Chapter 14: The Organization of International Business

a. Organizational architecture, strategy and its environment

According to the text, what elements must a firm coordinate to achieve maximum performance? a. Organizational architecture, strategy and its environment b. Organizational architecture, marketing mix and its environment. c. Organizational architecture, strategy and its financial systems d. Regulatory compliance, strategy and its environment

c. An incentive

After working for the company for three years, Roberto now qualifies to receive an annual bonus if he achieves the performance goals he has been given. This bonus is an example of _____________________. a. Insurance b. A commission c. An incentive d. Merit pay

d. Functional

Fatima started her small business two years ago and has been so successful that she is now developing into a large business and is creating purchasing, marketing, and manufacturing positions within the company. Fatima's business demonstrates the ___________________________ organizational structure. a. Customer b. Geographic c. Market d. Functional

b. Is clumsy and bureaucratic.

In practice, the global matrix structure often a. Works as well as the theory predicts. b. Is clumsy and bureaucratic. c. Makes it easy to ascertain accountability. d. Results in quick decision making.

d. Transnational

In which strategy would the level of performance ambiguity be at its highest? a. Localization b. Global standardization c. Domestic d. Transnational

a. Knowledge

The network of transmitting information within an organization that is based on informal contracts is called the ___________________ network. a. Knowledge b. Facility c. Product d. Liaison

a. Culture

The norms and value systems of a company make up the company's __________________ and are a source of organizational inertia. a. Culture b. Structure c. Mission d. Architecture

a. Integrating mechanisms

The processes and systems used to coordinate the subunits of an organization are called ____________. a. Integrating mechanisms b. Vertical differentiation c. Control systems d. Division of labor

c. Transnational

There is very high level of performance ambiguity in firms pursuing a _____________ strategy compared to firms pursuing other strategies. a. Localization b. International c. Transnational d. Global

d. Localization

A ____________ strategy has firms operating with worldwide area structures, where operating decisions are decentralized to functionally self-contained country subsidiaries. a. Domestic b. International c. Transnational d. Localization

a. Motivational research favors decentralization. Explanation: A company that is decentralized would not rely on only top management for decision-making which means that other levels of employees have more say in what happens and as a result would feel they have more control over their work.

Behavioral scientists have long argued that people are willing to give more to their jobs when they have a greater degree of individual freedom and control over their work. This suggests that a. Motivational research favors decentralization. b. Centralization can facilitate coordination. c. Centralization can ensure that decisions are consistent with organizational objectives. d. Decentralization reduces accountability.

d. Bureaucratic

Budgets and capital spending rules are the most important ____________________ controls in subunits within multinational firms. a. Cultural b. Output c. Personal d. Bureaucratic

c. Global standardization

Centralization of decision making will be used in a ____________ strategy because the dispersed global activities of the firm that create value need to be tightly coordinated. a. Localization b. Home-host country c. Global standardization d. Domestic

b. Control

Collecting data to decrease performance ambiguity is costly and time consuming, thereby raising the cost of ____________________. a. Knowledge b. Control c. Outputs d. Bureaucracy.

d. Measure performance

Control systems are established as a way to ___________________. a. Hire employees b. Reward behavior c. Forecast profits d. Measure performance

c. Incentives

Devices such as bonuses used to reward appropriate managerial behavior are called ________________. a. Reviews b. Arbitration c. Incentives d. Tariffs

b. Horizontal differentiation

Dividing an organization formally into subunits is called _________________. a. Control systems b. Horizontal differentiation c. Integrating mechanism d. Vertical differentiation

a. Global standardization Explanation: Firms pursuing a global standardization strategy focus on the realization of location and experience curve economies. If they are diversified, as many of them are, these firms operate with a worldwide product division structure. To coordinate the firm's globally dispersed web of value creation activities, headquarters typically maintains ultimate control over most operating decisions.

Firms pursuing a _____________ strategy focus on the realization of location and experience curve economies. a. Global standardization b. Localization c. Transnational d. International

d. Localization

Firms that adopt a(n) _____________ strategy have minimal need for integrating mechanisms because they are primarily concerned with local responsiveness. a. Global standardization b. International c. Transnational d. Localization

a. International

Firms that follow a(n) ______________ strategy maintain centralized control over the firm's core competencies, but decentralize most other operating decisions. a. International b. Matrix c. Localized d. Global standardization

b. Geographically

Firms with international divisions tend to be organized ____________________. a. By function b. Geographically c. Demographically d. By product

a. Knowledge

Fundha's company wants to foster cooperation between the five units of the organization and has established an informal ______________ network that allows the managers within the international firm to share ideas and foster the team approach. a. Knowledge b. Output c. Distributive d. Incentive

a. Product line. Explanation: The responsibility for operating decisions is typically decentralized to product divisions, which are then held accountable for their performance.

