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

Transcription

1 Chapter 14 The Organization of International Business True / False Questions 1. Organizational structure refers to the totality of a firm's organization. True False 2. 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. True False 3. 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. True False

2 4. A firm's vertical differentiation determines where in its hierarchy the decisionmaking power is concentrated. True False 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. True False 6. A decentralized organization allows managers to respond to environmental changes more quickly than in a centralized organization. True False 7. Centralization gives top-level managers the power and authority to be able to bring about needed major organizational changes. True False 8. A firm pursuing a localization strategy will have a strong incentive to centralize decision- making. True False

3 9. The choice between centralization and decentralization is not absolute. True False 10. In firms pursuing a transnational strategy, some operating decisions are relatively centralized, while others are relatively decentralized. True False 11. 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. True False 12. Regardless of a firm's domestic structure, its international division tends to be organized on economy. True False 13. The worldwide area structure tends to be adopted by firms with a low level of diversification whose domestic structures are based on functions. True False

4 14. In a worldwide area structure, each area tends to be a self-contained, largely autonomous entity with its own set of value creation activities. True False 15. A worldwide product division structure tends to be adopted by firms that are reasonably diversified and originally had domestic structures based on product divisions. True False 16. In a worldwide product divisional structure, each division is a self-contained, largely autonomous entity with full responsibility for its own value creation activities. True False 17. The worldwide product division structure facilitates local responsiveness. True False 18. 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). True False

5 19. It is difficult to ascertain accountability in the global matrix structure. True False 20. The need for coordination between units is greatest in firms pursuing a localization strategy. True False 21. The need for coordination is high in firms trying to profit from location and experience curve economies. True False 22. Direct contact between subunit managers is the simplest integrating mechanism. True False 23. In a matrix structure all roles are viewed as integrating roles. True False 24. A knowledge network is a network for transmitting information within an organization that is based on formal organizational structure. True False

6 25. Personal control is a type of control that tends to be most widely used in large firms. True False 26. Bureaucratic control involves personal contact with subordinates. True False 27. In a company using cultural controls, employees' behavior is closely monitored and controlled through direct supervision. True False 28. 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. True False 29. Performance ambiguity lowers the cost of control. True False

7 30. The costs of control can be defined as the amount of time top management must devote to monitoring and evaluating subunits' performance. True False 31. Firms pursuing a global standardization strategy must cope with a higher level of performance ambiguity, and this raises their costs of control. True False 32. New processes that might lead to a competitive advantage can be developed anywhere within the organization's global network of operations. True False 33. Norms are abstract ideas about what a group believes to be good, right, and desirable. True False 34. 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. True False

8 35. An organizational culture can be strong but bad. True False 36. Firms pursuing a localization strategy have a high need for coordination between subunits. True False 37. Firms pursuing a localization strategy tend to operate with an array of formal and informal integrating mechanisms. True False 38. Firms pursuing a global standardization strategy are more centralized than enterprises pursuing a localization or international strategy. True False 39. National regulations including local content rules and policies pertaining to layoffs might act as a source of inertia. True False

9 40. It is important to realize that organizational change will occur regardless of the commitment of senior managers to it. True False Multiple Choice Questions 41. 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.

10 42. 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 43. 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. 44. 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.

11 45. 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. 46. 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 47. 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

12 48. 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. 49. 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. 50. 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.

13 51. 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. 52. A firm that needs greater flexibility should choose for its decision-making. A. horizontal differentiation B. decentralization C. localization strategy D. control systems

14 53. 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. 54. 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

15 55. 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. 56. 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

16 57. 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 58. 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 selfcontained, largely autonomous entity with its own functions. D. In a product divisional structure, the responsibility for operating decisions is typically centralized.

17 59. Regardless of a firm's domestic structure, its international division tends to be organized on: A. product. B. geography. C. people. D. economy. 60. 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.

18 61. 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 62. 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. 63. A structure encourages fragmentation of the organization into highly autonomous entities. A. worldwide area B. global matrix C. worldwide product D. global network

19 64. 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 65. 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. 66. 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.

20 67. 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. 68. 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. 69. 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.

