Chapter 08

International Management, 8e (Deresky)
Chapter 8 Organization Structure and Control Systems
1) ________ is the process by which a firm gradually changes in response to global competition;
domestic market saturation; and the desire for expansion, new markets, and diversification.
A) Segmentation
B) Integration
C) Segregation
D) Internationalization
Answer: D
Diff: 1
Chapter: 8
Skill: Concept
Objective: 1
AACSB: Dynamics of the global economy
2) Historically, a firm reorganizes as it internationalizes to ________.

A) inhibit organizational change
B) curb competition
C) boost domestic competition
D) accommodate new strategies
Answer: D
Diff: 1
Chapter: 8
Skill: Concept
Objective: 1
3) Usually, smaller firms start their international involvement by ________.

A) exporting
B) divesting
C) entering into a full-blown global joint venture
D) using foreign direct investment
Answer: A
Diff: 1
Chapter: 8
Skill: Concept
Objective: 1
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4) Which of the following is true with regard to the structural evolution model?
A) Typically, firms that start their internationalization at a higher level of involvement use this
model.
B) Firms using this model do not export.
C) This model has become known as the stages model, resulting from Stopford's research on 187
U.S. multinational corporations.
D) All firms follow this model without exception.
Answer: C
Diff: 2
Chapter: 8
Skill: Concept
Objective: 1
5) Which of the following does NOT represent a typical way in which firms organize their
international activities?
A) domestic structure plus export department
B) matrix structure
C) domestic structure plus foreign subsidiary
D) regional structure
Answer: D
Diff: 1
Chapter: 8
Skill: Concept
Objective: 1
6) Smaller firms are most likely to reorganize into ________ during their internationalization.
A) domestic structure plus export department
B) domestic structure plus foreign subsidiary
C) global product structure
D) global functional structure
Answer: A
Diff: 1
Chapter: 8
Skill: Concept
Objective: 1
2
7) Sedona Inc. is an American firm that manufactures high-quality handbags, duffel bags, and
leather belts at its facility in Arizona. Sedona's products have been featured in various fashion
magazines and as a result, consumer demand has increased significantly. Currently, Sedona is
organized as a domestic structure plus export department. Executives at Sedona believe the firm
is ready to internationalize its operations, and they are considering various organizational
structures.
Which of the following best supports the argument that Sedona should give its subsidiary
managers significant autonomy?
A) Praxis Inc., one of Sedona's domestic competitors, has a flat organizational structure.
B) Sedona is a family-owned business that began as a subsidiary to Aloha enterprises.
C) Sedona has recently reorganized into a domestic structure plus foreign subsidiary.
D) Sedona conducts a large percentage of domestic sales through the company's Web site.
Answer: C
Diff: 1
Chapter: 8
Skill: Application
Objective: 1
AACSB: Analytic skills; Dynamics of the global economy
8) Sedona Inc. is an American firm that manufactures high-quality handbags, duffel bags, and
leather belts at its facility in Arizona. Sedona's products have been featured in various fashion
magazines and as a result, consumer demand has increased significantly. Currently, Sedona is
organized as a domestic structure plus export department. Executives at Sedona believe the firm
is ready to internationalize its operations, and they are considering various organizational
structures.
Which of the following best supports the argument that Sedona should reorganize into a global
functional structure?
A) Sedona has a highly decentralized system of management.
B) Sedona uses a variety of technologies for its numerous and varied product lines.
C) Sedona has only a few domestic competitors.
D) Sedona serves a narrow spectrum of customers and has a product line that uses similar
technology.
Answer: D
Diff: 2
Chapter: 8
Skill: Application
Objective: 2
3
9) Which of the following is true with regard to the global functional structure?
A) The global functional structure results in plants that serve widely different markets.
B) The global functional structure is most advantageous for firms with diversified product lines
that have different technological bases and that are aimed at dispersed markets.
C) The global functional structure is used primarily by large firms with highly decentralized
systems.
D) Foreign operations in a global functional structure are integrated into the activities and
responsibilities of each department to economies of scale.
Answer: D
Diff: 1
Chapter: 8
Skill: Concept
Objective: 1
10) To be effective, firms reorganizing into a domestic structure plus foreign subsidiary in one or
more countries should ________.
A) categorically ignore niche markets
B) stop investing in domestic businesses
C) refrain from exporting
D) allow a great deal of autonomy to subsidiary managers
Answer: D
Diff: 1
Chapter: 8
Skill: Concept
Objective: 1
11) A(n) ________ permits managers to allocate and coordinate resources for foreign activities
under one roof, and thus enhances the firm's ability to respond, both reactively and proactively,
to market opportunities.
A) local division
B) international division
C) export department
D) domestic structure plus foreign subsidiary
Answer: B
Diff: 1
Chapter: 8
Skill: Concept
Objective: 1
4
12) A firm that uses an international division structure sometimes experiences intra-
organizational conflict because ________.
A) such a structure disallows managers to coordinate resources for foreign activities under one
roof
B) the international division invariably fails to respond to cultural differences
C) more resources and management attention tend to get channeled toward the international