Garrett works at a snack food company which has a product divisional structure. In this type of structure, each division is responsible for a distinct a. Product line. b. Individual product. c. Regional area. d. Shipping zone.

b. Structure

Geoff's company has separate product divisions for each product line. These product divisions are part of the company's __________________. a. Mission b. Structure c. Culture d. Function

b. Ambiguity

If subunit A relies on subunit B located in a different country to complete its work, but subunit B fails to do its job and as a result both subunits fail, it demonstrates the idea of performance ________________________. a. Arbitration b. Ambiguity c. Bureaucracy d. Parity

b. Transnational

It is more important in firms employing a(n) _______________________ strategy to have a common culture. a. Global standardization b. Transnational c. International d. Localization

c. Personal

Lisa's manager stops by her desk a few times each week to get her opinion on customer requests. What type of control system does this represent? a. Output b. Cultural c. Personal d. Bureaucratic

d. Worldwide

Natalie's company has its headquarters in Chicago and three areas of the world — the Far East, Latin America, and Europe. Her company is an example of the ______________ area structure. a. Localization b. Product c. Local d. Worldwide

c. Transnational Explanation P&G's strategy is consistent with a transnational strategy. Firms pursuing a transnational strategy focus on the simultaneous attainment of location and experience curve economies, local responsiveness, and global learning (the multidirectional transfer of core competencies or skills).

P&G believes that to be successful it needs to combine global scale benefits with a local focus in each market it serves. The approach is most consistent with a ______________________ strategy. a. Localization b. International c. Transnational d. Global local e. Global standardization

e. Global matrix Explanation: P&G's structure can best be described as a global matrix structure. In the classical global matrix structure, horizontal differentiation proceeds along two dimensions: product division and geographic area.

P&G divides its product line into four industry sectors and its markets into six core markets. P&G believes this approach allows it to combine global scale benefits with a local focus. P&G's structure can best be described as a ______________________ structure. a. Product line b. Geographic c. Global d. International e. Global matrix

e. Organizational culture.

P&G employs individuals representing 140 different nationalities. The norms and value systems that are shared among the P&G employees are called a. Organizational architecture. b. The employee grapevine. c. The employee network. d. Organizational structure. e. Organizational culture.

c. Control systems.

P&G is organized into four industry-based sectors. The metrics used to measure the performance of subunits and make judgments about how well managers are running those subunits are called a. Performance appraisals. b. Profit analyses. c. Control systems. d. Annual reviews. e. Control metrics.

d. The organizational architecture. Explanation: The totality of P&G's organization, including formal organizational structure, control systems and incentives, processes, organizational culture, and people is called the organizational architecture.

P&G is the world's largest maker of household product with sales in 180 countries and a staff representing 140 different nationalities. The totality of P&G's organization, including formal organizational structure, control systems and incentives, processes, organizational culture, and people is called a. The formal organizational division. b. Human resources and control systems. c. The organizational process d. The organizational architecture. e. The organizational structure.

a. Small

Personal controls would be more commonly used in a ___________ company. a. Small b. International c. Large d. Domestic

c. That employees be socialized into the new way of doing things. Explanation: Refreezing an organization may require that a new culture be established while the old one is being dismantled. Thus, refreezing requires that employees be socialized into the new way of doing things

Refreezing an organization requires a. Achieving global production standards. b. Substantial change in the form of a multinational's organizational architecture so that it matches the desired new strategic posture. c. That employees be socialized into the new way of doing things. d. Taking action such as reassigning responsibilities adding incentive and reward systems, or letting people go who are seen as an impediment to change.

d. Metric

Selena's company measures the performance of its subsidiaries according to their profits. In other words, her company uses profits as a _______________. a. Parity b. Dividend c. Process d. Metric

b. Existing culture. Explanation: Organizations are difficult to change. Within most organizations are strong inertia forces. The existing distribution of power and influence within an organization, the existing culture, senior managers' preconceptions about the appropriate business model and institutional constraints might all act as sources of organizational inertia.

Sources of organizational inertia include a. Religious influences. b. Existing culture. c. Plan for the distribution of power within the organization. d. Senior managers' ideas about changes to the business model.

b. International

The strategy in which businesses centralize functions such as R&D and marketing functions, but decentralize operating decisions to subsidiaries is the _______________ strategy. a. Global standardization b. International c. Localization d. Regional

d. Transnational

The ______________ strategy may use a mix of centralization and decentralization depending on the pressures for local responsiveness and the need to coordinate a dispersed value chain and transfer core competencies. There is a high need for coordination when using this strategy. a. International b. Global standardization c. Localization d. Transnational

c. Liaison

The _________________ role is a formal mechanism in which a person in each subunit is given responsibility for coordinating with another subunit on a regular basis. a. Executive b. Manager c. Liaison d. Arbitrator

b. Values

The abstract ideas about what a group believes to be good, right, and desirable are known as ______________. a. Norms b. Values c. Facts d. Folkways

b. Cultural

The control systems used in international firms include: personal, bureaucratic, output, and ____________. a. Managerial b. Cultural c. Political d. Scientific

c. An online platform

The economic model known as the sharing economy is based on the idea that sharing access to products and services is done through ___________. a. Government intervention b. Bartering c. An online platform d. Trade treaties

c. Culture Explanation: Just as societies have cultures, so do organizations. The values and norms that employees of a company share reflect what is believed to be good, right, and desirable.

