Megaline, Inc

question 33

Multiple Choice

Megaline, Inc., with five divisions, follows the competitive form of the multidivisional structure.One division has not met the rate-of-return goals for the past year.Another division has exceeded the rate-of-return goals.The other three divisions met the rate-of-return goals.The headquarters office must decide where to allocate capital in the next year.Which of the following scenarios is the MOST likely?

• A) The poorest-performing division will get the highest capital allocation so that it can fix its problems and achieve the rate-of-return goal next year.
• B) The highest-performing division will get the highest capital allocation because it has the best prospects for creating more wealth for the shareholders next year.
• C) The average-performing divisions that met the rate-of-return goals will receive the highest allocation because their performance exactly matched corporate requirements.
• D) All divisions will receive the same capital allocation for the next year because this organizational structure rewards divisional managers based on achievement of strategic goals.

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Definitions:

Opportunity Cost

The financial loss associated with rejecting the subsequent preferable choice when deciding or selecting amongst various options.

Specialization

The process of focusing on and becoming expert in a particular subject or skill, or of businesses, regions, or nations concentrating on producing certain goods or services.

Opportunity Cost

The cost of forgoing the next best alternative when making a decision, essentially what is given up when choosing one option over another.

Specialization

The practice of focusing effort on a particular field or discipline, leading to increased efficiency and expertise in that area.