division than toward the domestic divisions
D) such a structure depresses the firm's ability to respond to market opportunities
Answer: C
Diff: 2
Chapter: 8
Skill: Concept
Objective: 1
13) In which of the following is a firm's foreign operations integrated into the activities and
responsibilities of each department to gain operative specialization and economies of scale?
A) global matrix structure
B) global geographic structure
C) global divisional structure
Answer: D
Diff: 1
Chapter: 8
Skill: Concept
Objective: 2
14) Sigma Inc. is designed on the basis of the company's business activities such as production,
finance, and marketing. Foreign operations at Sigma are integrated into the activities and
responsibilities of each division to achieve economies of scale and operative specialization. In
other words, Sigma has a(n) ________.
A) domestic structure with foreign subsidiary
B) domestic structure with export department
C) global functional structure
D) international division structure
Answer: C
Diff: 2
Chapter: 8
Skill: Application
Objective: 2
5
15) Which of the following organizational structures is particularly appropriate for product lines
using similar technology and for businesses with a narrow spectrum of customers?
A) global functional structure
B) international division
D) matrix structure
Answer: A
Diff: 1
Chapter: 8
Skill: Concept
Objective: 2
16) Which of the following is true with regard to a global product structure?
A) A global product structure is disadvantageous for firms with diversified product lines that are
aimed at dissimilar or dispersed markets.
B) The advantages of this organizational form are market concentration, innovation, and
responsiveness to new opportunities in a particular environment.
C) In a global product structure, a cluster of products are grouped into a single division.
D) A global product structure does not facilitate diversification and inhibits growth.
Answer: B
Diff: 1
Chapter: 8
Skill: Concept
Objective: 2
17) Which of the following refers to a self-contained business within a company with its own
functional departments and accounting systems?
A) buying center
B) supply chain
C) value chain
D) strategic business unit
Answer: D
Diff: 1
Chapter: 8
Skill: Concept
Objective: 2
6
18) Which of the following forms of organization is particularly appropriate in a dynamic and
diverse environment?
A) the global functional structure
B) the global product structure
C) the domestic structure plus export department
D) the domestic structure plus foreign subsidiary
Answer: B
Diff: 3
Chapter: 8
Skill: Concept
Objective: 2
19) With the geographic structure, the focus is on ________, since products can be adapted to
local requirements.
A) marketing
B) innovation
C) divesting
D) importing
Answer: A
Diff: 1
Chapter: 8
Skill: Concept
Objective: 2
20) Which of the following is the most common form of organizing foreign operations in which
divisions are created to cover various regions?
A) global functional structure
D) matrix structure
Answer: B
Diff: 1
Chapter: 8
Skill: Concept
Objective: 2
7
21) Which of the following is true with regard to the global geographic structure?
A) With the geographic structure, the focus is on importing.
B) Marketing-oriented companies are most likely to opt for this structure.
C) The geographic structure is not an adequate structure for consolidating regional expertise.
D) In a geographic structure, problems of coordination across different regions are virtually
nonexistent.
Answer: B
Diff: 3
Chapter: 8
Skill: Concept
Objective: 2
AACSB: Reflective thinking skills; Dynamics of the global economy
22) Marketing-oriented companies, such as Nestlé and Unilever, which produce a range of
products that can be marketed through similar channels of distribution to similar customers, will
usually opt for the ________.
A) domestic structure plus foreign subsidiary
C) matrix structure
D) domestic structure plus export department
Answer: B
Diff: 1
Chapter: 8
Skill: Concept
Objective: 2
23) The focus of Selina Inc., an MNC producing a range of products that can be marketed
through common channels to similar customers worldwide, is marketing. Its aim is to become an
insider in every country it operates. Which of the following organizational forms is most likely to
be favored by Selina's management?
A) a global geographic structure
B) a global functional structure
C) a domestic structure plus export department
D) a domestic structure plus foreign subsidiary
Answer: A
Diff: 2
Chapter: 8
Skill: Application
Objective: 2
8
24) A ________ is a hybrid organization of overlapping responsibilities.
A) functional structure
B) divisional structure
C) product structure
D) matrix structure
Answer: D
Diff: 1
Chapter: 8
Skill: Concept
Objective: 2
25) Which of the following is true about the matrix structure of organizational design?
A) The matrix structure is developed to combine geographic support for both global integration
and local responsiveness.
B) Regional managers are solely responsible for the operations and performance of the countries
within a given region.
C) In the matrix structure, communication problems, confusion, and conflict are minimal.
D) Overlapping responsibilities are absent in a matrix structure.
Answer: A
Diff: 2
Chapter: 8
Skill: Concept
Objective: 2
26) No matter what the stage of internationalization, a firm's structural choices always involve
________.
A) low standardization procedures
B) integration and differentiation
C) vertical job specialization
D) mass marketing and niche marketing
Answer: B
Diff: 1
Chapter: 8
Skill: Concept
Objective: 3
9
27) Which of the following refers to focusing on and specializing in specific markets?
A) integration
B) implementation
C) differentiation
D) globalization
Answer: C
Diff: 1
Chapter: 8
Skill: Concept
Objective: 3
28) Which of the following refers to the coordination of specific markets?

