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Chapter 15 The Organization of International Business 1. Once managers have specified the company's strategy, their jobs turn to converting strategic plan into actions. This task begins by _____. a. devising an organization that can create value while mediating the pressures for worldwide integration versus local differentiation b. configuring the subsidiary network to create the optimal value chain c. adjusting the strategy to avoid conflicts with company traditions d. precisely mapping the responsibilities for each subsidiary and every manager Answer: a. devising an organization that can create value while mediating the pressures for worldwide integration versus local differentiation 2. The task of organization in the international company to execute its strategy is becoming more challenging because of the growing importance of _____. a. formally outlining the structure of the organization b. overcoming resistance to product change c. building knowledge-generating and decision-making relationships d. reengineering inefficient units of the company Answer: c. building knowledge-generating and decision-making relationships 3. _____ and _____ trends pose new challenges to building an organization that helps managers implement their chosen strategy a. Demographic; technological b. Institutional; cognitive c. Social; political. d. Environmental; workplace Answer: d. Environmental; workplace 4. The three components of building a capable organization include all of the following except _____. a. formal structure that specifies the framework for work b. systems that coordinate and control what gets done c. developing a set of shared values among employees around the world d. leadership and training programs to develop the staff of the company Answer: d. leadership and training programs to develop the staff of the company 5. The degree of _____ in a company determines where it has opted to assign decision-making authority within the context of its organization structure. a. systemic differentiation b. horizontal differentiation c. schematic differentiation d. vertical differentiation Answer: d. vertical differentiation 6. The_____ the level of the company at which managers make decisions, the more that organization is _____. a. higher; decentralized b. lower; centralized c. higher; centralized d. higher; unimportant Answer: c. higher; centralized 7. Concerns about cost, expediency, and uncertainty encourage a MNE to _____. a. decentralize decision-making b. centralize decision-making c. expand the number of levels of the organization involved in decision-making d. consult more subsidiary personnel Answer: b. centralize decision-making 8. Decentralized decision-making is most appropriate when _____. a. success in international operations depends on the quality of local adaptation b. decisions involve moving goods or resources internationally c. global standardization is required to contain costs d. decisions must be made that will impact the entire company Answer: a. success in international operations depends on the quality of local adaptation 9. The term _____ refers to the formal arrangement of roles, responsibilities, and relationships within an organization. a. structure b. systems c. culture d. strategy Answer: a. structure 10. The idea of _____ describes how the company specifies organizational tasks, divides those tasks into jobs, departments, subsidiaries, and divisions, and then assigns authority and authority relationships. a. systemic differentiation b. horizontal differentiation c. vertical differentiation d. schematic differentiation Answer: b. horizontal differentiation 11. An organization chart—the system of lines and boxes that represents its formal structure—depicts all of the following except _____. a. division of labor within an organization b. linkages among the various units of an organization c. when subsidiaries report to headquarters d. the arrangement of management positions Answer: c. when subsidiaries report to headquarters 12. _____ is the matter of how the company balances centralization versus decentralization of decision-making whereas _____ is the matter of how the company opts to divide itself into specific units to do specific jobs. a. Horizontal differentiation; vertical differentiation b. Vertical differentiation; systemic differentiation c. Schematic differentiation; schematic differentiation d. Vertical differentiation; horizontal differentiation Answer: d. Vertical differentiation; horizontal differentiation 13. A _____ is the ideal way to organize work when a company's products share a common technology and competitive pressures push for a cost-leadership strategy. a. centralized structure. b. matrix structure. c. divisional structure d. functional structure Answer: d. functional structure 14. Organizing departments and units around discrete business activities, such as finance, production, marketing, and human resources, results in a _____. a. network structure b. matrix structure c. functional structure d. divisional structure Answer: c. functional structure 15. Decision-making in a functional structure tends to be _____. a. decentralized b. centralized c. vertical d. lateral Answer: b. centralized 16. Functional structures for international operations are most likely found among those companies that _____. a. face competitive pressures for a cost-leadership strategy b. offer a broad range of products that share few common technologies c. rely on differentiated production and marketing methods d. compete in stable industries Answer: a. face competitive pressures for a cost-leadership strategy 17. Whereas executives specify roles and relationships in a functional structure in terms of _____, they use the divi¬sional structure format to specify them according to _____. a. inputs; outputs b. buyers; supplies c. markets; countries d. politics; economics Answer: a. inputs; outputs 18. A major benefit of the international division structure is _____. a. the creation of incentives for domestic divisions to contribute resources for international operations b. the formation of a critical mass of international