21 70. 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 71. 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 72. Which control system is most widely used by small firms? A. Personal B. Output C. Bureaucratic D. Cultural

22 73. 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. 74. control is achieved by comparing actual performance against targets and intervening selectively to take corrective action. A. Personal B. Output C. Bureaucratic D. Cultural 75. 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.

23 76. 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. 77. 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

24 78. Firms pursuing a global standardization strategy: A. have low performance ambiguity. B. attempt to create value by transferring core competencies from home to foreign subsidiaries. C. are less centralized than enterprises pursuing a localization or international strategy. D. have a high need for coordination and cultural controls. 79. A firm that operates with matrix-type structures in which both product divisions and geographic areas have significant influence would use which of the following strategies? A. International strategy B. Transnational strategy C. Global strategy D. Localization strategy 80. Firms pursuing a transnational strategy: A. have a low need for coordination. B. require very few integrating mechanisms. C. have a very high need for cultural controls. D. operate with a worldwide product division structure.

25 Essay Questions 81. Explain organizational structure. 82. Discuss the relationship between a firm's control systems and a firm's incentive system. Why is this relationship important?

26 83. What are the three dimensions of organizational structure? 84. Why should a firm centralize its decision-making? 85. Explain the five reasons why a firm should decentralize its decision-making.

27 86. Discuss the location of decision-making in a firm that is following a transnational strategy. 87. Describe the situation where an international division makes sense. How common is this structure? What are the disadvantages of the structure?

28 88. What type of firms favor the worldwide area structure and why? What are the disadvantages of this type of structure? 89. Discuss the type of firm that uses the worldwide product division structure.

29 90. What are the main strengths and weaknesses of the worldwide product division structure? 91. Discuss the global matrix structure. 92. What are the formal integrating mechanisms used to integrate subunits?

30 93. What is a knowledge network? What is the advantage of such a system? 94. Consider the use of personal controls in international firms. In which type of firm is this control most common? 95. What are output controls?

31 96. What is performance ambiguity? Discuss the relationships between strategy, interdependence, and performance ambiguity. 97. Discuss the sources of inertia in organizations. Is it easy to make organizational changes?

32 98. What are the basic principles for successful organizational change? 99. Discuss the issues involved in unfreezing an organization Discuss the issues involved in refreezing an organization.

33 Chapter 14 The Organization of International Business Answer Key True / False Questions 1. Organizational structure refers to the totality of a firm's organization. FALSE Organizational architecture refers to the totality of a firm's organization. Organizational structure refers to three things. First, the formal division of the organization into subunits; second, the location of decision-making responsibilities within that structure; and third, the establishment of integrating mechanisms. Blooms: Remember Difficulty: 1 Easy Learning Objective: Explain what is meant by organization architecture. Topic: Organizational Architecture

34 2. 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. FALSE Organizational culture refers to the norms and value systems that are shared among the employees of an organization. Blooms: Remember Difficulty: 1 Easy Learning Objective: Explain what is meant by organization architecture. Topic: Organizational Architecture 3. 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. TRUE Incentives are the devices used to reward appropriate managerial behavior. Incentives are very closely tied to performance metrics. Blooms: Understand Difficulty: 2 Medium Learning Objective: Explain what is meant by organization architecture. Topic: Organizational Architecture

35 4. A firm's vertical differentiation determines where in its hierarchy the decisionmaking power is concentrated. TRUE Vertical differentiation refers to the location of decision-making responsibilities within a structure. Blooms: Remember Difficulty: 1 Easy 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. TRUE Centralization can avoid the duplication of activities that occurs when similar activities are carried on by various subunits within the organization. Blooms: Remember Difficulty: 1 Easy

36 6. A decentralized organization allows managers to respond to environmental changes more quickly than in a centralized organization. TRUE Decentralization permits greater flexibility more rapid response to environmental changes because decisions do not have to be "referred up the hierarchy" unless they are exceptional in nature. Blooms: Remember Difficulty: 1 Easy 7. Centralization gives top-level managers the power and authority to be able to bring about needed major organizational changes. TRUE 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. Blooms: Remember Difficulty: 1 Easy

