FVC1 - Global Business (Module 7 - 8)
The formal system of task and authority relationships that control how people coordinate their actions and use resources to achieve organizational goals.
Organizational Structure
An international company has created a diagram to show the division of labor between departments. What is the name of this diagram?
Organizational chart
Visually depict the division of labor that forms the structure of the organization.
Organizational Charts
Different Organizational Structures
1. Functional / Department Structure 2. Divisional Structure 3. Matrix Structure 4. Teams Structure
It allows for activities based upon a division of labor by departmentalization, standardization, and specialization of functions and tasks.
Organizational Structure
A company plans on using horizontal integration. Which strategy is being adopted by this company?
Acquiring companies that supply the same or similar goods and services
A company is trying to identify the factors that will increase their risk when entering a global market. Which strategy increases this risk?
Acquiring domestic business partners (Many companies are not successful in a foreign market without partnering with a strong, domestic business with compatible values. Companies increase risk with this approach when partners do not have objectives that align with the company.)
Global Marketing Strategy Used in international markets by a firm that is different from those used in domestic market. 100 Marketing Campaigns
Adaptation
Sarah Industries tailors their products and marketing campaigns to each market. They operate and sell their products in 100 different markets. Each of 100 markets is unique, so they have a modification and improvements for each market. Sara industries has 100 unique products and marketing campaigns.
Adaptation
When expanding internationally to a country with a lower average income, a company made efforts to reduce the price of its product, even though it eliminated some of the benefits the product has in other markets. This allowed for greater sales in the new market. Which strategy is being used by this company?
Adaptation
A company has decided that a foreign direct investment should be made during the next quarter to strengthen the organization. Which method should be used for this purpose?
Establishing a greenfield venture
Which unethical act is addressed by the U.S. Foreign Corrupt Practices Act of 1977?
Bribery
How should a company ensure that internal controls are effectively implemented?
By performing due diligence with procedures
A company sells products that many have reported on social media to be culturally insensitive, and sales have decreased significantly since the negative publicity began. How are consumers responding to the publicity?
By voting with their purchases
Government Impact on FDI Host government improve or enhance local infrastructure - energy, transportation, and communications - to encourage specific industries to invest and to improve the local conditions of domestic firms.
Encourage FDI - Infrastructure
Decision making in MNC Only the top managers make decisions Lower-level managers execute the directives e.g. Military In-efficient decision making Consistency
Centralized
A company is reviewing how ethical consumerism is being addressed in the organization. It is hoping to improve its awareness of this factor and how it will influence future business decisions. How does this factor affect business decisions?
Companies must remember that their consumers may care about more than just the final product.
Which term describes the normative beliefs and practices passed from generation to generation that help define a group of people?
Cultural norms
It facilitates coordination and integration of activities through hierarchical supervision, formal rules and procedures, and training and socilization.
Organizational Structure
Decision making in MNC Decision-making is pushed down to the managers who are the closest to the work or client Flexibility to meet local needs Inconsistent decision making
Decentralized
An employee feels empowered to make decisions to solve customer problems independent of seeking manager approval and uses flexibility to meet customer needs. Which decision-making structure is being used by this employee?
Decentralized (Decentralized decision-making structure is when lower-level employees, like the one mentioned, make decisions. This type of decision-making may be inconsistent.)
Managers in an international company are arranging jobs so similar tasks are coordinated. Which activity is being completed by this company?
Departmentalization
Government Impact on FDI Host governments can specify ownership restrictions if they want to keep the citizens in control of local markets or industries.
Discourage FDI - Ownership Restriction
Government Impact on FDI A company's home government usually imposes these restrictions to persuade companies to invest in the domestic rather than foreign market.
Discourage FDI - Tax Rates and Sanctions
Groups people together to serve the needs of products, markets, or geographical regions.
Divisional Structure
What does business ethics implicitly regulate?
Employee behavior (Employers want employees to self-regulate so that when a stimulus appears they will take proper action in the interest of everyone involved, either directly or indirectly.)
Government Impact on FDI Host country offers businesses a combination of tax incentive and loans to invest. Home country governments may also offer a combination of insurance, loans, and tax breaks to promote their companies' overseas investments.
Encourage FDI - Financial Incentives
It sets the organization's boundaries and regulates its contacts with its environment and with other organizations.