expertise c. that it is well suited to firms with diverse product groups d. that it is located abroad Answer: b. the formation of a critical mass of international expertise 19. Historically, when firms have expanded abroad, they have typically grouped all their international activities in a(n) _____ division. a. customer b. functional c. international d. manufacturing Answer: c. international 20. A major benefit of the international division structure is _____. a. that it is well suited to firms with diverse product lines b. its ability to exploit economies of scale or scope c. the creation of incentives for domestic divisions to contribute resources for international operations d. the creation of a critical mass of managers that can wield power within the larger organization Answer: d. the creation of a critical mass of managers that can wield power within the larger organization 21. Which of the following organizational structures is particularly popular among companies that make a variety of diverse products? a. international division structure b. functional division structure c. geographic division structure d. product division structure Answer: d. product division structure 22. A(n) _____ tends to be adopted by firms that are reasonably diversified and likely use a range of distribution channels and supply chains. a. international division structure b. geographic division structure c. product division structure d. functional division structure Answer: c. product division structure 23. The _____, given that both the foreign and domestic operations report to the same manager, is designed to help overcome the coordination problems that arise with the international division and worldwide area structures. a. matrix division structure b. product division structure c. hierarchy division structure d. functional division structure Answer: b. product division structure 24. The primary limitation with the worldwide product division structure is _____. a. the cost of duplicated functions and international activities among the product divisions b. that it complicates finding synergies between foreign and domestic value activities c. that it does not facilitate the transfer of core competencies within a division's worldwide operations d. the difficulty it creates in a selling or spinning-off product lines Answer: a. the cost of duplicated functions and international activities among the product divisions 25. Applying strategies that try to simultaneously deal with competing pressures for global integration and local responsiveness spur some MNEs to adopt a _____ structure. a. matrix b. functional c. geographic division d. functional division Answer: a. matrix 26. Which of the following statements is false about a matrix structure? a. It specifies extensive communication channels. b. It is more easily managed than a divisional structure. c. It creates dual career ladders. d. It slows decision-making. Answer: b. It is more easily managed than a divisional structure. 27. The fundamental limitation of a matrix structure is that it _____. a. creates the sense that someone else is handling responsibilities for strategic decisions b. can isolate upper management from operational levels c. institutes a dual hierarchy that violates the unity-of-command principle d. encourages power contests among executives Answer: c. institutes a dual hierarchy that violates the unity-of-command principle 28. In reality, the organizational charts of _____ MNEs neatly depict a functional, divisional, or matrix structure. a. no b. few c. many d. all Answer: b. few 29. Contemporary structures essentially aim to arrange roles and responsibilities in the organization so that more employees, particularly those in the front-lines who deal more directly with resources and markets, have _____ decision-making authority. a. no b. less c. more d. absolute Answer: c. more 30. Contemporary structures aim to support organizations _____. a. in which the location of control between the constituent units of a network alliance is evident b. that centralize decision-making authority to those who can make informed decisions c. that dismantle horizontal, vertical, or external boundaries that block ideas and relationships d. that create predictable workplaces with slight collaboration among subsidiaries Answer: c. that dismantle horizontal, vertical, or external boundaries that block ideas and relationships 31. Which of the following is an unlikely characteristic of contemporary structures? a. few barriers between people b. extensive collaborative efforts among people in different specialties and different geographic locations c. higher capacity for change and learning d. centralized decision-making Answer: d. centralized decision-making 32. Contemporary structures aim to have few boundaries between all of the following except _____. a. different vertical ranks and functions b. different units in different geographic locations c. the firm and its suppliers, distributors, allies, and customers d. the firm and its competitors Answer: d. the firm and its competitors 33. The benefits of network structures include _____. a. higher competition among members for resources and rewards b. difficulty in switching suppliers, no matter where in the world they are located c. developing core competencies in a broad range of value activities d. maintaining a strong sense of organization in the face of dynamic partnerships Answer: d. maintaining a strong sense of organization in the face of dynamic partnerships 34. A hyperarchy is _____. a. a form of structure that precise superiors and subordinates relationships b. a form of structure that relies on extensive centralization c. a large-scale, self-organizing community d. analogous to a hierarchy Answer: c. a large-scale, self-organizing community 35. A virtual organization is _____ of a traditional vertical hierarchy. a. an elaboration b. the antithesis c. the latest interpretation d. a selective application Answer: b. the antithesis 36. Some MNEs that have tried "spaghetti organizations" have run into problems, most notably _____. a. frequent managerial intervention in decision-making b. relentless centralization of decision-making c. overly motivated employees d. extreme competition among members for resources Answer: a. frequent managerial intervention in decision-making 37. Coordination refers to the _____. a. linking of various value activities within an organization b. span of control within an organization c. portioning the performance of specific tasks d. means to ensure managers act in ways that are anchored in their immediate Answer: a. linking of various value activities within an organization responsibility. 