37 8. A firm pursuing a localization strategy will have a strong incentive to centralize decision- making. FALSE The emphasis on local responsiveness in firms pursuing a localization strategy creates strong pressures for decentralizing operating decisions to foreign subsidiaries. Blooms: Remember Difficulty: 1 Easy 9. The choice between centralization and decentralization is not absolute. TRUE Decisions regarding overall firm strategy, major financial expenditures, financial objectives, and legal issues are typically centralized at the firm's headquarters. However, operating decisions, such as those relating to production, marketing, R&D, and human resource management, may or may not be centralized depending on the firm's strategy. Blooms: Remember Difficulty: 1 Easy

38 10. In firms pursuing a transnational strategy, some operating decisions are relatively centralized, while others are relatively decentralized. TRUE The situation in firms pursuing a transnational strategy is complex. In firms pursuing a transnational strategy, some operating decisions are relatively centralized, while others are relatively decentralized. Blooms: Remember Difficulty: 1 Easy 11. 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. TRUE Further horizontal differentiation may be required if the firm significantly diversifies its product offering, which takes the firm into different business areas. Problems of coordination and control arise when different business areas are managed within the framework of a functional structure. Blooms: Understand Difficulty: 2 Medium

39 12. Regardless of a firm's domestic structure, its international division tends to be organized on economy. FALSE Regardless of the firm's domestic structure, its international division tends to be organized on geography. Blooms: Remember Difficulty: 1 Easy 13. The worldwide area structure tends to be adopted by firms with a low level of diversification whose domestic structures are based on functions. TRUE A worldwide area structure tends to be favored by firms with a low degree of diversification and a domestic structure based on functions. Blooms: Understand Difficulty: 2 Medium

40 14. In a worldwide area structure, each area tends to be a self-contained, largely autonomous entity with its own set of value creation activities. TRUE Under the worldwide area structure, the world is divided into geographic areas. An area may be a country or a group of countries. Each area tends to be a selfcontained, largely autonomous entity with its own set of value creation activities. Blooms: Understand Difficulty: 2 Medium 15. A worldwide product division structure tends to be adopted by firms that are reasonably diversified and originally had domestic structures based on product divisions. TRUE A worldwide product division structure tends to be adopted by firms that are reasonably diversified and, accordingly, originally had domestic structures based on product divisions. As with the domestic product divisional structure, each division is a self-contained, largely autonomous entity with full responsibility for its own value creation activities.

41 Blooms: Remember Difficulty: 1 Easy 16. In a worldwide product divisional structure, each division is a self-contained, largely autonomous entity with full responsibility for its own value creation activities. TRUE In a worldwide product division each division is a self-contained, largely autonomous entity with full responsibility for its own value creation activities. Blooms: Remember Difficulty: 1 Easy 17. The worldwide product division structure facilitates local responsiveness. FALSE The main problem with the worldwide product division structure is the limited voice it gives to area or country managers, since they are seen as subservient to product division managers. The result can be a lack of local responsiveness, which can lead to performance problems. Blooms: Understand

42 Difficulty: 2 Medium 18. 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). TRUE In the classic global matrix structure, horizontal differentiation proceeds along two dimensions: product division and geographic area. It is believed that this dual decision-making responsibility should enable the firm to simultaneously achieve its particular objectives. Blooms: Understand Difficulty: 2 Medium

43 19. It is difficult to ascertain accountability in the global matrix structure. TRUE The dual hierarchy in the global matrix structure can lead to conflict and perpetual power struggles between the areas and the product divisions, catching many managers in the middle. To make matters worse, it can prove difficult to ascertain accountability in this structure. Blooms: Understand Difficulty: 2 Medium 20. The need for coordination between units is greatest in firms pursuing a localization strategy. FALSE The need for coordination is lowest in firms pursuing a localization strategy, is higher in international companies, higher still in global companies, and highest of all in transnational companies. Firms pursuing a localization strategy are primarily concerned with local responsiveness. Blooms: Understand Difficulty: 2 Medium

44 21. The need for coordination is high in firms trying to profit from location and experience curve economies. TRUE Coordination is necessary to support the transfer of skills and product offerings between units. The need for coordination is also great in firms trying to profit from location and experience curve economies, that is, in firms pursuing global standardization strategies. Blooms: Understand Difficulty: 2 Medium 22. Direct contact between subunit managers is the simplest integrating mechanism. TRUE Direct contact between subunit managers is the simplest integrating mechanism. By this "mechanism," managers of the various subunits simply contact each other whenever they have a common concern. Direct contact may not be effective if the managers have differing orientations that act to impede coordination.

