TB Chapter05
TB Chapter05
MULTIPLE CHOICE
1. Yum! Brands, which owns Pizza Hut, Taco Bell, KFC, and Long John Silver's, gets ____ of
its profits from overseas.
a. 15 percent
b. 33 percent
c. 55 percent
d. 70 percent
ANS: C PTS: 1 REF: pg. 210
NAT: AACSB Analytic | Environmental Influence
3. Which of the following is not a primary factor that motivates companies to expand
internationally?
a. Cheaper production factors
b. Smaller number of distribution channels
c. Economies of scale
d. Economies of scope
ANS: B PTS: 1 REF: pg. 212
NAT: AACSB Analytic | Environmental Influence
4. ____ refers to the number and variety of products and services a company offers, as well as
the number and variety of regions, countries, and markets it serves.
a. Economies of scale
b. Market potential
c. Scope
d. Development stage
ANS: C PTS: 1 REF: pg. 213
NAT: AACSB Reflective Thinking | Environmental Influence
5. One of the earliest, and still one of the most powerful, motivations for U.S. companies to
invest abroad relates to ____: obtaining raw materials, labor, and other resources at the lowest
possible cost.
a. factors of production
b. economies of scope
c. economies of scale
265
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266 ● chapter five
d. technological factors
ANS: A PTS: 1 REF: pg. 213
NAT: AACSB Reflective Thinking | Environmental Influence
7. In the ____ stage of international evolution, explosion occurs as international operations take
off.
a. global
b. domestic
c. multinational
d. international
ANS: C PTS: 1 REF: pg. 215
NAT: AACSB Reflective Thinking | Operations Management
8. Which of these operates in truly global fashion, and the entire world is their marketplace?
a. Multidomestic firms
b. Domestic organizations
c. Governmental agencies
d. Global companies
ANS: D PTS: 1 REF: pg. 215
NAT: AACSB Analytic | Environmental Influence
9. In the ____ stage, an international division has replaced the export department, and specialists
are hired to handle sales, service, and warehousing abroad.
a. domestic
b. international
c. global
d. multinational
ANS: B PTS: 1 REF: pg. 215
NAT: AACSB Reflective Thinking | Environmental Influence
10. The worldwide geographic or product structures are most likely to appear during the ____
stage of international evolution.
a. domestic
b. international
c. multinational
d. global
ANS: C PTS: 1 REF: pg. 215
NAT: AACSB Reflective Thinking | Creation of Value
11. All of the following, except ____, are typical alliances used for global expansion.
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GLOBAL ORGANIZATION DESIGN ● 267
a. wholly-owned subsidiaries
b. joint ventures
c. consortia
d. licensing
ANS: A PTS: 1 REF: pg. 216
NAT: AACSB Analytic | Creation of Value
12. ____ is a popular approach to sharing development and production costs and penetrating new
markets.
a. Consortia
b. Licensing
c. Joint ventures
d. Franchising
ANS: C PTS: 1 REF: pg. 216
NAT: AACSB Reflective Thinking | Creation of Value
13. ____ are groups of independent companies that join together to share skills, resources, costs,
and access to one another's markets.
a. Joint ventures
b. Franchising
c. Licensing
d. Consortia
ANS: D PTS: 1 REF: pg. 216
NAT: AACSB Reflective Thinking | Creation of Value
14. Which of the following means that product design, manufacturing, and marketing strategy
are standardized throughout the world?
a. Globalization strategy
b. Standardization strategy
c. Multidomestic strategy
d. Transnational strategy
ANS: A PTS: 1 REF: pg. 216
NAT: AACSB Analytic | Strategy
15. A ____ strategy would encourage production design, assembly, and marketing tailored to the
specific needs of each country.
a. focused
b. multidomestic
c. globalization
d. joint venture
ANS: B PTS: 1 REF: pg. 217
NAT: AACSB Reflective Thinking | Strategy
16. When a company such as Coca-Cola decides to use the same product design and advertising
strategy throughout the world, it is following the ____ strategy.
a. multidomestic
b. consortia
c. focused
d. globalization
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268 ● chapter five
17. Reference Organization Chart 6.1. Comparing the structure that is diagramed to a global
geographic structure:
a. the firm shown above is not as far along in developing opportunities for multidomestic
strategy as the global geographic structure would be.
b. product managers differ in that in the chart above, the product heads are line managers
primarily accountable for their product domestically whereas in the global geographic
structure, product coordinators are staff advisors.
c. the structure shown is better than the global geographic structure.
d. the global geographic structure is more domestically oriented than the one above.
