Deck 10: Organizational Design and Control

Question 1

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

Answer 1

True

Question 2

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

Answer 2

True

Question 3

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.

Answer 3

False

Question 4

Organizational change refers to the way that an organization formally arranges its various domestic and international units and activities and the relationships among these various organizational components.

Question 5

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

Question 6

The product global corporate form eliminates the duplication of product and area specialists.

Question 7

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

Question 8

Both multinational and global companies use regionalized organizations.

Question 9

In designing an international organization, it is essential that the structures and systems being implemented are consistent not merely with each other but also with the strategy the company and its competitors are using.

Question 10

The initial choice of organizational structure after discarding the international division is usually a hybrid based on product and market factors.

Question 11

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 12

Global firms that organize by function at the top level have functional managers that report directly to the area heads.

Question 13

The regionalized organization appears to be popular with companies that manufacture products with a rather low technological content.

Question 14

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

Question 15

A company's international operating environment, both currently and as it is expected to be in the future, is the primary determinant of its organizational structure.

Question 16

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

Question 17

The disadvantage of an organization divided into geographic regions is that each region must have its own product and functional specialists.

Question 18

The type of structure that simplifies the task of directing worldwide operations because every country in the world is clearly under the control of someone who is in contact with headquarters is global product.

Question 19

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

Question 20

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

Question 21

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 22

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 23

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 24

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 25

A virtual corporation is also called a network organization.

Question 26

A matrix organization involves two or more dimensions, such as area and product, in which managers are at the same level but do not have overlapping responsibilities.

Question 27

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

Question 28

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

Question 29

All decisions are made either at the IC headquarters or at the subsidiary level.

Question 30

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

Question 31

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 32

A form of organization characterized by lateral decision processes, horizontal networks, and a strong corporatewide business philosophy is a horizontal corporation.

Question 33

According to the text, every successful company uses controls to put its plans into effect, evaluate, correct, and reward.

Question 34

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 35

The more familiar, or the more similar, conditions in the host country are perceived to be, the more likely headquarters is to rely on subsidiary management.

Question 36

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 37

Moving executives around an IC system can increase confidence and mutual reliance.

Question 38

A business entity with a clearly defined market, specific competitors, the ability to carry out its business mission, and a size appropriate for control by a single manager is a strategic operating unit.

Question 39

Companies controlled by other companies through ownership of enough voting stock to elect majorities on the board of directors are called subsidiaries or affiliates.

Question 40

As the 21^st century evolves, it is expected that managers will make greater use of the dynamic network structure to integrate smaller units into an operation better coordinated by a large central headquarters organization.

Question 41

To facilitate Kraft's goal of enhancing growth prospects within developing-country markets, 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) expanded core product categories into large developing countries.
D) all of the above.
E) two of A, B, and C.

Question 42

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

Question 43

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 costs of coordination, requiring managers to choose between the two.
D) all of the above
E) two of A, B, and C.

Question 44

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

A) finding the most 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) none of the above.

Question 45

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

Question 46

Organizational design:

A) is a process that deals with how an international business should be organized in order to ensure that its business activities are integrated globally.
B) must consider the size of an organization and the complexity of its business operations.
C) must be able to evolve over time in order to enable the organization to respond to change.
D) all of the above.
E) two of A, B, and C.

Question 47

Organizational structure:

A) 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) helps to determine where formal power and authority will be located within the organization.
C) is primarily created and evolved by senior management.
D) all of the above.
E) two of A, B, and C.

Question 48

Global companies:

A) none of the following is correct.
B) do not have international divisions.
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.

Question 49

Subsidiary detriment occurs when a small loss for a subsidiary results in a greater gain for the total IC.

Question 50

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

A) Two of B, C, and D
B) Process
C) Customer class
D) Nature of competition
E) All of B, C, and D

Question 51

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 nature of their competitors' international strategies, both currently and how they are expected to change in the future.
C) gains from increased specialization of labor may at times be nullified by the increased cost of coordination.
D) all of the above
E) two of A, B, and C.

Question 52

The primary dimensions that need to be considered when designing the structure of an international company are:

A) product and technical expertise, geographic expertise, and functional expertise.
B) product and technical expertise, customer expertise, and functional expertise.
C) geographic expertise, functional expertise, and customer expertise.
D) all of the above
E) two of A, B, and C.

Question 53

Subsidiary management morale is one element in determining where decisions would be made.

Question 54

Pricing that is established for transactions between members of the enterprise is called transfer pricing.

Question 55

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

Question 56

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

A) Two of B, C, and D
B) National subsidiary
C) Domestic or international
D) Function
E) All of B, C, and D

Question 57

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 58

The increasing pace of change and intensity of competition in many markets of the world, as well as continued differences across many markets, are causing even large experienced companies to delegate at least some decision-making authority to subsidiary managers.

Question 59

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

Question 60

Decisions that work to the detriment of the subsidiary may be beneficial to the enterprise.

Question 61

The potential benefits of the virtual corporation concept include that:

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) all of the above.
E) two of A, B, and C.

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

Reengineering is:

A) the redesign of the company's products to improve the quality.
B) the significant reduction of middle management.
C) the empowerment of employees.
D) two of the above.
E) all of A, B, and C.

Question 64

Problems with the matrix structure include that:

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) all of the above.
E) two of A, B, and C.

Question 65

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) none of the above.

Question 66

Companies that adopted the global organizational form felt that this organization would:

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) all of the above.
E) two of A, B, and C.

Question 67

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) often encounters problems with global product planning.
D) two of the above.
E) all of A, B, and C.

Question 68

Proponents of the horizontal corporation:

A) claim that lateral relationships inhibit innovation and new-product development.
B) state that this approach to organizing helps to place more decision-making responsibility in the hands of middle managers and other skilled professionals.
C) claim that it enhances increased control and supervision by upper management.
D) all of the above.
E) two of A, B, and C.

Question 69

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 70

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) none of the above

Question 71

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) none of the above.
E) all of A, B, and C.

Question 72

As their overseas operations have increased in importance, companies have felt the need to:

A) eliminate the international division.
B) establish worldwide organizations based on product, function, region, or customer classes at the top level.
C) lower production costs by setting up in-bond plants.
D) two of the above.
E) all of A, B, and C.

Question 73

The regionalized organization 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) two of the above.

Question 74

The horizontal corporation:

A) often draws teams from different departments to solve a problem or deliver a product.
B) has been characterized as "antiorganization."
C) puts greater decision-making responsibility in the hands of middle managers.
D) all of the above.
E) two of A, B, and C.

Question 75

According to the text, companies are now accepting:

A) two of B, C, and
B) the need for frequent reorganization.
C) the need for reducing the size of middle management.
D) B and C are correct, so A is the appropriate answer.
E) all of B, C, and D.

Question 76

__________ 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 77

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

A) from international division to geographic area division to worldwide product division.
B) from international division to worldwide product division to geographic area division.
C) from geographic 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 78

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 79

The use of a global product organization structure:

A) frequently represents a return to 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) all of the above.
E) two of A, B, and C.

Question 80

Control activities are the efforts to:

A) put plans into effect.
B) learn if plans are working as intended.
C) make corrections.
D) all of the above.
E) two of A, B, and C.