45 Blooms: Remember Difficulty: 1 Easy 23. In a matrix structure all roles are viewed as integrating roles. TRUE When the need for integration is very high, firms may institute a matrix structure, in which all roles are viewed as integrating roles. The structure is designed to facilitate maximum integration among subunits. Blooms: Remember Difficulty: 1 Easy 24. A knowledge network is a network for transmitting information within an organization that is based on formal organizational structure. FALSE A knowledge network is a network for transmitting information within an organization that is based not on formal organization structure, but on informal contacts between managers within an enterprise and on distributed information systems. Blooms: Remember

46 Difficulty: 1 Easy 25. Personal control is a type of control that tends to be most widely used in large firms. FALSE Personal control is control by personal contact with subordinates. This type of control tends to be most widely used in small firms, where it is seen in the direct supervision of subordinates' actions. Blooms: Understand Difficulty: 2 Medium Topic: Control Systems and Incentives 26. Bureaucratic control involves personal contact with subordinates. FALSE Bureaucratic control is control through a system of rules and procedures that directs the actions of subunits. The most important bureaucratic controls in subunits within multinational firms are budgets and capital spending rules. Blooms: Remember Difficulty: 1 Easy

47 Topic: Control Systems and Incentives 27. In a company using cultural controls, employees' behavior is closely monitored and controlled through direct supervision. FALSE Cultural controls exist when employees "buy into" the norms and value systems of the firm. When this occurs, employees tend to control their own behavior, which reduces the need for direct supervision. Blooms: Understand Difficulty: 2 Medium Topic: Control Systems and Incentives

48 28. 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. TRUE The basic principle is to make sure the incentive scheme for an individual employee is linked to an output target that he or she has some control over and can influence. The individual employees on the factory floor may not be able to exercise much influence over the performance of the entire operation, but they can influence the performance of their team, so incentive pay is tied to output at this level. Blooms: Understand Difficulty: 2 Medium Topic: Control Systems and Incentives 29. Performance ambiguity lowers the cost of control. FALSE The costs of control can be defined as the amount of time top management must devote to monitoring and evaluating subunits' performance. This is greater when the amount of performance ambiguity is greater. Blooms: Understand

49 Difficulty: 2 Medium Topic: Control Systems and Incentives 30. The costs of control can be defined as the amount of time top management must devote to monitoring and evaluating subunits' performance. TRUE The costs of control can be defined as the amount of time top management must devote to monitoring and evaluating subunits' performance. This is greater when the amount of performance ambiguity is greater. Blooms: Understand Difficulty: 2 Medium Topic: Control Systems and Incentives 31. Firms pursuing a global standardization strategy must cope with a higher level of performance ambiguity, and this raises their costs of control. TRUE Although firms pursuing a global standardization strategy can reap the cost benefits of location and experience curve economies, they must cope with a higher level of performance ambiguity, and this raises the costs of control (in comparison with firms pursuing an international or localization strategy).

50 Blooms: Understand Difficulty: 2 Medium Topic: Control Systems and Incentives 32. New processes that might lead to a competitive advantage can be developed anywhere within the organization's global network of operations. TRUE It is particularly important for a multinational enterprise to recognize that valuable new processes that might lead to a competitive advantage can be developed anywhere within the organization's global network of operations. New processes may be developed by a local operating subsidiary in response to conditions pertaining to its market. Blooms: Understand Difficulty: 2 Medium Topic: Processes

51 33. Norms are abstract ideas about what a group believes to be good, right, and desirable. FALSE Values are abstract ideas about what a group believes to be good, right, and desirable. Norms mean the social rules and guidelines that prescribe appropriate behavior in particular situations. Blooms: Understand Difficulty: 2 Medium Topic: Processes 34. 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. FALSE It is more difficult for a leader, however forceful, to change an established organizational culture than it is to create one from scratch in a new venture. Blooms: Understand Difficulty: 2 Medium Topic: Organizational Culture