ANS: A PTS: 1 REF: pg. 218-219
NAT: AACSB Analytic | Strategy
19. Which of the following strategies should an organization pursue if the forces for national
responsiveness and the forces for global integration are high?
a. Export
b. Multidomestic
c. Globalization
d. Globalization and multidomestic
ANS: D PTS: 1 REF: pg. 218
NAT: AACSB Analytic | Strategy
© 2010 Cengage Learning. All Rights Reserved. This edition is intended for use outside of the U.S. only, with content that may be dif-
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GLOBAL ORGANIZATION DESIGN ● 269
22. The global product structure works best when a division handles products that:
a. are technologically dissimilar.
b. can be standardized for marketing worldwide.
c. obsolete in one country, but not in another.
d. cheap and easy to produce.
ANS: B PTS: 1 REF: pg. 220
NAT: AACSB Analytic | Environmental Influence
© 2010 Cengage Learning. All Rights Reserved. This edition is intended for use outside of the U.S. only, with content that may be dif-
ferent from the U.S. Edition. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.
.
270 ● chapter five
27. Which of the following is not a primary segment of the global organizational challenge?
a. The problem of transferring knowledge across a global firm
b. Greater complexity and differentiation
c. The need for integration
d. The need for KSAs
ANS: D PTS: 1 REF: pg. 226
NAT: AACSB Analytic | Environmental Influence
28. As organizations become more differentiated, with multiple products, divisions, departments,
and positions scattered across numerous countries, managers face a tremendous ____ challenge.
a. knowledge transfer
b. differentiation
c. integration
d. development
ANS: C PTS: 1 REF: pg. 228
NAT: AACSB Reflective Thinking | Creation of Value
29. All of the following are reasons why many organizations tap only a fraction of the potential
that is available from cross-border transfer of knowledge and innovation, except:
a. Barriers of language, cultural, and geographic distances.
b. Lack of trust among people at different locations.
c. Divisions sometimes view knowledge and innovation as power and want to hold onto it.
d. Economies of scope can increase a company's market power as compared to competitors.
ANS: D PTS: 1 REF: pg. 229
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ferent from the U.S. Edition. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.
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GLOBAL ORGANIZATION DESIGN ● 271
NAT: AACSB Analytic | Creation of Value
30. ____ teams are cross-border work groups made up of multiskilled, multinational members
whose activities span multiple countries.
a. Management
b. Global
c. Functional
d. Focus
ANS: B PTS: 1 REF: pg. 230
NAT: AACSB Reflective Thinking | Environmental Influence
31. In one survey, 70 percent of global companies reported that the most important function of
corporation headquarters was to:
a. make shareholders happy.
b. provide enterprise leadership.
c. provide extensive training.
d. develop new goals and visions for the company frequently.
ANS: B PTS: 1 REF: pg. 231
NAT: AACSB Reflective Thinking | Leadership Principles
32. Some organizations create formal ____ positions to coordinate information and activities
related to key customer accounts.
a. functional manager
b. transnational team
c. network coordinator
d. division network
ANS: C PTS: 1 REF: pg. 232
NAT: AACSB Reflective Thinking | Information Technologies
33. High ____ means that people accept inequality in power among institutions, organizations,
and people.
a. uncertainty avoidance
b. power distance
c. employee empowerment
d. integration
ANS: B PTS: 1 REF: pg. 233
NAT: AACSB Reflective Thinking | Creation of Value
34. The ____ model reflects the ultimate in both organizational complexity, with many diverse
units, and organizational coordination, with mechanisms for integrating the varied parts.
a. transformative
b. transnational
c. global
d. multidomestic
ANS: B PTS: 1 REF: pg. 237
NAT: AACSB Diversity | Environmental Influence
35. All of the following are characteristics that distinguish the transnational organization from
other global organization forms except:
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272 ● chapter five
a. assets and resources are dispersed worldwide into highly specialized operations that are
linked together through interdependent relationships.
b. structures are stable.
c. subsidiary managers initiate strategy and innovations that become strategy for the
corporation as a whole.
d. unification and coordination are achieved primarily through corporate culture, shared
vision and values, and management style rather than through formal structures and
systems.
