Answer to Question 1
Vertical differentiation refers to the way in which an organization designs its hierarchy of authority and creates reporting relationships to link organizational roles and subunits. Vertical differentiation establishes the distribution of authority between levels to give the organization more control over its activities and increase its ability to create value.
Horizontal differentiation refers to the way in which an organization groups organizational task into roles and roles into subunits (functions and divisions). It establishes the division of labor that enables people in an organization to become more specialized and productive and increases its ability to create value.
Answer to Question 2
B
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