52 35. An organizational culture can be strong but bad. TRUE Strong does not necessarily mean good. A culture can be strong but bad. The culture of the Nazi Party in Germany was certainly strong, but it was most definitely not good. Blooms: Remember Difficulty: 1 Easy Topic: Organizational Culture 36. Firms pursuing a localization strategy have a high need for coordination between subunits. FALSE The need for coordination between subunits (areas and country subsidiaries) is low. This suggests that firms pursuing a localization strategy do not have a high need for integrating mechanisms, either formal or informal, to knit together different national operations. Blooms: Remember Difficulty: 1 Easy Learning Objective: Explain how organization can be matched to strategy to improve the performance of an international business. Topic: Synthesis: Strategy and Architecture

53 37. Firms pursuing a localization strategy tend to operate with an array of formal and informal integrating mechanisms. FALSE Firms pursuing a localization strategy do not have a high need for integrating mechanisms, either formal or informal, to knit together different national operations. The lack of interdependence implies that the level of performance ambiguity in such enterprises is low, as (by extension) are the costs of control. Blooms: Remember Difficulty: 1 Easy Learning Objective: Explain how organization can be matched to strategy to improve the performance of an international business. Topic: Synthesis: Strategy and Architecture 38. Firms pursuing a global standardization strategy are more centralized than enterprises pursuing a localization or international strategy. TRUE Firms pursuing a global standardization strategy are more centralized than enterprises pursuing a localization or international strategy. Reflecting the need for coordination of the various stages of the firms' globally dispersed value chains, the need for integration in these firms also is high. Blooms: Remember Difficulty: 1 Easy

54 Learning Objective: Explain how organization can be matched to strategy to improve the performance of an international business. Topic: Synthesis: Strategy and Architecture 39. National regulations including local content rules and policies pertaining to layoffs might act as a source of inertia. TRUE Institutional constraints might also act as a source of inertia. National regulations including local content rules and policies pertaining to layoffs might make it difficult for a multinational to alter its global value chain. Blooms: Remember Difficulty: 1 Easy Learning Objective: Discuss what is required for an international business to change its organization so that it better matches its strategy. Topic: Organizational Change

55 40. It is important to realize that organizational change will occur regardless of the commitment of senior managers to it. FALSE It is important to realize that change will not occur unless senior managers are committed to it. Senior managers must clearly articulate the need for change so employees understand both why it is being pursued and the benefits that will flow from successful change. Blooms: Understand Difficulty: 2 Medium Learning Objective: Discuss what is required for an international business to change its organization so that it better matches its strategy. Topic: Organizational Change Multiple Choice Questions

56 41. 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. By organizational structure refers to three things: First, the formal division of the organization into subunits; second, the location of decision-making responsibilities within that structure; and third, the establishment of integrating mechanisms to coordinate the activities of subunits. Blooms: Remember Difficulty: 1 Easy Learning Objective: Explain what is meant by organization architecture. Topic: Organizational Architecture

57 42. 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 Control systems are the metrics used to measure the performance of subunits and make judgments about how well managers are running those subunits. Blooms: Remember Difficulty: 1 Easy Learning Objective: Explain what is meant by organization architecture. Topic: Organizational Architecture

58 43. 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. Control systems are the metrics used to measure the performance of subunits and make judgments about how well managers are running those subunits. For example, historically Unilever measured the performance of national operating subsidiary companies according to profitability profitability was the metric. Blooms: Remember Difficulty: 1 Easy Learning Objective: Explain what is meant by organization architecture. Topic: Organizational Architecture

59 44. 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. Processes are the manner in which decisions are made and work is performed within the organization. Blooms: Remember Difficulty: 1 Easy Learning Objective: Explain what is meant by organization architecture. Topic: Organizational Architecture

60 45. 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. Organizational culture refers to the norms and value systems that are shared among the employees of an organization. Just as societies have cultures, so do organizations. Blooms: Remember Difficulty: 1 Easy Learning Objective: Explain what is meant by organization architecture. Topic: Organizational Architecture

61 46. 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 A firm's vertical differentiation determines where in its hierarchy the decisionmaking power is concentrated. Blooms: Remember Difficulty: 1 Easy

62 47. 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 Horizontal differentiation refers to the formal division of the organization into subunits. Blooms: Remember Difficulty: 1 Easy 48. 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. Integrating mechanisms are mechanisms for coordinating subunits. Blooms: Remember Difficulty: 1 Easy

