Deck 10: Organizational Design and Control

Question 1

Both multinational and global companies use regionalized organizations.

Answer 1

True
Explanation: As stated directly in the text, both multinational and global companies use regionalized organizations. Global companies consider the division in which the home country is located as just another division for purposes of resource allocation and development of management talent.

Question 2

A company's organizational structure helps to determine where formal power and authority will be located within the organization.

Answer 2

True
Explanation: A company's structure helps determine where formal power and authority will be located within the organization. This structure is what we typically see in a company's organization chart.

Question 3

Organization by product is most favored by global companies because this type of organization guarantees the firm is a global company.

Answer 3

False
Explanation: The regionalized organization appears to be popular with companies that manufacture products with a rather low technological content. It is also favored by firms with diverse products, each having different product requirements, competitive environments, and political risks. Many producers of consumer products, such as prepared foods, pharmaceuticals, and household products, employ a geographic region structure.

Question 4

Strategic business units are an organizational form in which geographic divisions have been defined as though they were distinct,independent businesses.

Question 5

Organizational structure deals with how an international business should be organized to ensure that its worldwide business activities are integrated in an efficient and effective manner.

Question 6

According to the text,an organization that coordinates economic activity to deliver value to customers using resources outside its traditional boundaries is an integrated corporation.

Question 7

An organization in which top-level divisions are required to heed input from a staff composed of experts of another organizational dimension in an attempt to avoid the double-reporting difficulty of a matrix organization but still mesh two or more dimensions is called a hybrid organization.

Question 8

In a typical matrix organization based on area and product dimensions,country managers will be responsible to both the area managers and the product line managers.

Question 9

The international product structure eliminates the duplication of product and area specialists.

Question 10

The matrix overlay organizational form attempts to eliminate some of the problems of the matrix organization.

Question 11

Hybrid organizations are often the result of a regionally organized company having introduced a new and different product from what the regionally organized form is accustomed to handling.

Question 12

The international division is a division in the organization that is responsible for all nonhome country activities and reports to the domestic division.

Question 13

Two of the concerns that management faces in designing the organizational structure for an international company are (1)finding the most effective way to take advantage of geographic differences,and (2)coordinating the activities of departments to enable the firm to meet its overall objectives.

Question 14

The rapidly changing business environment caused by increased global competition,customer preference for custom-made rather than mass-produced products,and faster technological change is pressuring companies to make greater use of global product structures.

Question 15

Changes in an international company's strategy may require changes in the organization's design,but not the reverse.

Question 16

A structure organized by more than one dimension at the top level is a matrix organization.

Question 17

Few international companies are organized by function at the top level.

Question 18

Production coordination poses difficult problems in many regionalized organizations,which has led many companies to assign many specialized product managers who have line authority.

Question 19

An evolving structure for an international organization over time is normal,as the company's involvement in foreign markets increases over time.

Question 20

Most companies establish worldwide organizations based on product,region,function,or customer classes.

Question 21

Regarding an IC's structures and systems

A) management must avoid changing them over time, to avoid disrupting operations.
B) they must be designed before a company can develop its strategy.
C) they must be consistent with the organization's environmental context.
D) they depend on the country in which the IC is headquartered.
E) they must ensure that control is dispersed to subsidiaries to compete successfully across international markets.

Question 22

In designing the organizational structure,management know two concerns,__________ and __________,run counter to each other.

A) an effective way to departmentalize; coordinating activities
B) earning profits; paying taxes
C) hiring employees; reducing labor costs
D) sales growth; research and design expenditures
E) geographic dispersion; profit rate

Question 23

In some cases,an international company legally can keep more profit after taxes by allocating work and prices.

Question 24

Regarding an IC's structure,

A) structure follows strategy, but the reverse is not true.
B) strategy follows structure, but the reverse is not true.
C) if a firm's structure changes, then its strategy must change.
D) if a firm's strategy changes, then its structure must change.
E) structure is usually an integral part of strategic planning.

Question 25

The horizontal organization has been characterized as antiorganization because its designers try to remove the constraints imposed by the conventional organizational structure.

Question 26

When Kraft's earlier efforts to achieve continued growth and efficiencies were hindered,in 2012 it initiated a major reorganization that included

A) acquiring the British confectioner Cadbury.
B) selling off brands such as Oreo cookies to a Chinese firm.
C) withdrawing from emerging markets.
D) splitting the company into two independent companies.
E) withdrawing from the grocery business and selling its assets to another food company.

Question 27

Which of the following is not true about organizational structure?

A) It refers to the way that an organization formally arranges its various domestic and international units and activities, and the relationships among these organizational components.
B) It helps to determine where formal power and authority will be located within the organization.
C) It is primarily created and evolved by senior management.
D) It refers to the informal organization among an organization's units and activities.
E) All of the company's managers work within the context created by this structure.