A) differentiation
B) globalization
C) diversification
D) integration
Answer: D
Diff: 1
Chapter: 8
Skill: Concept
Objective: 3
29) A specific strategy that treats the world as one market by using a standardized approach to
products and markets is called ________.
A) globalization
B) localization
C) differentiation
D) integration
Answer: A
Diff: 1
Chapter: 8
Skill: Concept
Objective: 3
10
30) Managers choose the manufacturing location for each product based on where the best
combination of cost, quality, and technology can be attained in order to achieve ________.
A) customer loyalty
B) integration
C) segregation
D) rationalization
Answer: D
Diff: 1
Chapter: 8
Skill: Concept
Objective: 3
31) The downside of rationalization is ________.

A) high cost of production
B) widely varying product design for different markets around the world
C) different marketing and sales strategies are adopted for each country
D) a lack of differentiation and specialization for local markets
Answer: D
Diff: 1
Chapter: 8
Skill: Concept
Objective: 3
32) Which of the following refers to a problem that firms with structurally sophisticated global
networks are most likely to face?
A) environmental volatility
B) competition from domestic firms
C) low cost savings
D) import tariffs
Answer: A
Diff: 1
Chapter: 8
Skill: Concept
Objective: 3
11
33) In their rush to get on the globalization bandwagon, too many firms have ________.
A) opted for niche marketing
B) sacrificed the ability to respond to local market structures and consumer preferences
C) overly focused on local markets at the cost of losing out on market share abroad
D) wrongly overestimated the importance of mass customization for the global market
Answer: B
Diff: 1
Chapter: 8
Skill: Concept
Objective: 3
34) Organizing for global product standardization requires ________, an especially difficult task
for multiproduct companies.
A) multibranding
B) vertical organizational mobility
C) seamless product development
D) centralized global product responsibility
Answer: D
Diff: 1
Chapter: 8
Skill: Concept
Objective: 3
35) Centralized global product responsibility implies that ________.

