Deck 14: The Organization of International Business

Question 1

Centralization gives top-level managers the power and authority to be able to bring about needed major organizational changes.

Answer 1

True

Question 2

In a classic matrix structure, individual managers belong to two hierarchies (a divisional hierarchy and an area hierarchy) and have two bosses (a divisional boss and an area boss).

Answer 2

True

Question 3

A decentralized organization allows managers to respond to environmental changes more quickly than in a centralized organization.

Answer 3

True

Question 4

The choice between centralization and decentralization is not absolute.

Question 5

The need for coordination between units is greatest in firms pursuing a localization strategy.

Question 6

A firm's organizational culture refers to the formal organizational structure of the company, the control systems and incentives in place, and the human resources component.

Question 7

In a worldwide area structure, each area tends to be a self-contained, largely autonomous entity with its own set of value creation activities.

Question 8

A manager receives a bonus because the national operating subsidiary, that she is in charge of, exceeds its performance target. This is an example of an incentive.

Question 9

By centralizing decision making, a firm can avoid the duplication of activities that occurs when similar activities are carried on by various subunits within the organization.

Question 10

Beyond the initial functional division of the organization, further horizontal differentiation may be required if the firm significantly diversifies its product offering, which takes the firm into different business areas.

Question 11

In a worldwide product divisional structure, each division is a self-contained, largely autonomous entity with full responsibility for its own value creation activities.

Question 12

The worldwide area structure tends to be adopted by firms with a low level of diversification whose domestic structures are based on functions.

Question 13

In firms pursuing a transnational strategy, some operating decisions are relatively centralized, while others are relatively decentralized.

Question 14

The worldwide product division structure facilitates local responsiveness.

Question 15

A firm's vertical differentiation determines where in its hierarchy the decision-making power is concentrated.

Question 16

A firm pursuing a localization strategy will have a strong incentive to centralize decision-making.

Question 17

It is difficult to ascertain accountability in the global matrix structure.

Question 18

Regardless of a firm's domestic structure, its international division tends to be organized on economy.

Question 19

Organizational structure refers to the totality of a firm's organization.

Question 20

A worldwide product division structure tends to be adopted by firms that are reasonably diversified and originally had domestic structures based on product divisions.

Question 21

Firms pursuing a global standardization strategy must cope with a higher level of performance ambiguity, and this raises their costs of control.

Question 22

An organizational culture can be strong but bad.

Question 23

Personal control is a type of control that tends to be most widely used in large firms.

Question 24

Direct contact between subunit managers is the simplest integrating mechanism.

Question 25

The basic principle behind incentive systems is to ensure that the incentive scheme for an individual employee is linked to an output target that he or she has some control over and can influence.

Question 26

A knowledge network is a network for transmitting information within an organization that is based on formal organizational structure.

Question 27

New processes that might lead to a competitive advantage can be developed anywhere within the organization's global network of operations.

Question 28

Firms pursuing a localization strategy have a high need for coordination between subunits.

Question 29

Firms pursuing a localization strategy tend to operate with an array of formal and informal integrating mechanisms.

Question 30

Norms are abstract ideas about what a group believes to be good, right, and desirable.

Question 31

In a matrix structure all roles are viewed as integrating roles.

Question 32

Firms pursuing a global standardization strategy are more centralized than enterprises pursuing a localization or international strategy.

Question 33

The need for coordination is high in firms trying to profit from location and experience curve economies.

Question 34

It is important to realize that organizational change will occur regardless of the commitment of senior managers to it.

Question 35

Performance ambiguity lowers the cost of control.

Question 36

In a company using cultural controls, employees' behavior is closely monitored and controlled through direct supervision.

Question 37

National regulations including local content rules and policies pertaining to layoffs might act as a source of inertia.

Question 38

The costs of control can be defined as the amount of time top management must devote to monitoring and evaluating subunits' performance.

Question 39

It is more difficult for a leader to create an organizational culture from scratch in a new venture than it is to change an established one.

Question 40

Bureaucratic control involves personal contact with subordinates.

