Question 1

Franchise agreements typically require payment of a fee up front and then a percentage of the revenues.

Accepted Answer

Franchise agreements typically require payment of a fee up front and then a percentage of the revenues. In return, the franchisor provides assistance and, in some instances, may require the purchase of goods or supplies to ensure the same quality of goods or services worldwide.

Question 2

One of the primary advantages of global area division structures is the ease with which product emphasis can be reconciled with a geographic orientation.

Accepted Answer

The primary disadvantage of a global area division structure is the difficulty encountered in reconciling a product emphasis with a geographic orientation. A second drawback is that new R&D efforts often are ignored by division groups because they are selling goods that have reached the maturity stage.

Question 3

One of the major drawbacks of a global product division structure is that it disallows line and staff managers within the division to gain expertise in the technical and marketing aspects of the products assigned to them.

Accepted Answer

A global product division permits line and staff managers within the division to gain expertise in the technical and marketing aspects of the products assigned to them. It also provides a direct line of communication from the customer to those in the organization who have product knowledge and expertise, thus enabling research and development (R&D) to work on the development of products that serve the needs of the world customer.

Question 4

A franchise is an agreement that allows one party to use an industrial property right in exchange for payment to another party.

Accepted Answer

A franchise is a business arrangement under which one party (the franchisor) allows another (the franchisee) to operate an enterprise using its trademark, logo, product line, and methods of operation in return for a fee.

Question 5

An international alliance is composed of two or more firms from different countries.

Accepted Answer

An international alliance is composed of two or more firms from different countries. Some alliances are temporary; others are more permanent.

Question 6

The primary reason for the use of wholly owned subsidiaries is a multinational company's (MNC's)desire for total control and the belief that managerial efficiency will be better without outside partners.

Accepted Answer

The primary reason for the use of wholly owned subsidiaries is a desire by a multinational company (MNC) for total control and the belief that managerial efficiency will be better without outside partners. Because of sole ownership, it has been found that profits can be higher with this venture and that there are clearer communications and shared visions.

Question 7

Companies that spend a relatively large share of their revenues on research and development (R&D)are likely to be licensees,and those that spend very little on R&D are more likely to be licensors.

Accepted Answer

Companies that spend a relatively large share of their revenues on research and development (R&D) are likely to be licensors, and those that spend very little on R&D are more likely to be licensees. In fact, some small R&D firms make a handsome profit every year by developing and licensing new products to large firms with diversified product lines.

Question 8

An international division structure of an organization puts a great deal of burden on the CEO for monitoring the operations of a series of overseas subsidiaries as well as domestic operations.

Accepted Answer

An international division structure of an organization is useful as it takes a great deal of burden off the CEO for monitoring the operations of a series of overseas subsidiaries as well as domestic operations. Instead, a new head of the international division coordinates and monitors overseas activities and reports directly to the CEO on these matters.

Question 9

The global structural arrangement differs from the international division structure because,while both have an international scope,the former focuses on greater expansion and integration among international operations.

Accepted Answer

The global structural arrangement differs from the international division structure because, while both have an international scope, the former focuses on greater expansion and integration among international operations. This international perspective signifies a major change in management strategy, and it is supported by the requisite changes in organization structure.

Question 10

An advantage of a global area division structure is that it allows the division manager to cater to the tastes of the local market and make rapid decisions to accommodate environmental changes.

Accepted Answer

The geographic structure of a global area division structure allows the division manager to cater to the tastes of the local market and make rapid decisions to accommodate environmental changes.

Question 11

One of the main objectives of developing the structure for joint ventures is to help the partners address and effectively meld their different values and organizational preferences.

Accepted Answer

One of the main objectives of developing the structure for joint ventures is to help the partners address and effectively meld their different values, management styles, action orientation, and organization preferences.

Question 12

One disadvantage of a global product division structure is that division managers may pursue currently attractive geographic prospects for their products and neglect other areas with better long-term potential.

Accepted Answer

One disadvantage of a global product division structure is that division managers may pursue currently attractive geographic prospects for their products and neglect other areas with better long-term potential. Another disadvantage is that many division managers spend too much time trying to tap the local rather than the international market because it is more convenient and they are more experienced in domestic operations.

Question 13

Multinational companies (MNCs)have found that cross-functional coordination results in people spending more time within their functions and thus becoming more knowledgeable regarding developments that are occurring in their specialized areas.

Accepted Answer

Multinational companies (MNCs) have found that cross-functional coordination results in people spending less time within their functions and thus becoming less knowledgeable regarding developments that are occurring in their specialized areas.

Question 14

Firms that pursue a global product division structure typically have products that are in the maturity stage of the product life cycle.

Accepted Answer

Global product divisions operate as profit centers. The products are generally in the growth stage of the product life cycle, so they need to be promoted and marketed carefully.

Question 15

Specialization is the use of defined structures and systems in decision making,communicating,and controlling.

Accepted Answer

As an organizational characteristic, specialization is the assigning of individuals to specific, well-defined tasks.

Question 16

In most companies,mutual adjustment is achieved by assigning people to a specific project and having them meet face to face and work out a plan of action of designing the new product.

Accepted Answer

Mutual adjustment is a type of organizational mechanism. In most companies, this is achieved by assigning people to a specific project and having them meet face to face and work out a plan of action for designing the new product.

Question 17

Over the last few years,there has been a major increase in the number of "electronic freelancers"-individuals who work on a project for a company,usually via the Internet,and move on to other employment when the assignment is done.

Accepted Answer

Over the last few years, there has been a major increase in the number of "electronic freelancers"-individuals who work on a project for a company, usually via the Internet, and move on to other employment when the assignment is done. In a way, these individuals represent a new type of electronic network organization-"a temporary company"-that serves a particular, short-term purpose and then goes on to other assignments.

Question 18

Wholly owned subsidiaries face a low risk with large investments in one area.

Accepted Answer

Typically, wholly owned subsidiaries face a high risk with large investments in one area and are not very efficient with entering multiple countries or markets. This can also lead to low international integration or multinational involvement.

Question 19

An advantage of a global functional division structure is that only the CEO can be held accountable for the profits.

Accepted Answer

There are some important disadvantages of a global functional division: (1) coordination of manufacturing and marketing often is difficult, (2) managing multiple product lines can be very challenging because of the separation of production and marketing into different departments, and (3) only the chief executive officer can be held accountable for the profits.

Question 20

Centralization is a management system in which important decisions are made at the top.

Accepted Answer

Centralization is a management system in which important decisions are made at the top. In an international context, the value of centralization will vary according to the local environment and the goals of an organization.

Quiz 9: Entry Strategies and Organizational Structures