38. Prevalent approaches to coordination include all of the following except _____. a. standardization b. mutual adjustment c. adaptive d. planning Answer: c. adaptive 39. The approach to coordination that involves ongoing discussions among different units of the MNE to figure out how to resolve challenges jointly is known as _____. a. management by objectives b. organization structure c. coordination by plan d. coordination by mutual adjustment Answer: d. coordination by mutual adjustment 40. Companies often use a range or executive development and education programs to get to improve the performance of _____. a. coordination by standardization b. coordination by consensus c. coordination by plan d. coordination by conflict Answer: c. coordination by plan 41. Establishing common rules and procedures that apply uniformly to everyone worldwide is the effort to coordinate by _____. a. standardization b. consensus c. plan d. mutual adjustment Answer: a. standardization 42. Three types of control systems are used in MNEs. These are _____. a. market control, bureaucratic control, and lan control b. standardization control, adjustment control, and clan control c. market control, adjustment control, and clan control d. planning control, market control, and clan control Answer: a. market control, bureaucratic control, and lan control 43. The MNE that uses external market mechanisms, like price competition and relative market share, to establish internal performance benchmarks and standards is applying a system of _____. a. bureaucratic control b. market control c. standardization control d. clan control Answer: b. market control 44. The MNE that uses centralized authority to install an extensive set of rules and procedures to govern a broad range of activities is applying a system of _____. a. market control b. adjustment control c. bureaucratic control d. clan control Answer: c. bureaucratic control 45. The MNE that relies on shared values among all employees to idealize the preferred behaviors and identify performance measures within the company is applying a system of _____. a. market control b. bureaucratic control c. planning control d. clan control Answer: d. clan control 46. Written reports compiled and submitted by local subsidiaries to the home office _____. a. are a major means of promoting organization culture b. have recently become less important in MNEs c. are discouraged between headquarters and subsidiaries in the event of a language gap d. resemble the format used domestically Answer: d. resemble the format used domestically 47. MNEs use reporting systems for foreign operations that are similar to the ones they use domestically _____. a. primarily in the early stages of operating abroad b. because common systems allow comparative evaluations c. until the subsidiary demonstrates mastery of the form d. only in those countries with extremely similar systems of information technology Answer: b. because common systems allow comparative evaluations 48. A common problem of corporate visits as a control mechanism is _____. a. the language gap between corporate and subsidiary personnel b. their view by foreign subsidiary managers as being wasteful jaunts by home office executives c. jet lag that keeps headquarters personnel from being effective d. the ill will created with joint venture partners Answer: b. their view by foreign subsidiary managers as being wasteful jaunts by home office executives 49. _____ is the norms and value systems that are shared among the employees of an organization. a. Organizational systems b. Organizational structure c. Organizational culture d. Organizational vision Answer: c. Organizational culture 50. Despite wide-range interpretation, many believe that a company's organization culture is best viewed as all of the following except _____. a. values and principles of management b. outlook on power distance c. nature of the work climate and atmosphere d. traditions and ethical standards Answer: b. outlook on power distance 51. Studies report a(n) _____link between organization culture and the financial performance of the firm. a. significant b. negligible c. spurious d. occasional Answer: a. significant 52. A strong organization culture provides many benefits to an MNE, including _____. a. inspiring managers worldwide to react to changing customer and market requirements b. solidifying resistance to new versions of traditional policies and procedures c. diluting employee commitment to generating knowledge and building relationships to manage growing interdependence among value activities d. creating the flexibility to adapt its strategy when company or market circumstances change Answer: d. creating the flexibility to adapt its strategy when company or market circumstances change 53. When companies acquire foreign operations, which of the following statements regarding control problems is false? a. Acquisitions can result in overlapping geographic responsibilities and markets as well as new lines of business with which corporate management has no experience. b. Resistance to change may come from management in the acquired company, but not from governmental authorities in the country of the acquisition. c. Attempts to centralize certain decision-making or change operating methods may result in distrust, apprehension, and resistance to change on the part of the acquired company. d. When companies acquire only part of the ownership, the flexibility of corporate decision-making may be limited. Answer: b. Resistance to change may come from management in the acquired company, but not from governmental authorities in the country of the acquisition. 