Question 28

According to the text,the two main issues for management to consider in designing an international company's structure include which of the following?

A) Departmentalizing to most effectively take advantage of efficiencies gained from specialization of capital.
B) Integrating functions to achieve lowest possible costs.
C) Ensuring that policies and procedures can enable continued product innovation.
D) Coordinating departments' activities to meet the firm's overall objectives.
E) Ensuring that power is dispersed so that dependency on individual units is minimized.

Question 29

In a firm without a global product policy,the preference of the operations management people in the home office has always been to localize the product,or at least the production process,in as many overseas plants as possible.

Question 30

According to the text,organizational designers in the IC must be aware that the gain that is achieved from increased specialization of labor may sometimes be nullified by

A) the increased cost of geographic expansion.
B) the increased cost of coordination.
C) the increased cost of product development.
D) increased costs from unionization.
E) increasing costs of marketing and branding.

Question 31

To facilitate Kraft's goal of enhancing growth prospects within developing-country markets,between 2006 and 2012 the company

A) moved an increasing proportion of decisions to the company's Illinois headquarters.
B) gave full profit-and-loss accountability to the business units.
C) centralized product development activities to enhance new product creation.
D) gave headquarters increased control over human and financial resource management.
E) diversified away from global snacks and entered into housewares and clothing.

Question 32

In larger,older organizations more decisions are made at the subsidiaries.

Question 33

For controls to be effective,all operating units of an IC must provide headquarters with timely,accurate,and complete reports,including those dealing with financial,technological,market opportunity,and political and economic information.

Question 34

Advantages of the virtual corporation concept include that it allows a company to build competence from the ground up and to increase management's control over the corporation's activities.

Question 35

With less than 50 percent of the voting stock,or even with no voting stock,an IC can still have control.

Question 36

According to the text,the primary dimensions that need to be considered when designing the structure of an international company include all of the following except

A) product and technical expertise.
B) functional expertise.
C) customer expertise.
D) geographical expertise.
E) financial and market expertise.

Question 37

Decisions may be made at parent company headquarters,at the subsidiary headquarters,or with the cooperation of both.

Question 38

All the reasons for making decisions either at IC headquarters,at 100-percent-owned subsidiary headquarters,or cooperatively do not apply in joint venture situations.

Question 39

According to the text,every successful company uses procedures to put its plans into effect,evaluate the plans' effectiveness,and make desirable corrections.

Question 40

Organizational design

A) is a process that deals with how an international business should be organized to ensure that its business activities are integrated globally.
B) is not concerned with the size of an organization or the complexity of its business operations.
C) must remain stable over time to enable the organization to create and exploit competitive advantage.
D) becomes less important as an IC encounters increased environmental and strategic change.
E) becomes less important as an IC encounters increased global dispersion.

Question 41

Regarding the structure of international companies

A) managers have to consider the nature of their company's international operating environment, both currently and how it is expected to change in the future.
B) managers have to consider the nationalities of their competitors and how that determines structure.
C) gains from increased specialization of labor may at times be magnified by the reduced costs of coordination.
D) managers have to identify the best structure and maintain it over time.
E) managers must modify their structures if they change strategy.

Question 42

The use of an international product structure

A) represents a return to the international division times.
B) has domestic product divisions responsible for the worldwide operations such as marketing and production of products under their control.
C) often suffers from an absence of area experts.
D) helps to avoid a duplication of product experts.
E) often has a group of managerial specialists in an international division who have authority over the product divisions.

Question 43

A division in the organization that is at the same level as the domestic division and is responsible for all non-home-country activities is a(n)

A) foreign division.
B) global product division.
C) regional division.
D) international division.
E) sales division.

Question 44

The international structural stages model suggests that a typical evolutional path for an international company's structure would be

A) from international division to geographical area division to worldwide product division.
B) from international division to worldwide product division to geographical area division.
C) from geographical area division to worldwide product division to global matrix.
D) from functional division to horizontal company to virtual corporation.
E) from international division to worldwide product division to global matrix.

Question 45

According to the text,which of the following dimensions provide the basis for organizational subdivisions at the secondary,tertiary,and still lower levels?

A) Size of the company
B) Process
C) Nation in which headquarters is located
D) Nature of competition
E) Nationality of management

Question 46

The geographic region structure seems to be popular with companies that

A) operate in many diverse foreign regions.
B) favor licensing as a form of market entry.
C) manufacture products with a low technological content requiring strong marketing ability.
D) manufacture products incorporating high technology in industrialized regions.
E) wish to avoid duplication of product specialists.

Question 47

The regionalized organization

A) has the advantage that it avoids duplication of product and functional specialists.
B) seems to be popular with companies that have diverse products, each with different product requirements, competitive environments, and political risks.
C) avoids problems with global product planning.
D) has geographic area managers report directly to domestic operating units.