A) a single manager at the headquarters is responsible for a specific product around the world
B) a single manager is responsible for a specific product locally
C) a group of managers at the headquarters jointly shares product responsibility
D) product responsibility rests with subsidiary managers
Answer: A
Diff: 2
Chapter: 8
Skill: Concept
Objective: 4
12
36) ________ refers to an organization running its operations and opening subsidiaries
worldwide right from the beginning.
A) International joint venture
B) the subordinateship phenomenon
C) the born-global phenomenon
D) Outsourcing
Answer: C
Diff: 1
Chapter: 8
Skill: Concept
Objective: 4
37) Papillion Inc. is a small American high-technology firm that has been successfully competing
in the international business arena from its inception two years ago. Instead of internationalizing
slowly, Papillion embarked upon an ambitious plan to leverage niche market opportunities
worldwide—right from the beginning. Papillion Inc. exemplifies the ________ phenomenon.
A) born-global
B) subordinateship
C) outsourcing
D) insourcing
Answer: A
Diff: 3
Chapter: 8
Skill: Application
Objective: 4
38) Which of the following is true with regard to born globals?

A) Born globals cater to a single, narrow market segment.
B) In their rush to get on the globalization bandwagon, born globals have categorically ignored
domestic market opportunities.
C) Born globals operate in the international business arena right from their inception.
D) Born globals do not have foreign subsidiaries.
Answer: C
Diff: 1
Chapter: 8
Skill: Concept
Objective: 4
13
39) Customizing a range of products in a combination suitable for a particular target market, as a
response for the increasing need for speedy adaptation to the market, is known as ________.
A) outsourcing
B) diversification
C) platformisation
D) internationalization
Answer: C
Diff: 1
Chapter: 8
Skill: Concept
Objective: 4
40) ________ is described by Miles et al. as a collaborative, multi-firm network along with
community-based structures, used by innovative firms such as Taiwan's Acer.
A) A cloud database
B) A born global
C) Platformisation
D) The I-form
Answer: D
Diff: 1
Chapter: 8
Skill: Concept
Objective: 4
41) Nimbus Inc. is a hybrid organization. The organizational structure of the company has been
developed to combine geographic support for both global integration and local responsiveness.
Nimbus is not a hierarchical organization and uses cross-functional teams to quickly adapt to the
dynamic business environment.
If the above information is true, which of the following can be fittingly inferred?
A) that Nimbus has only a few SBUs
B) that Nimbus has a matrix structure
C) that Nimbus is a born global
D) that Nimbus does not favor standardization of its products
Answer: B
Diff: 3
Chapter: 8
Skill: Critical Thinking
Objective: 4
14
42) Using the Internet to streamline global supply systems ________.
A) enhances the efficiency of the supply chain
B) eliminates the reliance on local suppliers
C) creates a vertical hierarchical structure within organizations
D) increases fixed costs
Answer: A
Diff: 1
Chapter: 8
Skill: Concept
Objective: 4
AACSB: Use of information technology
43) ________ refers to the ability to manage across national boundaries, retaining local
flexibility while achieving global integration.
A) Positioning
B) Globalization
C) Transnational capability
D) Filtering capability
Answer: C
Diff: 1
Chapter: 8
Skill: Concept
Objective: 4
44) To address the globalization–localization dilemma, firms that have evolved through the
multinational form and the global company seek the advantages of ________ in the pursuit of
transnational capability.
A) niche marketing
B) horizontal organization
C) a narrow product line
D) vertical organization
Answer: B
Diff: 1
Chapter: 8
Skill: Concept
Objective: 4
15
45) Which of the following organizational structures is typical of most transnational companies?
A) matrix structure
B) bureaucratic structure
Answer: A
Diff: 1
Chapter: 8
Skill: Concept
Objective: 4
46) Two major variables in choosing the structure and design of an organization are the
opportunities and need for ________.
A) globalization and localization
B) mass marketing and niche marketing
C) vertical mobility and horizontal mobility
D) differentiation and integration
Answer: A
Diff: 1
Chapter: 8
Skill: Concept
Objective: 5
47) According to the ________ model, as the company becomes larger, more complex, and more
sophisticated in its approach to world markets, it may evolve into a transnational corporation.
A) four stages of contribution
B) crowdsourcing
C) matrix
D) evolutionary stages
Answer: D
Diff: 1
Chapter: 8
Skill: Concept
Objective: 5
16
48) The ________ strategy involves maximizing opportunities for both efficiency and local
responsiveness by adopting a structure that uses alliances, networks, and horizontal design
formats.
A) multidomestic structure
B) transnational corporation
C) international division structure
D) bureaucratic structure
Answer: B
Diff: 1
Chapter: 8
Skill: Concept
Objective: 5
49) In a ________ strategy, the need to coordinate is low.