Organizational Structure
A company wants to gain market share but does not want to establish operations in other countries nor tailor its products to the other countries. Which entry strategy should the company use to meet this goal under these conditions?
Export
Low Global Integration & Low Local Responsiveness Export products around the globe Not interested in global expansion. Same products for all markets
Export Strategy
Entry Strategy Easy, can be done over the internet Competition is generally keen and the profit margins may not be high Low control, low local knowledge, potential negative environmental impact of transportation
Export-Import (Lowest Risk)
A company would like to expand its operations overseas but has little experience in global markets. What is the easiest way for a company to get started in this market?
Exporting (Exporting is cheaper than other methods of entry because it does not require having a physical presence in another nation, a separate distributor, or an export management company to handle business at that location.)
A business partner is hoping to persuade the other partners on the benefits that can be gained by expanding into foreign markets. Which reason should the business partner use to illustrate these benefits?
Extends the reach of the brand
TRUE or FALSE Sara Industries would like to expand into a new market in order to gain access to local market and resources. The company has decided to purchase an 11% stake in Uri Tech, an Israeli company. Both Sarah and Uri tech specialize in Research and Development. This is an example of vertical portfolio investment.
FALSE (Horizontal FDI)
TRUE or FALSE Sarah Industries is a multinational corporation. They are headquartered in the United States but they have facilities throughout Europe and South America. The management is centralized n the US. The managers in Europe and South America have been able to modify the product to better serve the needs of the local customers. Sara Industries takes a standardized approach.
False (Multidomestic Approach)
TRUE or FALSE Aria is an employee at Sara Industries. She is a part of the marketing team and reports to the head of the computer marketing. Her boss reports to the head of the computer division. The head of the division reports to Sara Industries CEO. Sara Industries has a Flat Structure.
False (Tall Structure - a lot of hierarchy.)
Organization Structure Only a few layers of management between frontline employees and top level
Flat Structures
Foreign Investment Directly investing in, controlling, and managing value-added activities in other countries. Hands on management of assets. -An equity stake of 10% or more in foreign-based enterprise -Purchasing the assets of foreign company -Investing in a company - New property, plant or equipment
Foreign Direct Investment
Entry Strategy Obligates the parent firm to provide specialized equipment and/or services to the franchisee (e.g. product specification and adaptation, pricing, promotion, and distribution strategies), and sometimes to fund some startup costs. The franchisee pays an annual fee, which is generally based upon sales generated and seed money provided for the venture.
Franchising
A large, publicly traded telecommunications company falsified its earnings report and hid debt. Which unethical practice did the company engage in?
Fraudulent accounting
Groups people together to hold similar positions, perform similar tasks, or use the same kinds of skills.
Functional/Departmental Structure
Degree to which the company is able to use the same products and methods in other countries
Global Integration
Global Marketing Strategy Involves perusing a standardization strategy in foreign markets when possible and an adaptive one when necessary. 1 < x < 100 Marketing Campaigns
Glocalization
A global company has warned managers that the country involved in their current business venture typically expects small payments to be made to government officials to expedite decisions and transactions. The company has encouraged managers to avoid this type of unethical practice. Which form of activity is the company concerned about?
Grease payments
Which method of entering an international market offers the most potential for above-average returns?
Greenfield venture (A greenfield venture is a high-risk way to enter a market because the company assumes all of the risk. Along with this risk comes the potential of higher returns than other means of entering a foreign market.)
Why go Global?
Large corporations with significant amounts of resources at their disposal. Are willing and able to take a huge risk needed to globally operate Enter Foreign Markets (e.g. Direct Investment, Exports, licencors, joint ventures, strategic partners, mergers, wholly-owned subsidiaries)
A coffee company received international criticism for an employee negatively responding towards a customer. The response was said to be racially motivated. The company needs to take swift action to improve how all employees in the organization are viewed by ethical consumers. Which course of action should the company take to meet this goal?
Have employees attend sensitivity training
A company that released a new vehicle marketed as being environmentally friendly is found to have cheated when testing the vehicle's total emissions. The company would like to repair damage from the negative publicity by changing its image and catering more to ethical consumers. Which action should the company take to reach this goal?
Hire a new leader to send the message that practices have changed
An international company wants to establish links between the people at the same level of the organization to form committees. What is the name for this type of link in a company?
Horizontal
Foreign Direct Investment Producing the same products or offering the same services in a host country as firms do at home.