Question 48

The geographic region structure

A) has all managers reporting directly to the chief executive officer.
B) has geographic area managers report directly to domestic operating units.
C) avoids duplication of area specialists.
D) avoids problems with product coordination across regions.
E) avoids duplication of functional specialists.

Question 49

Disadvantages of the regionalized organization structure include

A) the increased complexity of directing worldwide operations.
B) its inappropriateness for use in global companies.
C) its duplication of area and product specialists.
D) the need for placing specialized product managers with line authority onto headquarters' staff.
E) product coordination across regions can be challenging.

Question 50

The international division structure

A) is usually adopted before a firm begins expanding into international markets.
B) usually has the international division reporting to the domestic division.
C) is only used during the early stages of internationalization; large multinationals change their structure to global, regional, or matrix structures.
D) is the most inefficient of the structures.
E) usually has the international division responsible for all overseas activity.

Question 51

According to the text,one expectation by companies that adopted the global organizational form was that this change may

A) permit them to obtain cheaper labor.
B) be more capable of avoiding global competition.
C) enable them to get lower interest rates to finance expansion.
D) enhance technology transfer and the allocation of company resources.
E) guarantee them lower production costs by larger market share.

Question 52

Regarding the international division structure

A) conflicts tend to be minimized within the firm.
B) by operating separately from the domestic operations, it prevents disagreements from arising regarding product design.
C) the challenges of managing the international division diminish as larger size and scale are achieved.
D) most companies move away from an international division and adopt a global function structure.
E) disagreements may be encountered regarding prices charged to the international division by the domestic unit.

Question 53

As their overseas operations have increased in importance,larger multinationals have felt the need to

A) change from a global structure to an international division.
B) establish worldwide organizations based on product, process, national subsidiary, or customer classes at the top level.
C) eliminate their domestic operations.
D) establish worldwide organizations based on product, customer class, function, or region at the top level.
E) adopt a matrix structure to improve efficiency and reduce the complexity of global activities.

Question 54

Regarding the way international companies are structured and integrated

A) no single structure is best for all companies and contexts.
B) managers must consider the nature of their company's international operating environment and their competitors' strategies when deciding when and how to modify the company's organizational structure.
C) gains from increased specialization will be nullified by increased benefits of coordination, requiring managers to choose between the two.
D) managers have to consider the nationalities of their competitors and of their own company before selecting a structure.
E) if the company's strategy changes, then structure must change.

Question 55

According to the text,which of the following dimensions do not provide the basis for organizational subdivisions at the secondary,tertiary,and still lower levels?

A) Size of company
B) National subsidiary
C) Domestic or international
D) Function
E) Customer class

Question 56

Companies with global structures

A) outperform those with international divisions.
B) are organized on the basis of geography and not on products or processes.
C) are large companies with numerous overseas manufacturing facilities.
D) are organized on the basis of products and do not have other organizing dimensions in a pure organization.
E) may obtain lower production costs by promoting worldwide product standardization.

Question 57

The common characteristic of multinationals that are organized by function at the upper level is a narrow

A) and highly integrated product mix.
B) and highly integrated customer list.
C) variation of prices in the product mix.
D) research and development effort.
E) and highly concentrated regional focus.

Question 58

The use of an international product structure

A) represents a sharp move away from pre-export department times.
B) has domestic product divisions responsible for the worldwide operations such as marketing and production of products under their control.
C) helps to avoid duplication of area experts.
D) often suffers from a duplication of product experts.
E) often has a group of managerial specialists in an international division, who have authority over the product divisions.

Question 59

A structure organized by more than one dimension at the top level is known as a

A) hybrid organization.
B) matrix organization.
C) matrix overlay.
D) network corporation.
E) virtual corporation.

Question 60

According to the text,one expectation by companies that adopted the global organizational form was that this change may

A) permit them to obtain cheaper labor.
B) be more capable of developing strategies to confront new global competition.
C) enable them to get lower interest rates to finance expansion.
D) enable them to avoid regulation.
E) guarantee them lower production costs by larger market share.

Question 61

__________ are organizational forms in which product divisions are defined as though they were independent businesses.

A) Free-form management units
B) Strategic business companies
C) Strategic business units
D) Matrix overlays
E) Virtual corporations

Question 62

The __________ organization has evolved from management's attempt to mesh product and regional and functional expertise while maintaining clear lines of authority.

A) hybrid
B) matrix
C) global
D) functional
E) network

Question 63

The horizontal corporation

A) often draws teams from different departments to solve a problem or deliver a product.
B) relies extensively on the use of vertical networks.
C) puts greater decision-making responsibility in the hands of managers from outside the company.
D) is a form of organization characterized by vertical decision processes.
E) has been characterized as "virtual organization."