ANS: B PTS: 1 REF: pg. 237 | pg. 239
NAT: AACSB Analytic | Environmental Influence
TRUE/FALSE
3. Having a presence in multiple countries provides marketing power and synergy compared to
the same size firm that has presence in fewer countries.
4. The second stage of international evolution, "International Stage," will usually be structured
with a domestic structure with an export department.
5. A company typically shifts its interest from domestic activity to exporting in the 3rd stage
(multinational) of international development.
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GLOBAL ORGANIZATION DESIGN ● 273
6. The international stage of international development means that exports are taken seriously
and that the company deals with the competitive issues of each country separately.
7. Stage two is the global stage which means the company takes exports seriously and begins to
think multidomestically.
8. Truly global companies no longer think if themselves as having a single home country and
have been called stateless corporations.
9. A joint venture is a separate entity created with two or more active firms as sponsors.
10. Managers and organizations all over the world are very reluctant to cooperate to achieve
competitive advantage on a global scale.
11. The globalization strategy means that product design, manufacturing, and marketing strategy
are standardized throughout the world, whereas a multidomestic strategy means that competition
in each country is handled independently of competition in other countries.
12. In parts of Mexico, laundry detergent is used to wash dishes, not clothes, pointing out the
need for a multidomestic strategy.
13. If the forces for national responsiveness and the forces for global integration are high, then a
multidomestic strategy with a global geographic structure would be the best fit.
14. In many instances, companies will need to respond to both global and local opportunities
simultaneously, in which case the global matrix structure can be used.
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ferent from the U.S. Edition. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.
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274 ● chapter five
NAT: AACSB Reflective Thinking | Environmental Influence
15. As companies begin to explore international opportunities, they typically start with an
international division that grows into an export department.
16. Functional structures are found more frequently in a worldwide business than in a domestic
business.
17. With a global geographic division structure, each division's manager is responsible for
planning, organizing, and controlling all functions for the production and distribution of its
products for any market around the world.
18. The product-based structure works best when a division handles products that are
technologically similar and can be standardized for marketing around the world.
19. The global geographic structure divides the world into geographical regions, with each
geographical division reporting to the CEO.
20. To meet new competitive threats, many manufacturing firms are emphasizing the ability to
customize their products to meet specific needs, which requires a greater emphasis on global
responsiveness.
21. The global product division structure works best when pressure for decision-making balances
the interests of both product standardization and geographical localization and when coordination
to share resources is important.
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GLOBAL ORGANIZATION DESIGN ● 275
23. Innovation refers to the quality of collaboration across organizational units.
24. The "not-invented-here" syndrome makes some managers reluctant to tap into the know-how
and expertise of other units.
25. A transnational team is a work group made up of multinational members whose activities
span multiple countries.
26. Functional managers coordinate across functions, whereas country managers coordinate
among countries.
27. Network coordinators would enable a manufacturing organization to provide knowledge and
integrated solutions across multiple business, divisions, and countries for a large customer.
28. High uncertainty avoidance means that people accept inequality in power among institutions,
organizations, and people.
29. Low uncertainty avoidance means that people have a high tolerance for the unstructured, the
unclear, and the unpredictable.
30. Many large international companies are moving toward a multidomestic model of
organization.
31. The transnational model reflects the ultimate in both organizational complexity, with many
diverse units, and organizational coordination, with mechanisms for integrating the varied parts.
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ferent from the U.S. Edition. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.
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276 ● chapter five
32. The management philosophy of transnational model is based on interdependence rather than
either full divisional independence or total dependence of these units on headquarters for decision
making and control.
ESSAY
Case 6.0
It was reported in the Wall Street Journal that Ford Motor Co. was reorganizing to place its
functions such as product development, sales, and engine/transmissions under their own
executives with global authority. Alexander Trotman, chairman and CEO, wanted to create a
structure that would avoid costly duplication in different parts of the world and that would foster
Ford's developing models such as its Mondeo (Europe) and Contour (U.S.) which could sell
worldwide with few modifications. Trotman wanted a company that was strong internationally in
product development, manufacturing, and purchasing that could take advantage of where Ford's
strength was around the world.