54. A foreign branch is _____. a. legally separated from the parent b. a subsidiary c. legally not a separate entity from the parent d. a minority interest in a foreign operation Answer: c. legally not a separate entity from the parent 55. When a foreign operation is legally separate from the parent, even if wholly owned by it, it is known as a(n) _____. a. turnkey operation b. branch c. network d. subsidiary Answer: d. subsidiary 56. An advantage of a foreign subsidiary over a foreign branch is that it _____. a. ordinarily does not engage the parent in additional legal liability b. can use the same reporting system as the parent uses domestically c. is freer to respond to national market needs d. has to disclose less information to the host government Answer: a. ordinarily does not engage the parent in additional legal liability business? Why do managers increasingly worry about it? What trends drive current change? 57. Any organization, no matter what form it takes, ultimately must help managers reconcile the pressures for worldwide integration versus local differentiation. Answer: True 58. Current approaches to designing an organization see the task of building knowledge-generating and decision-making relationships as less important than specifying the best structural arrangement. Answer: False 59. A firm's vertical differentiation determines where in its organization structure managers have decided to concentrate decision-making authority. Answer: True 60. A firm's horizontal differentiation determines where it has opted to assign decision-making authority within the context of its hierarchy. Answer: False 61. Horizontal differentiation is concerned with how the managers of a firm decide to divide the company into discrete subunits. Answer: True 62. Determining how to balance the centralization versus decentralization of decision-making requires managers address the matter of horizontal differentiation. Answer: False 63. The functional structure is ideal when products and manufacturing methods are largely undifferentiated among countries. Answer: False 64. The functional structure is ideal when the company faces complex and changing environments. Answer: False 65. A major benefit of the international division structure is the creation of a critical mass of international expertise. Answer: True 66. A division structure tends to be adopted by firms that are diversified by products or markets. Answer: True 67. Companies with a narrow range of products are most likely to use a product division. Answer: False 68. Firms with a low degree of diversification and a domestic structure based on function tend to favor a worldwide area structure. Answer: True 69. Group interdependence, either in terms of products, functions, or geography, and the increased exchange of information are features of a matrix structure. Answer: True 70. A matrix organization is a hybrid of the functional and area organizations. Answer: False 71. Contemporary structures aim to centralize decision-making authority by removing boundaries that impede the decentralization of decision-making. Answer: False 72. A common feature of contemporary structures is greater cross-functional collaboration. Answer: True 73. The idea of a network organization refers to a collection of independent, mostly single-function firms. Answer: True 74. The notion of boundaries, within the context of contemporary structures, refers to those limitations that interfere with communication and collaboration between the firm and its suppliers, distributors, allies, competitive rivals, and customers. Answer: False 75. Coordination by plan deals with exact rules and procedures that spell out what needs to be done and how. Answer: False 76. Coordination methods include mutual adjustment, planning, and standardization. Answer: True 77. MNEs typically design their control systems in terms of either market control, bureaucratic control, or adaptation control. Answer: False 78. Adopting a market control system requires that the MNE uses external market mechanisms to establish internal performance benchmarks and standards. Answer: True 79. Written reports are a major means of promoting corporate culture. Answer: False 80. The reporting systems used by MNEs to control worldwide operations typically differ from country to country. Answer: False 81. The common values shared by a company's employees are known as its corporate culture. Answer: True 82. The character of a company's corporate culture is a product of, beside the core values and business principles that management advocates, the behaviors that define "how we do things around here." Answer: True 83. A foreign branch is separated from the parent company by a variety of laws and regulations. Answer: True 84. When a foreign operation is legally separate from the parent, even if wholly owned by it, it is known as a branch. Answer: False 85. How might centralization of decision-making adversely affect local managers (those managers in foreign branches or subsidiaries)? Answer: Although some decisions are better left to corporate management, doing so may cause morale problems among local managers who perceive their responsibility has been taken away. When local managers are prevented from acting in the best interest of their own operation, they tend to think, I could have done better, but corporate management would not let me. If local managers cannot participate in developing global strategies, they may lack the positive attitude to work hard to implement global strategic decisions. These managers also may not gain the experience needed to advance within the company. 86. What are some of the trade-offs that companies need to consider when deciding where to locate decision-making in international business? Answer: The higher the managerial level at which managers make decisions, the more they are centralized, the lower the level, the more they are decentralized. The location of decision-making may vary within the same company over time as well as by product, function, and country. An ethnocentric attitude would influence a company to develop competencies, such as knowledge and technology, in its home country and control how they are transferred aboard. A polycentric attitude would cause the company to delegate decisions to foreign subsidiaries because headquarters personnel believe only people on the spot know best what to do. A geocentric attitude would permit more openness to capabilities either at home or abroad and be conducive to a transnational strategy. 