Question 41

Centralization:

A) gives top management time to focus on critical issues by delegating more routine issues to lower-level managers.
B) can give top-level managers the means to bring about needed major organizational changes by concentrating power and authority in one individual or a management team.
C) permits greater flexibility because decisions do not have to be "referred up the hierarchy" unless they are exceptional in nature.
D) can be used to establish relatively autonomous, self-contained subunits within an organization.

Question 42

To unfreeze the established culture of an organization the company must take bold steps such as shaking up the management structure in order to implement change.

Question 43

Organizational structure means all of the following, EXCEPT:

A) the establishment of integrating mechanisms to coordinate the activities of subunits.
B) the location of decision-making responsibilities with a structure.
C) the manner in which decisions are made and work is performed by individuals.
D) the formal division of the organization into subunits such as product divisions and functions.

Question 44

Centralization and decentralization differ because:

A) centralization hinders coordination, while decentralization facilitates coordination.
B) centralization prevents top-level managers from making required organizational changes, while decentralization gives top-level managers greater power to make organizational changes.
C) centralization ensures that decisions are consistent with organizational objectives, while decentralization can result in decisions at variance with organizational goals.
D) centralization promotes flexibility, while decentralization reduces flexibility.

Question 45

What is horizontal differentiation?

A) The mechanisms that enable each subunit to operate independently
B) The formal division of the organization into subunits
C) The location of decision-making responsibilities within a structure
D) The mechanisms for coordinating subunits

Question 46

Which of the following would be a typical responsibility of a product division in a product divisional structure?

A) Operating decisions
B) Overall strategic development of the firm
C) Financial control of the various divisions
D) Decisions regarding legal issues

Question 47

Historically, Unilever measured the performance of national operating subsidiary companies according to profitability. In this example, profitability is a(n):

A) control system.
B) process.
C) integrating mechanism.
D) incentive.

Question 48

Global learning based on the multidirectional transfer of skills between subsidiaries and the corporate center is a central feature of a firm pursuing a(n) _____ strategy.

A) localization
B) global standardization
C) transnational
D) international

Question 49

Which of the following terms refers to the metrics used to measure the performance of subunits and make judgments about how well managers are running those subunits?

A) Key processes
B) Control systems
C) Knowledge networks
D) Job assignments

Question 50

Which of the following decisions is typically centralized at a firm's headquarters?

A) Production decisions
B) Human resource management
C) Marketing decisions
D) Overall firm strategy

Question 51

A firm that needs greater flexibility should choose _____ for its decision-making.

A) horizontal differentiation
B) decentralization
C) localization strategy
D) control systems

Question 52

Which of the following is an argument favoring decentralization?

A) It can facilitate coordination.
B) It can help ensure that decisions are consistent with organizational objectives.
C) It can give top-level managers the means to bring about needed major organizational changes.
D) It permits greater flexibility.

Question 53

Incremental change rarely happens in an organization because of those whose power may be threatened by such a change.

Question 54

The manner in which decisions are made and work is performed within the organization is known as the firm's:

A) organizational culture.
B) incentives.
C) control systems.
D) processes.

Question 55

Which of the following is an argument favoring centralization?

A) It permits greater flexibility.
B) Motivational research favors it.
C) It can avoid the duplication of activities.
D) It gives top management time to focus on critical issues by delegating routine issues to lower-level managers.

Question 56

The emphasis on local responsiveness in firms pursuing a localization strategy creates strong pressures for:

A) centralizing all decisions regarding marketing, R&D, and human resource management.
B) decentralizing operating decisions to foreign subsidiaries.
C) centralizing all operating decisions.
D) global learning.

Question 57

Refreezing an organization should happen quickly.

Question 58

The norms and values systems that are shared among the employees of a company are referred to as:

A) processes.
B) control systems.
C) incentives.
D) organizational culture.

Question 59

Integration mechanisms are:

A) the formal division of the organization into subunits.
B) the mechanisms that enable each subunit to operate independently.
C) the mechanisms for coordinating subunits.
D) the location of decision making responsibilities within a structure.

Question 60

A firm's _____ determines where in its hierarchy the decision-making power is concentrated.

A) integrating mechanism
B) vertical differentiation
C) knowledge network
D) horizontal differentiation

Question 61

A(n) _____ tends to be adopted by firms that are reasonably diversified.