63 49. 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. Centralization can avoid the duplication of activities that occurs when similar activities are carried on by various subunits within the organization. For example, many international firms centralize their R&D functions at one or two locations to ensure that R&D work is not duplicated. Blooms: Understand Difficulty: 2 Medium

64 50. 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. Decentralization permits greater flexibility more rapid response to environmental changes because decisions do not have to be "referred up the hierarchy" unless they are exceptional in nature. Blooms: Understand Difficulty: 2 Medium

65 51. 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. 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. Blooms: Remember Difficulty: 1 Easy

66 52. A firm that needs greater flexibility should choose for its decisionmaking. A. horizontal differentiation B. decentralization C. localization strategy D. control systems Decentralization permits greater flexibility more rapid response to environmental changes because decisions do not have to be "referred up the hierarchy" unless they are exceptional in nature. Blooms: Understand Difficulty: 2 Medium

67 53. 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. Centralization can help ensure that decisions are consistent with organizational objectives. When decisions are decentralized to lower-level managers, those managers may make decisions at variance with top management's goals. Centralization of important decisions minimizes the chance of this occurring. Blooms: Understand Difficulty: 2 Medium

68 54. 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 Decisions regarding overall firm strategy are typically centralized at the firm's headquarters. Operating decisions, such as those relating to production, marketing, R&D, and human resource management, may or may not be centralized depending on the firm's strategy. Blooms: Remember Difficulty: 1 Easy

69 55. 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. The emphasis on local responsiveness in firms pursuing a localization strategy creates strong pressures for decentralizing operating decisions to foreign subsidiaries. Blooms: Understand Difficulty: 2 Medium

70 56. 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 Global learning based on the multidirectional transfer of skills between subsidiaries, and between subsidiaries and the corporate center, is a central feature of a firm pursuing a transnational strategy. Blooms: Remember Difficulty: 1 Easy

71 57. 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 With a product divisional structure, each division is responsible for a distinct product line (business area). The responsibility for operating decisions is typically decentralized to product divisions, which are then held accountable for their performance. Blooms: Remember Difficulty: 1 Easy

72 58. 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 selfcontained, largely autonomous entity with its own functions. D. In a product divisional structure, the responsibility for operating decisions is typically centralized. With a product divisional structure, each division is responsible for a distinct product line (business area). The responsibility for operating decisions is typically decentralized to product divisions, which are then held accountable for their performance. Blooms: Understand Difficulty: 2 Medium

73 59. Regardless of a firm's domestic structure, its international division tends to be organized on: A. product. B. geography. C. people. D. economy. When firms initially expand abroad, they often group all their international activities into an international division. Regardless of the firm's domestic structure, its international division tends to be organized on geography. Blooms: Remember Difficulty: 1 Easy

74 60. 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. Despite its popularity, an international division structure can give rise to problems. The dual structure it creates contains inherent potential for conflict and coordination problems between domestic and foreign operations. Blooms: Understand Difficulty: 2 Medium

75 61. 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 Another problem with international division structure is the implied lack of coordination between domestic operations and foreign operations, which are isolated from each other in separate parts of the structural hierarchy. This can inhibit the worldwide introduction of new products, the transfer of core competencies between domestic and foreign operations, and the consolidation of global production at key locations so as to realize location and experience curve economies. Blooms: Understand Difficulty: 2 Medium

76 62. 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. A worldwide area structure facilitates local responsiveness. Because decisionmaking responsibilities are decentralized, each area can customize product offerings, marketing strategy, and business strategy to the local conditions. However, this structure encourages fragmentation of the organization into highly autonomous entities. Blooms: Understand Difficulty: 2 Medium

77 63. A structure encourages fragmentation of the organization into highly autonomous entities. A. worldwide area B. global matrix C. worldwide product D. global network A worldwide area structure tends to be favored by firms with a low degree of diversification and a domestic structure based on functions. This structure encourages fragmentation of the organization into highly autonomous entities. Blooms: Remember Difficulty: 1 Easy

78 64. 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 A worldwide product division structure tends to be adopted by firms that are reasonably diversified and, accordingly, originally had domestic structures based on product divisions in which each division is a self contained, largely autonomous entity with full responsibility for its own value creation activities. The headquarters retains responsibility for the overall strategic development and financial control of the firm. Blooms: Remember Difficulty: 1 Easy