87. Explain the major types of traditional organization structures and the advantages and disadvantages of each for international operations. Answer: a. Functional division structure—Divide personnel functionally so that marketing people report to other marketing people, finance people to other finance people, and so on. Functional divisions are popular among companies with a narrow range of products, particularly if the production and marketing methods are undifferentiated among them. However, as they add new and different products, this structure becomes cumbersome. b. Product division structure—Product divisions are particularly popular among companies that make a variety of diverse products, especially those that have become diverse through acquisitions. Because these divisions may have little in common, they may be highly independent of each other. As is true for the functional structure, the product division structure is well suited for a global strategy because both the foreign and domestic operations for a given product report to the same manager, who can find synergies between the two, such as by sharing information on the successes and failures of each. c. International division structure—Grouping international business activities into their own division puts internationally specialized personnel together to handle such diverse matters as export documentation, foreign exchange transactions, and relations with foreign governments. This prevents duplication of these activities in more than one place in the organization. It also creates a large enough critical mass so that personnel within the division can wield power within the organization to push for international expansion. d. Geographic division structure—Companies use geographic divisions if they have large foreign operations that are not dominated by a single country or area. This structure is more common to European MNEs than to U.S MNEs, which tend to be dominated by the strong domestic market. The structure is useful when maximum economies in production can be gained on a regional rather than on a global basis because of market size or the production technologies for the industry. A drawback is possibly costly duplication of work among areas. e. Matrix division structure—Due to the problems inherent in either integrating or separating foreign operations, many companies are moving toward matrix organizations. In this organizational structure, a subsidiary reports to more than one groupage. This structure is based on the theory that because each group shares responsibility over foreign operations, the groups will become more interdependent, exchange information, and exchange resources with each other. One drawback, however, concerns how groups compete for scarce resources to enact their preferred operating methods. 88. Describe some of the general features of contemporary structures. Answer: Because each type of organizational structure has advantages and disadvantages, companies in recent years have developed new forms or organization structure to pull together some of the diverse functional, geographic, and product perspectives. Some of these mechanisms are: a. developing teams with members from different countries for planning to build scenarios on how the future may evolve b. strengthening corporate staffs so that headquarters and subsidiary managers with line responsibilities must listen to different viewpoints c. using more management rotation, such as between domestic and international positions, to break down parochial views d. keeping international and domestic personnel in closer proximity to each other, e. establishing liaisons among subsidiaries within the same country so that different product groups can get combined action on a given issue f. developing teams from different countries to work on special projects of cross-national importance, so that they share viewpoints g. placing foreign personnel on the board of directors and top-level committees to bring foreign viewpoints into top-level decisions h. giving all divisions and subsidiaries credit for business resulting from cooperative efforts so that they are encouraged to view activities broadly i. basing reward systems partially on global results so that managers are committed to global as well as local performance 89. Describe using reports as a control mechanism. Answer: Headquarters needs timely reports to allocate resources, correct plans, and reward personnel. Their decisions on how to use capital, personnel, and technology are almost continuous, so reports must be frequent, accurate, and up-to-date to assure meeting the MNE's objectives. Headquarters uses reports to evaluate the performance of subsidiary personnel so as to reward and motivate them. Written reports are more important in an international setting than in a domestic one because subsidiaries' managers have much less personal contact with managers above them. Corporate managers miss out on much of the informal communication that could tell them about the performance of foreign operations. Most MNEs use reports for foreign operations that resemble those they use domestically. The reasons for this are: a. If the reports have been effective domestically, management often believes they also will be effective internationally. b. There are economies from carrying over the same types of reports. The need to establish new types of reporting mechanisms is eliminated, and corporate management is already familiar with the system. c. Reports with similar formats presumably allow management to better compare one operation with another's. Test Bank for International Business: Environments and Operations John D. Daniels, Lee H. Radebaugh, Daniel P. Sullivan 9780131869424, 9780201846188, 9780130308016, 9780201566260, 9780201107135, 9780132668668