A) worldwide area structure
B) international division structure
C) worldwide product division structure
D) global matrix structure

Question 62

The worldwide product division structure:

A) is weak in local responsiveness.
B) inhibits the realization of location economies.
C) inhibits the realization of experience curve economies.
D) limits the transfer of core competencies between areas.

Question 63

In practice, the dual-hierarchy in a global matrix structure:

A) lessens all forms of conflict.
B) makes it easy to ascertain accountability.
C) results in extremely quick decision making.
D) can lead to perpetual power struggles.

Question 64

A _____ structure encourages fragmentation of the organization into highly autonomous entities.

A) worldwide area
B) global matrix
C) worldwide product
D) global network

Question 65

The need for coordination between subunits is lowest in firms pursuing a(n):

A) localization strategy.
B) international strategy.
C) global strategy.
D) transnational strategy.

Question 66

_____ refers to giving a person in each subunit responsibility for coordinating with another subunit on a regular basis.

A) Global learning
B) Liaison roles
C) Knowledge network
D) Matrix Structures

Question 67

Which of the following statements is true about a product divisional structure?

A) In a product divisional structure, the responsibility for the financial control of the firm is typically decentralized.
B) A product divisional structure tends to be organized on geography.
C) In a product divisional structure, each product division is set up as a self-contained, largely autonomous entity with its own functions.
D) In a product divisional structure, the responsibility for operating decisions is typically centralized.

Question 68

_____ control is achieved by comparing actual performance against targets and intervening selectively to take corrective action.

A) Personal
B) Output
C) Bureaucratic
D) Cultural

Question 69

Which of the following is a problem that arises due to an international division structure?

A) In an international division structure, a firm's international division tends to be organized on products.
B) The heads of domestic functions are presumed to be able to represent the interests of all countries to headquarters.
C) The heads of foreign subsidiaries are not given as much voice in the organization as the heads of domestic functions or divisions.
D) The dual-hierarchy structure can lead to conflict and perpetual power struggles between the areas and the product divisions.

Question 70

Which control system is most widely used by small firms?

A) Personal
B) Output
C) Bureaucratic
D) Cultural

Question 71

In which of the following organizational structures are the domestic operations and foreign operations isolated from each other leading to coordination problems?

A) Global matrix structure
B) International division structure
C) Worldwide product division structure
D) Worldwide area structure

Question 72

Control through a system of rules and procedures that directs the actions of subunits is:

A) personal control.
B) bureaucratic control.
C) output control.
D) cultural control.

Question 73

Which of the following is NOT true of a strong corporate culture?

A) Almost all managers share a relatively consistent set of values and norms that have a clear impact on the way work is performed.
B) A strong culture leads to high performance.
C) Outsiders see firms with a strong culture as having a certain way of doing things.
D) A strong culture can be a bad culture.

Question 74

The need for coordination between subunits is highest in firms pursuing a(n):

A) localization strategy.
B) international strategy.
C) global strategy.
D) transnational strategy.

Question 75

Firms pursuing a(n) _____ attempt to create value by transferring core competencies from home to foreign subsidiaries.

A) localization strategy
B) international strategy
C) transnational strategy
D) global strategy

Question 76

A(n) _____ is valuable because it can be used as a nonbureaucratic conduit for information flows within a multinational enterprise.

A) liaison network
B) matrix structure
C) organizational structure
D) knowledge network

Question 77

Which of the following is NOT true regarding a worldwide area structure?

A) It tends to be favored by firms with a low degree of diversification.
B) It facilitates local responsiveness.
C) It tends to be favored by firms with a domestic structure based on functions.
D) Decision-making responsibilities are centralized.

Question 78

Regardless of a firm's domestic structure, its international division tends to be organized on:

A) product.
B) geography.
C) people.
D) economy.

Question 79

In the classic global matrix structure, horizontal differentiation proceeds along two dimensions. These dimensions are:

A) hierarchy and overall strategy.
B) target returns and sales potential.
C) marketing strategy and sales potential.
D) product division and geographic area.

Question 80

There is low interdependence, performance ambiguity, and costs of control in firms pursuing a(n):

A) localization strategy.
B) international strategy.
C) transnational strategy.
D) global strategy.