The company had been organized geographically into three relatively independent divisions--
Ford North America, Ford of Europe, and Ford Asia/Pacific. The new product cited above, the
Mondeo and Contour, sapped $6 billion in development costs because of expensive coordination
time between the sometimes-conflicting European and North American divisions. Elimination of
duplication was a goal of the new structure.
Simultaneously a new "program team facility" was being constructed so that all of Ford's new
product development would be by teams. The new coupe Mustang was borne from an
experimental cross-functional team that designed the product in less than three years compared to
Ford's normal four to five year development cycle. Trotman emphasized that he wanted to change
the process, not just the structure, by which new products were developed. Ford apparently found
the team process convincing because the Mustang was developed on a budget about 30% lower
than comparable project budgets.
SOURCE: "Ford to Realign With a System of Global Chiefs," The Wall Street Journal, March
31, 1994, pages A3-A4.
1. Reference Case 6.0. Identify the strategy given in our textbook that Ford appeared to be
adopting. Describe advantages and disadvantages of that strategy for Ford. Why do you think
CEO Trotman moved to that strategy?
2. Reference Case 6.0. Draw out an organization chart showing the structure that Ford had been
using; place in your chart the functional departments and geographic departments that are
mentioned in the case. Then, in contrast, draw out an organization chart showing the relationships
proposed in this case; again place in your chart the functional departments and geographic
departments that are mentioned in the case. Label each organization chart.
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GLOBAL ORGANIZATION DESIGN ● 277
PTS: 1 REF: pg. 223
NAT: AACSB Reflective Thinking | Creation of Value
3. Reference Case 6.0. Describe how Ford's proposed structural changes are rather different from
the usual progression resulting from international development. Describe how Ford's proposed
structural changes parallel the new designs for domestic and global advantage.
4. Reference Case 6.0. In a general sense, what do you see as the primary differences between
horizontal corporations and functionally organized corporations? Apply your observations to the
Ford case and comment on any difficulties you might see in Ford being able to adopt the
philosophy and behavior of a horizontal corporation as they made the structural change CEO
Trotman outlined.
7. Select any organization with which you are familiar--your college, the Toyota dealership down
the road, a corporation where you work, etc. Analyze the global forces that influence the
organization you selected. How should the organization respond to those global forces in order to
gain international competitive advantage?
9. What are the international strategic alliances that companies can choose from to expand
globally? Discuss and give an example of each.
10. Which type of international strategic alliance, if any, would you recommend for a business
that wanted to gain entry into China? Explain the reasons behind your choice.
11. Compare and contrast the typical alliances: licensing, joint ventures, and consortia.
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ferent from the U.S. Edition. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.
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278 ● chapter five
12. Compare and contrast the globalization strategy and the multidomestic strategy. Give an
example of effective use of each strategy.
13. When should a company begin using an international division? What problems are likely to
be solved? As the company progresses in its international development, what problems will likely
not be solved by this structure?
14. Under what conditions should an organization consider a global geographic structure as
opposed to a global product structure?
16. Compare and contrast the global product division structure and global matrix structure. Draw
a diagram of each.
18. What are the three primary segments of the global organizational challenge? Discuss each.
19. List the reasons why most organizations tap only a fraction of the potential that is available
from the cross-border transfer of knowledge.
20. The most advanced and competitive use of global teams involves simultaneous contributions
in three strategic areas. List these three areas.
© 2010 Cengage Learning. All Rights Reserved. This edition is intended for use outside of the U.S. only, with content that may be dif-
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GLOBAL ORGANIZATION DESIGN ● 279
NAT: AACSB Reflective Thinking | Creation of Value
23. Discuss the three primary approaches to coordination and control as represented by Japanese,
American, and European companies.
24. List and discuss the characteristics that distinguish the transnational organization from other
global organization forms.
© 2010 Cengage Learning. All Rights Reserved. This edition is intended for use outside of the U.S. only, with content that may be dif-
ferent from the U.S. Edition. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.
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