A) multidomestic
B) international
C) global
D) transnational
Answer: A
Diff: 1
Chapter: 8
Skill: Concept
Objective: 5
50) At persistent signs of ineffective work, a company should ________.

A) switch from a customer orientation to a product orientation
B) implement price skimming
C) analyze its organizational design, systems, and work flow for the possible causes of those
problems
D) acquire smaller born globals to regain lost market share
Answer: C
Diff: 1
Chapter: 8
Skill: Concept
Objective: 5
17
51) The organizational culture has a low impact in a ________ strategy.
A) global
B) transnational
C) multidomestic
D) international
Answer: C
Diff: 1
Chapter: 8
Skill: Concept
Objective: 5
52) In general, centralized decision making is common for some functions such as ________.
A) sales
B) finance
C) marketing
D) production
Answer: B
Diff: 1
Chapter: 8
Skill: Concept
Objective: 5
53) Which of the following indicates a need for change in organizational design?
A) low turnover
B) a decrease in overseas customer complaints
C) seamless innovation
D) new management with different goals and strategies
Answer: D
Diff: 1
Chapter: 8
Skill: Concept
Objective: 5
54) In general, decentralized decision making is common for some functions such as ________.
A) finance
B) research and development
C) production
D) strategic management
Answer: C
Diff: 1
Chapter: 8
Skill: Concept
Objective: 5
18
55) The best organizational structure is the one that ________.
A) does not allow any compromise on the globalization-localization continuum.
B) upholds the status quo
C) actively resists organizational change
D) facilitates the firm's goals and is appropriate to its industry, size, technology, and competitive
environment
Answer: D
Diff: 1
Chapter: 8
Skill: Concept
Objective: 5
56) To be effective, an organizational structure should ________.

A) not accommodate overlapping responsibilities
B) be rigid
C) be highly adaptable to the changing needs of the company
D) be the same as that of its competitors
Answer: C
Diff: 1
Chapter: 8
Skill: Concept
Objective: 5
57) ________ is most likely to reduce the effectiveness of an organizational structure.