The employees at ABC Corp are a close group. They work and play together, and they believe that the company's goals are their goals. This demonstrates the organization's a. Structure. b. Processes. c. Culture. d. Control systems.

c. Shock therapy

The first principle of successful organizational change is to unfreeze the organization through _____________. a. Global standardization b. Diversification c. Shock therapy d. Knowledge networks

c. Matrix

The global __________ structure allows for horizontal differentiation in product division and geographic areas. a. Function b. Area c. Matrix d. Product

d. Company headquarters

The majority of operating decisions are made by the __________________ for firms operating within a global standardization strategy. a. Employees b. Foreign intermediary c. Liaison d. Company headquarters

c. Processes

The manner in which decisions are made and work is performed within a company is referred to as _________________. a. Agreements b. Contracts c. Processes d. Forecasts

a. Process

The marketing and product development teams at Kyle's company meet once each month to brainstorm ideas. This monthly meeting is an example of a(n) __________________ used at Kyle's company. a. Process b. Union c. Forecast d. Contract

b. Incentive

Trevor's company provides an end-of-year bonus to those managers who have worked at the company for at least five years. This bonus is an example of a(n) ______________. a. Metric b. Incentive c. Benchmark d. Control

False Reason: Based on the global matrix stricture, operating decisions for a particular product should be made by the product division and the various areas of the firm.

True or False: According to the global matrix structure, operating decisions for a particular product should be made only by the subsidiary.

FALSE Reason: A localization strategy has firms operating with worldwide area structures, where operating decisions are decentralized to functionally self-contained country subsidiaries.

True or False: In a localization strategy, decision-making is centralized at headquarters because firms are not pressured for local responsiveness.

True Reason: A "fit" between strategy and architecture is necessary for a firm to achieve high performance.

True or False: In order to succeed, a firm's organizational architecture must be consistent with its strategy.

True

True or False: The communication strategy of a company is a key component to maintaining culture within the organization.

b. Country managers have limited voice and are considered subservient to product division managers.

What is considered the main problem with the worldwide product divisional structure? a. Divisions within the organization lose all autonomy. b. Country managers have limited voice and are considered subservient to product division managers. c. The demands for customization limit company profits. d. Each division focuses on its own value creation activities with no regard for the worldwide division.

b. Norms

What is defined as the social rules and guidelines that prescribe appropriate behavior in a particular situation? a. Beliefs b. Norms c. Opinions d. Values

b. Worldwide product division

What structure allows for each division to have full responsibility for its own value creation activities but the headquarters maintains responsibility for overall strategy and financial control? a. Flexible matrix b. Worldwide product division c. Global matrix d. International functional division

b. Product divisional

When Meredith began her company it made sense to divide it into three areas: production, marketing, and transportation. Now that her business has grown, she thinks it will be best to reorganize the business so that each division is responsible for a distinct business area. What type of structure does Meredith want to use in her reorganization? a. Geographic b. Product divisional c. Functional d. Global matrix

d. Geographic area.

When using horizontal differentiation, a firm divides itself into subunits based on function, type of business, or a. Location of competition. b. Level of difficulty. c. Employee skill-level. d. Geographic area.

c. Worldwide area

Which form of horizontal differentiation divides the world into geographic areas? a. Functional b. Regional responsive c. Worldwide area d. Product divisional

a. They do not have a high need for integrating mechanisms, either formal or informal. Explanation: Firms pursuing a localization strategy focus on local responsiveness. They do not have a high need for integrating mechanisms, either formal or informal, to knit together different national operations. The lack of interdependence implies that the level of performance ambiguity in such enterprises is low, as (by extension) are the costs of control.

Which of the following is true about firms pursuing a localization strategy? a. They do not have a high need for integrating mechanisms, either formal or informal. b. They have a high need for coordination between subunits. c. The level of performance ambiguity in such enterprises is high, as are the costs of control. d. They tend to operate with a worldwide production division structure.

b. Functional

Which organizational structure is typically the first one used by firms? a. Global b. Functional c. Internal d. Horizontal

c. Transnational

Which strategy encompasses a high level of interdependence of subunits for some operation decisions combined with high degrees of centralization for others? a. Localization b. Regional c. Transnational d. Internationalization

a. Headquarters

Who is responsible for the overall strategic development and financial control of a firm under the product divisional structure? a. Headquarters b. Middle managers c. Product divisions d. Branch sales units

b. Processes Explanation: Examples of processes would be deciding how to allocate resources within a firm or evaluating the performance of the management team.

_______________________ is/are the manner in which decisions are made and work is performed within the organization. a. People b. Processes c. Control systems d. Organizational culture