Merion Corporation is a large technology company that is listed on a major US stock exchange. Over the last two years, Merion has badly missed its earnings forecast. In response, the companys share price is down 60% since this time last year. In a bold move, Merions CEO has decided to transform the firms business strategy. The CEO believes this new strategy will boost revenue growth and bolster Merions share price over the medium- to long-term. To complement this strategic change, Merion will entirely overhaul its organizational structure. Merions CEO has designed the new organizational structure so as to ensure that the firm can best execute on its new strategy.

Up until now, Merion has been structured as follows:

Under the new strategy, Merion will be structured as follows:

Which of the following statements is most likely to be true?

Group of answer choices

A.Merions new structure will allow the firm to better execute its new cost-focused strategy that aims to mitigate harmful silo effects and leverage economies of scale.

B.Merions new structure will allow the firm to better execute its new strategy that seeks to foster productive internal competition and higher levels of work specialization, driving down costs.

C.Merions new structure will allow the firm to better execute on its new strategy that requires divisions to promptly respond to the specific needs of customers. The new structure will make the divisions more agile and will create a strong incentive for managers to boost divisional profitability.

D.Merion will retain a functional structure but do so in a manner that increases centralization. In doing so, the firm will be able to better implement its new strategy, which relies on giving managers increased decision-rights in order to improve divisional flexibility and responsiveness and uses high-powered incentives to encourage innovation.

What controls should Merion put in place or remove in order to mitigate the co-ordination and motivation problems that are likely to arise under the firms new organizational structure?

[Select one or more options.]

Group of answer choices

A.In order to better align the goals of the division managers and the firms shareholders, Merion could reward the division managers based in part on long-term improvements in the firms share price.

B.Merion should scale back or remove all pre-existing control systems. The firms new organizational structure needs to allow for managers to innovate and improvise without interference from senior executives. Control systems will only serve to stifle these value-enhancing behaviours.

C.In order to limit the emergence of harmful silos across the Consumer and Business Customer Divisions, Merion should measure and reward inter-divisional communication and knowledge sharing.

D.In order to allow division managers to use their decision rights in a manner that maximizes firm value, Merion should put in place control systems and build an organizational culture that encourages inter-divisional competition where the performance of each divisional manager is based exclusively on the financial performance of their division relative to other divisions.