A) Low adaptability
B) Fluidity
C) Dynamism
D) High flexibility
Answer: A
Diff: 1
Chapter: 8
Skill: Concept
Objective: 5
19
58) Diana's, an Illinois-based cosmetics company, manufactures a wide range of natural
cosmetics and skin-care products. The company has international divisions located in Singapore
and London. The top management at Diana's is currently considering making a change to the
company's organizational structure.
Which of the following, if true, best supports the argument that Diana's should change its
organizational structure?
A) Employees at Diana's complain that they are too bogged down with administrative tasks to
focus on creating new products and concepts.
B) Diana's exports its products to the emerging markets in Asia and Africa.
C) Employee attrition is low at Diana's.
D) The labor union consisting of Diana's full-time employees successfully negotiated a hike in
their annual compensation with management a few months ago.
Answer: A
Diff: 3
Chapter: 8
Skill: Critical Thinking
Objective: 3
59) The feedback from the control process and the information systems should ________.
A) point out the most suitable organizational structure for a company at a given point in time
B) help employees formulate a plan for personal development
C) signal any necessary change in strategy, structure, or operations in a timely manner
D) eliminate organizational anarchy
Answer: C
Diff: 1
Chapter: 8
Skill: Concept
Objective: 5
60) Which of the following is true with regard to direct coordinating mechanisms?
A) Expatriates from "headquarters" do not exert control over the foreign affiliate through the
expectations of the national and corporate culture of the parent company.
B) Even in situations where parent control is considered less important, delegating the control to
the local level is ritually avoided.
C) Direct coordinating mechanisms that provide the basis for the overall guidance and
management of foreign operations include, the design of appropriate organizational structures
and the use of effective staffing practices.
D) Direct coordinating mechanisms do not include staffing practices.
Answer: C
Diff: 2
Chapter: 8
Skill: Concept
Objective: 6
20
61) Indirect coordinating mechanisms typically include all of the following EXCEPT ________.
A) sales quotas
B) budgets
C) visits by head-office personnel
D) feedback reports
Answer: C
Diff: 2
Chapter: 8
Skill: Concept
Objective: 6
62) Which of the following refers to a financial variable in MNC reports that complicates
financial statements and performance evaluations?
A) annual budget
B) inflation level
C) sales forecast
D) overhead costs
Answer: B
Diff: 1
Chapter: 8
Skill: Concept
Objective: 6
63) To reconcile accounting statements, MNCs usually require ________ different sets of
financial statements from subsidiaries.
A) two
B) three
C) five
D) seven
Answer: B
Diff: 1
Chapter: 8
Skill: Concept
Objective: 6
21
64) Which of the following is true with regard to indirect coordinating mechanisms?
A) Indirect coordinating mechanisms do not include feedback reports.
B) Indirect coordinating mechanisms typically include visits by head-office personnel.
C) Indirect coordinating mechanisms typically include sales quotas.
D) Indirect coordinating mechanisms include regular meetings to allow employees around the
world to consult and troubleshoot.
Answer: C
Diff: 1
Chapter: 8
Skill: Concept
Objective: 6
65) The degree to which headquarters' practices and goals are transferable most likely depends
on whether ________.
A) top managers are from the head office, the host country, or a third country
B) the organization is product- or service-oriented
C) financial performance reports show a positive trend in growth over the past several years
D) the production system is standardized
Answer: A
Diff: 1
Chapter: 8
Skill: Concept
Objective: 6
66) Which of the following is true of Ueno and Sekaran's study of Japanese and U.S. firms with
regard to monitoring and reporting systems?
A) U.S. firms tend to use long-term evaluations to a greater extent.
B) Compared to U.S. firms, Japanese firms build budget slack to a greater extent.
C) U.S. firms tend to use communication and coordination processes more extensively than
Japanese firms.
D) Japanese managers are more likely to use formal communication and coordination processes.
Answer: C
Diff: 1
Chapter: 8
Skill: Concept
Objective: 6
22
67) Which of the following factors adversely affects the accuracy and the timeliness of
information systems in less-developed countries?
A) limited sources of data for decision making
B) high cost of capital items
C) expensive labor
D) strict labor laws
Answer: A
Diff: 1
Chapter: 8
Skill: Concept
Objective: 6
68) Which of the following is true with regard to information systems in less-developed
countries?
A) In less-developed countries, the sources of reliable data for decision making is relatively high
in number.
B) The accuracy and timeliness of information systems are often less than perfect in less-
developed countries.
C) In less-developed countries, the sources of reliable data for decision making are easy to
locate.
D) Government information in less-developed countries is rarely fabricated, so it is considered to
be the most reliable source of information for headquarters managers.
Answer: B
Diff: 1
Chapter: 8
Skill: Concept
Objective: 6
69) The noncomparability of performance data across countries ________.

A) reduces employee empowerment
B) hinders the evaluation process
C) lowers production
D) enhances the overall organizational efficiency
Answer: B
Diff: 1
Chapter: 8
Skill: Concept
Objective: 6
23
70) Meaningful, long-term performance standards can be provided by taking into account
nonfinancial measures such as ________.
A) union relations
B) taxes
C) transfer pricing
D) exchange-rate fluctuations
Answer: A
Diff: 1
Chapter: 8
Skill: Concept
Objective: 6
71) Internationalization is the process by which a firm gradually changes in response to global
competition; domestic market saturation; and the desire for expansion, new markets, and
diversification.
Answer: TRUE
Diff: 1
Chapter: 8
Skill: Concept
Objective: 1
72) Small firms typically start their international involvement by establishing international
divisions.
Answer: FALSE
Diff: 1
Chapter: 8
Skill: Concept
Objective: 1
73) Global functional structures are primarily used by large firms with highly decentralized
systems.
Answer: FALSE
Diff: 2
Chapter: 8
Skill: Concept
Objective: 2
24
74) For firms with diversified product lines that have different technological bases and are aimed
at dissimilar or dispersed markets, a functional structure is far more strategically advantageous
than a global product structure.
Answer: FALSE
Diff: 1
Chapter: 8
Skill: Concept
Objective: 2
75) A strategic business unit (SBU) is a self-contained business with its own functional
departments and accounting systems.
Answer: TRUE
Diff: 1
Chapter: 8
Skill: Concept
Objective: 2
76) A matrix structure is a hybrid organization of overlapping responsibilities.

