Deck 13: The Organization of International Business

Question 1

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

Answer 1

True

Question 2

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

Answer 2

False

Question 3

By concentrating power and authority in one individual or a management team,centralization can give top-level managers the means to bring about needed major organizational changes.

Answer 3

True

Question 4

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 5

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 6

A key disadvantage of the worldwide area structure is that it limits local responsiveness.

Question 7

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 8

The worldwide product division structure facilitates local responsiveness.

Question 9

The need for coordination between units is greatest in transnational firms.

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

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

Question 12

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

Question 13

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 14

The need for coordination between subunits is highest in firms pursuing a localization strategy.

Question 15

The bonus a manager might receive if her subsidiary performance exceeds its performance target is an example of an incentive.

Question 16

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

Question 17

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

Question 18

A global standardization strategy is well suited to firms with a worldwide area structure.

Question 19

Formulating strategy,deciding how to allocate resources within a firm,and evaluating the performance of managers and giving feedback are examples of control systems.

Question 20

The term people refers to not just the employees of the organization,but also the strategy used to recruit,compensate,and retain those individuals and the type of people that they are in terms of their skills,values,and orientation.

Question 21

The matrix structure is designed to facilitate maximum integration among subunits.

Question 22

When we survey the systems that corporations use to control their subunits,we find that not all multinational firms use output and bureaucratic controls.

Question 23

The simplest integrating mechanism in an MNE is direct contact between managers.

Question 24

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

Question 25

In a company using cultural controls,employees tend to control their own behavior.

Question 26

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 27

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

Question 28

It is more important to have a common culture in firms employing a localization strategy than a transnational strategy.

Question 29

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

Question 30

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 31

Performance ambiguity raises the cost of control.

Question 32

A strong organizational culture always leads to strong performance.

Question 33

An organizational culture can be strong but bad.

Question 34

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

Question 35

To survive,a firm must strive to achieve a fit between its environment,its strategy,and its organizational architecture.

Question 36

Bureaucratic control involves personal contact with subordinates.

Question 37

A strong organizational culture might be beneficial at one point,leading to high performance,but inappropriate at another time.

Question 38

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

Question 39

Movement to a new state requires a substantial change in the form of a multinational's organization architecture so that it matches the desired new strategic posture.

Question 40

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

Question 41

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 42

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 43

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 44

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"
D)unless they are exceptional in nature.
E)can be used to establish relatively autonomous,self-contained subunits within an organization.

Question 45

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 46

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 47

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

A)vertical differentiation
B)centralization
C)horizontal differentiation
D)decentralization

Question 48

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 49

When a company measures the performance of its national operating subsidiaries according to profitability,the company is using:

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

Question 50

According to the text,superior enterprise profitability requires all of the following conditions to be fulfilled except:

A)the different elements of a firm's organizational architecture must be internally consistent.
B)the organizational architecture must match the strategy of the firm.
C)the strategy and architecture of the firm must not only be consistent with each other,but also consistent with the competitive environment of the firm.
D)the firm's formal organizational structure must revolve around the indigenous population in each subunit.

Question 51

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 permits total flexibility with no control.

Question 52

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

A)decentralizing all decisions to foreign subsidiaries.
B)decentralizing operating decisions to foreign subsidiaries.
C)centralizing all operating decisions.
D)centralizing all decisions.

Question 53

Which of these terms means the totality of a firm's organization,including formal organization structure,control systems and incentives,processes,organizational culture,and people?

A)Organizational ethics
B)Organizational architecture
C)Organizational norms
D)Organizational hierarchy

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

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 56

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)None.All decisions are typically centralized.

Question 57

Incentives are:

A)the metrics used to measure the performance of subunits and make judgments about how well managers are running those subunits.
B)the devices used to reward appropriate managerial behavior.
C)the manner in which decisions are made and work is performed within the organization.
D)the norms and value systems that are shared among the employees of an organization.

Question 58

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 59

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 60

Which term 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 61

A(n)_____ tends to be adopted by firms that are reasonably diversified and,accordingly,originally had domestic structures based on product divisions.

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

Question 62

Firms structured on this basis may encounter significant problems if local responsiveness is less critical than reducing costs or transferring core competencies for establishing a competitive advantage.

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

Question 63

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 64

In practice,the dual-hierarchy 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 65

The main types of control systems used in MNEs include all of the following,except:

A)personal controls.
B)bureaucratic controls.
C)input controls.
D)cultural controls.

Question 66

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 67

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 68

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

A)The need to get an area and a product division to reach a decision can slow decision making and produce an inflexible organization unable to respond quickly to innovate.
B)It gives limited voice to area or country managers,since it makes them subservient to product division managers.
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,catching many managers in the middle.

Question 69

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 70

The simplest integrating mechanism in an MNE is:

A)direct contact between managers.
B)the use of teams.
C)the introduction of liaisons.
D)the establishment of the matrix structure.

Question 71

Firms traditionally have tried to achieve coordination by adopting:

A)informal integrating mechanisms.
B)formal integrating mechanisms.
C)vertical differentiation.
D)horizontal differentiation.

Question 72

The main problem with this structure is the limited voice it gives to area or country managers,since it makes them subservient to product division managers.

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

Question 73

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

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

Question 74

This structure encourages fragmentation of the organization into highly autonomous entities.

A)Worldwide area structure
B)Global matrix structure
C)Worldwide product structure
D)Global network structure

Question 75

The implied lack of coordination between domestic operations and foreign operations,which are isolated from each other in separate parts of the structural hierarchy,is a problem encountered with a(n):

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

Question 76

In a domestic firm with a product divisional structure,each division is responsible for a distinct:

A)product line.
B)individual product.
C)product assortment.
D)product design.

Question 77

In practice,the global matrix structure:

A)works as well as the theory predicts.
B)is often clumsy and bureaucratic.
C)makes it easy to ascertain accountability.
D)results in quick decision making.

Question 78

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 79

Which of the following is a potential drawback of the worldwide area structure?

A)It encourages fragmentation of the organization into highly autonomous entities.
B)It is inconsistent with a localization strategy.
C)It discourages local responsiveness.
D)It is not suitable for firms with a low degree of diversification and a domestic structure based on functions.

Question 80

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 function.
D)Decision-making responsibilities are centralized.