Question 64

The potential disadvantages of the virtual corporation concept include the following:

A) It permits greater flexibility than is associated with more typical corporate structures.
B) Virtual corporations form a network of dynamic relationships that allows them to take advantage of the competencies of other organizations.
C) This form of organization increases the security of long-term employment for employees.
D) Virtual organizations may reduce management's control over the corporation's activities.
E) It reduces the potential for opportunistic actions by partners.

Question 65

Virtual corporations are also called

A) modular network.
B) corporate network.
C) modular corporation.
D) virtual network.
E) anti-organizations.

Question 66

Problems with the matrix structure are as follows:

A) two or more managers must agree on decisions, which can lead to slow decision making.
B) special divisions often must be established to serve heterogeneous customer segments.
C) global branding and production coordination are hindered.
D) functional concerns are ignored.
E) upper management is no longer involved in key decisions of the IC.

Question 67

A hybrid organization may be used when

A) a firm uses SBUs.
B) management attempts to mesh product and regional expertise.
C) management encounters problems with a matrix organization.
D) an IC is selling to a sizable, homogeneous class of customers.
E) management believes worldwide functional expertise is more significant to the firm than is product or area knowledge.

Question 68

The form of organization characterized by lateral decision processes,horizontal networks,and a strong corporate-wide business philosophy is known as a

A) modular network.
B) horizontal corporation.
C) modular corporation.
D) virtual network.
E) virtual organization.

Question 69

According to the text,companies are now accepting the need for

A) eliminating top management.
B) less frequent reorganization.
C) reducing the size of middle management.
D) eliminating structures based on function.
E) organizing based first on geography.

Question 70

A hybrid organization may result from

A) the firm's acquiring a company with distinct products and distribution channels.
B) management's attempt to mesh product and regional expertise.
C) management's problems with a matrix organization.
D) a firm's use of SBUs.
E) management's belief that worldwide functional expertise is more significant to the firm than is product or area knowledge.

Question 71

According to the text,why might ICs adopt the horizontal organization format?

A) they reduce costs by eliminating middle management.
B) they enhance efficiency by increasing the use of vertical decision processes.
C) they spark innovation and new product development.
D) they enable top management to control processes through centralized approval systems.
E) they have rigorously developed procedures for strict control and supervision, enhancing quality.

Question 72

According to the text,which of the following is not typically associated with strategic business units?

A) Clearly defined market
B) Specialized production technology
C) Specific competitors
D) Size appropriate for control by a single nation
E) Self-contained

Question 73

An organization in which top-level divisions are required to heed input from a staff composed of experts of another organizational dimension in an attempt to avoid the double-reporting difficulty of a matrix organization but still mesh two or more dimensions is known as a

A) hybrid organization.
B) matrix organization.
C) matrix overlay.
D) network corporation.
E) virtual corporation.

Question 74

According to the text,reengineering of organization forms is the

A) redesign of the company's products to improve their quality.
B) significant reduction of top management.
C) disempowerment of employees.
D) movement toward lean, fast, and innovative structures and processes.
E) increased use of specialization and added organizational hierarchy.

Question 75

An organization that coordinates economic activity to deliver value to customers using resources outside the traditional boundaries of the organization is known as a(n)

A) modular network.
B) horizontal corporation.
C) strategic business unit.
D) virtual corporation.
E) global corporation.

Question 76

According to the text,which of the following is not one of the developments that is encouraging managers to consider organizational designs such as reengineering,virtual corporations,and horizontal corporations?

A) Faster technological change.
B) Increased diversity of cultures and countries.
C) A growing customer preference for custom-made rather than mass-produced products.
D) Pressure to maintain alignment between the organization and its global and hypercompetitive environment.
E) The rapidly changing business environment caused by increased global competition.

Question 77

Which of the following is not true about horizontal corporations?

A) they often draw teams from different departments to solve a problem or deliver a product.
B) they rely extensively on the use of vertical networks.
C) they have a strong corporate-wide business philosophy.
D) they are characterized by lateral decision processes.
E) they have been characterized as "anti-organizations."

Question 78

The potential benefits of the virtual corporation concept include the following:

A) It permits greater flexibility than is associated with more typical corporate structures.
B) Virtual corporations form a network of static relationships that allow them to take advantage of the competencies of other organizations.
C) This form of organization increases management's control over the corporation's activities.
D) Virtual organizations reduce management's control over the corporation's activities.
E) It enhances the potential for opportunistic actions by partners.

Question 79

Most strategic business units are organized based on __________________.

A) geographic region
B) functional area
C) customer class
D) product line
E) country level

Question 80

The horizontal corporation:

A) relies on teams of specialists from within a department to solve a problem or deliver a product.
B) relies extensively on the use of vertical networks.
C) puts greater decision making responsibility in the hands of executives from headquarters.
D) is a form of organization characterized by lateral decision processes.
E) has been characterized as "virtual organization."