planning to set up a new business to commercialize his innovative idea. For a start,
he sets the target and goals of his business. Explain to Ali the definition and the
importance of vision, mission and objectives to an organization.
 Vision statement addresses the inquiry, "What do we want to
Vision become?"
vision gives the basis to create a complete mission statement

mission addresses the inquiry, "What is our business?"

Mission characterizes what an organization is and its explanation for
being.

specific outcome that an organization looks to accomplish in

Objectives
seeking after its fundamental mission.

3. Explain any 2 (two) of innovation strategies.

 Licensing
Licensing is open to organisation that can practice control over their intellectual property
rights. With patent protection set up one firm can give an alternate a license to fabricate
products utilizing its technology. Under the terms of a license the patent holder typically holds
intellectual property rights over the technology, yet permits the licensee to utilize the
technology within the products or services it creates, in exchange for a royalty fees. In any
case, it is ordinary for the licensing agreement to accommodate a royalty payment that will be
a percentage of the purchase price of the product. Normally this rate range between 3 to 10
percent. Licensing agreement will normally incorporate a minimum level of royalty that is not a
capacity of sales, so that the inventor is in any event ensured a minimum return.

 Spin-off
A spin-off is where one firm quite literally creates another in order to exploit the innovation. It
is likely to be an attractive option where the technology of the innovation is not closely related
to the core technology of the firm, because it avoids unnecessary distractions.
In order to spin off the innovation through the sale of a subsidiary company, it is necessary to
“package” the technology alongside the staff who have developed it and the associated
corporate resources (e.g. equipment, facilities, etc.) and sell it off. The normal way of doing
this is to locate the technology and the relevant human and other resources in a separate
company and then sell off the company. This is what is meant by a “spin-off” where the parent
company divests itself of the technology by selling off the subsidiary company where it is
based.

4. Differentiate between organic and mechanistic structures.

5. Using an appropriate diagram, explain one traditional and one contemporary organization
structure that management can choose.

 Functional structure (traditional)

The most commonly used structure is the functional or centralized type because this structure
is simple and inexpensive. A functional structure groups tasks and activities by business
function, such as operations, marketing, finance, research and development, and
management information systems. It can be uttilised in all types of organization. The
functions change to reflect the organization’s purpose and work. A functional structure also
promotes specialization of labor, support efficient use of managerial and technical ability,
minimizes the need for an complicated control system, and permits quick decision making.

 Matrix Structures (Contemporary)

A matrix structure is the most complex of all designs because it depends on both vertical and
horizontal flows of authority and communication (hence the term matrix). In contrast,
functional and divisional structures depend primarily on vertical flows of authority and
communication. It is commonly used in construction, health care, research, and defense
industry.

Functional resources are shared in a matrix structure, rather than duplicated as in a divisional
structure. Individuals with a high degree of expertise can divide their time as needed among
projects, and they in turn develop their own skills and competencies more than in other
structures.