Horizontal FDI
Relationships between equals in an organization Committees, task forces, and teams The majority of organizational decisions are first considered
Horizontal Linkages
An accountant for a transnational company feels pressure from senior management to hide losses from the firm's operational activities. The requested action is legal but certainly does not give an accurate financial picture of the firm's current finances and could influence foreign investment. What type of stimulus is being used in regards to this company's organizational ethics?
Internal
Entry Strategy A business that is jointly owned (implies shared equity) Jointly operated by two or more firms (usually one from the host country and the other from another country) Pooling of resources (labor, capital, technology, and management) to penetrate a host country as well as foreign markets, generate and split profits, and share the commercial risk. THe local partner will be most knowledgeable about the domestic economic, cultural, and political environments.
International Joint Venture
A company is expanding internationally through the purchase of other companies and decides to use the multibrand strategy. Why is this strategy appropriate?
It has a purchased company with a recognizable brand in its market.
How can the corruption perceptions index (CPI) be used to understand international business ethics?
It identifies nations in which corruption is frequent.
An American salesperson is attempting to do business in a Middle Eastern country. What is one of the major cultural issues the salesperson needs to understand about this part of the world?
It is more relationship-based than the United States.
A company owner is considering manufacturing using a global standardization strategy to achieve economies of scale. Why is this strategy effective?
It manufactures the same product for all markets.
A researcher at a university has developed a new vaccine to fight covid-19. They have patented their formula and have exclusive rights to the vaccine. As a researcher, they do not have the facilities to produce the medication for global use. They also do not have the needed funds to create a facility. What strategy would be the best option for this researcher?
Licensing
Entry Strategy A company or individual provides the foreign partner with the necessary means (patented technology, copyright, process, trademark, etc.) to manufacture and sell its products in the target country for an annual license fee No upfront cost Need strong regulatory environment (IP and contract law) to make sure licensing agreement can be enforced
Licensing
A company wishes to expand into a new country with its current products. The company is looking to keep the entry costs low. Which method of entry should the company use to enter the country?
Licensing (Licensing provides a low-cost strategy to enter the market. The products are shipped to the host country and sold there with no localization.)
Degree in which the company must customize its products and methods to meet conditions in other countries.
Local Responsiveness
A fast food company seeks to expand internationally and changes its menu to appeal to the new country's food tastes. Which action is being sought by the company by making this change?
Local responsiveness (The company is responsive to its local environment when it adapts it products and services to local consumer tastes.)
An individual is considering entering the global market via a franchise. Which outcome should be expected by the individual if this approach is used?
Majority of financial risk
A company decides to focus on economies of scale to decrease production costs and increase revenues. Why is this strategy effective?
Manufacturing in large quantities keeps costs low.
Aria is an employee of Sara Industries. She is part of the marketing team and reports to the head of the computer marketing. Her boss reports to the head of the computer division. The head of the division reports to Sara Industries CEO.
Matrix (Marketing Team > Computer Division)
Groups people simultaneously by function and by division.
Matrix Structure
Entry Strategy The home country firm will purchase the host country firm and implement its own international business strategy Viewed as a local company, known and established operations Fast entry
Merger and Acquisition
Low Global Integration & High Local Responsiveness Customizes products or processes to the specific conditions in each country Management is centralized in the home country but country managers are given latitude to make adaptions Sacrifice scale efficiencies for responsiveness to local conditions
Multidomestic Strategy
Company that operates in two or more countries, leveraging the global environment to enter new markets to increase revenue.
Multinational Corporations (MNC)
Firms that are headquartered in one country, but own and control manufacturing, services, R&D (research and development) facilities, or other business entities on foreign soil.
Multinational Enterprises
Which business challenge stems from exporting small amounts of goods through e-commerce companies?
Obeying legal restrictions
A business has experienced significant internal and external events, and the owner decides to respond effectively while maintaining the rules of behavior the company has always vocalized as being appropriate. Which component has guided this owner's response?
Organizational ethics
A conglomerate company in the United States wants to conduct business in a foreign country with another major corporation but recently found out that resources are limited if both companies produced the same products at the same speed. How should these companies cooperate to reduce costs?
Partnering
Which outcome is a result of a company ensuring that shrinkage is reported in accounting?
Petty theft being reduced (Discrepancies are unintentional accounting errors due to reasons such as incorrectly entered data and shrinkage. Accounting shrinkage can reduce petty theft, mismanaged inventory, and perishable goods going unrecorded.)
Foreign Investment Investment in a company's stocks, bonds, or assets. Not for the purpose of controlling or directing the firm's operations or management.
Portfolio Investment
Managers at an international business are deciding the method by which it will be organized. The business is highly diversified, manufacturing a number of different components and parts for its industrialized customers. Which departmentalization structure should be used by this company? Process
Product (When an organization is built around the products or services it sells, it is using a product departmentalization structure.)
A company wishes to make a foreign direct investment into a country. Which investment should be used by the company?
Purchase of a plant in the host country
A large corporation deceived regulators with fake holdings and cheated shareholders out of massive amounts of money. Which unethical practice was used by the corporation?
Securities fraud
A company requires one employee to be responsible for maintaining a machine. Another employee is responsible for maintaining accounting records for that machine. Which internal control has the company implemented?
Segregating duties
Global Marketing Strategy Used in the international market by a firm that is the same as those in its domestic market 1 Marketing Campaign
Standardization
High Global Integration & Low Local Responsiveness Treats the world as one market with little meaningful variation One product/marketing campaign for all markets Produces by centralizing many common activities
Standardization Strategy
The British East India Company used expansionist policies to gain profits in the East Indies by collecting unreasonable taxes from Indians. Which unethical practice was used by this company?
Stealing from the people they ruled
Entry Strategy Marriage of convenience between two or more firms that stand to gain revenue (or market share) through cooperation with each other for specific reasons and for a given period. Challenge - any member can quit at any point.
Strategic Alliance or Partnership
A company wants to enter the international market and is placing the entry modes into a hierarchy to determine the most and least expensive options. Which strategy has the greatest risk from a financial perspective?
Subsidiary (This means of entering an international market is the most expensive. The owner must assume all the financial, economic, political, and currency risk.)
Organizational Structure Several layers of management between frontline employees and the top level
Tall Structures
A global buyer reviews a company's ethical profile and the social responsibility section of its annual report. Understanding that the company's values match the buyer's principles, the buyer purchases the company's products. Which action did the buyer perform regarding the purchase of the company's products?
The buyer practiced ethical consumerism.
A multinational company plans on setting up a greenfield venture in a foreign country. What is a potential implication for the company?
The company will be seen as an insider who would hire locals.
Popular North American retail companies failed in their attempts to become part of the Chilean market in the 1990s. What is the main reason these retailers failed in this endeavor?
They did not offer banking services in their retail stores. (The Chilean retailers owned their own banks, and the banking services offered at their retail stores were a major reason for their profitability. Not offering banking services is the main reason the North American companies failed in the Chilean market.)
What is the purpose of internal controls?
To create redundancies in a system to ensure it functions properly
A company is experiencing a decrease in sales in the home country. During this difficult time, the company has decided to invest abroad. What is the motivation for taking this action?
To ensure the company reaches more customers in a new market
A well-respected company wants to expand its operations in another country and voluntarily decides to use locally supplied materials. What is a reason the company wishes to make this transfer?
To increase product profitability and cut costs.
A car company wants to expand internationally but encounters much international competition to reduce cost while responding to local needs. Which strategy should the company use to meet this goal under these conditions?
Transnational (This strategy is one in which a company must be nimble to respond to cost pressures while customizing products to local markets. Transnational strategies have to deal with the problems of standardization (cost) and multidomestic strategies (local responsiveness).)
High Global Integration & High Local Responsive Combines standardization strategy and multidomestic strategy. Used when a company encounter significant cost pressure from international competitors but must also offer products that meet local customer needs. Difficult to maintain because the company needs to achieve economies of scale through standardization but also be flexible to respond to local conditions.
Transnational Strategy
Each person should report directly only to one supervisor.
Unity of Command
Foreign Direct Investment A firm moves upstream or downstream at a different value chain stages in a host country
Vertical FDI
Tie supervisors and subordinates together. Show the lines of responsibility through which a supervisor delegates authority to subordinates, oversees their activities, evaluates their performance, and guides them toward improvement when necessary.
Vertical Linkages
Entry Strategy Build and operate its own facilities (also called - greenfield plants) overseas New company that's 100% owned in another country. Generally require large capital investment
Wholly-owned subsidiary