Answer: TRUE
Diff: 1
Chapter: 8
Skill: Concept
Objective: 2
77) Regardless of the stage of internationalization, a firm's structural choices always involve two
opposing forces: globalization and localization.
Answer: FALSE
Diff: 1
Chapter: 8
Skill: Concept
Objective: 2
78) Globalization is a specific strategy that treats the world as one market by using a
standardized approach to products and markets.
Answer: TRUE
Diff: 1
Chapter: 8
Skill: Concept
Objective: 3
25
79) To achieve rationalization, managers choose the manufacturing location for each product
based on where the best combination of cost, quality, and technology can be attained.
Answer: TRUE
Diff: 1
Chapter: 8
Skill: Concept
Objective: 3
80) Organizing to facilitate a globalization strategy does not involve rationalization.

Answer: FALSE
Diff: 1
Chapter: 8
Skill: Concept
Objective: 3
81) By transitioning to formats such as interorganizational networks, companies are abandoning

traditional structures and switching to more rigid organizational structures.
Answer: FALSE
Diff: 1
Chapter: 8
Skill: Concept
Objective: 4
82) Intel's "Platformisation" refers to customizing a range of chips in a combination suitable for a
particular target market, as a response for the increasing need for speedy adaptation to the
market.
Answer: FALSE
Diff: 1
Chapter: 8
Skill: Concept
Objective: 4
83) The organizational structure for global e-businesses, in particular for physical products,
typically involves a network of virtual e-exchanges and "bricks and mortar" services, whether
those services are in-house or outsourced.
Answer: TRUE
Diff: 1
Chapter: 8
Skill: Concept
Objective: 4
26
84) To address the globalization–localization dilemma, firms that have evolved through the
multinational form and the global company seek the advantages of horizontal organization in the
pursuit of transnational capability.
Answer: TRUE
Diff: 1
Chapter: 8
Skill: Concept
Objective: 4
85) The global functional structure typical of the transnational company creates a complex
coordination and control system, as it attempts to combine the capabilities and resources of a
multinational corporation.
Answer: FALSE
Diff: 1
Chapter: 8
Skill: Concept
Objective: 4
86) Two major variables in choosing the structure and design of an organization are the
opportunities and need for differentiation and integration.
Answer: FALSE
Diff: 1
Chapter: 8
Skill: Concept
Objective: 5
87) In general, decentralized decision making is common for functions such as finance, and
research and development that are organized for the entire corporation, whereas other functions
such as production, marketing, and sales are more appropriately centralized.
Answer: FALSE
Diff: 1
Chapter: 8
Skill: Concept
Objective: 5
27
88) Direct mechanisms that provide the basis for the overall guidance and management of
foreign operations include the design of appropriate structures and the use of effective staffing
practices.
Answer: TRUE
Diff: 1
Chapter: 8
Skill: Concept
Objective: 6
89) The MIS adequacy in foreign affiliates is a sticky problem for headquarters managers in their
attempt to maintain efficient coordination of activities and consolidation of results.
Answer: TRUE
Diff: 1
Chapter: 8
Skill: Concept
Objective: 6
90) Variables such as transfer pricing and exchange-rate fluctuations do not influence
profitability patterns.
Answer: FALSE
Diff: 1
Chapter: 8
Skill: Concept
Objective: 6
91) What are the major variables that should be taken into account when designing a firm's
organizational structure?
Answer: The design of an organization, as with any other management function, should be
contingency-based, taking into account the variables of that particular system at that specific
point in time. Major variables include the firm's strategy, size, and appropriate technology, as
well as the environment in those parts of the world in which the firm operates. Given the
increased complexity of the variables involved in the international context, it is no easy task to
design the most suitable organizational structure and subsystems. In fact, research shows that
most international managers find it easier to determine what to do to compete globally (strategy)
than to decide how to develop the organizational capability (structure) to do it. Additional
variables affecting structural choices—geographic dispersion as well as differences in time,
language, cultural attitudes, and business practices—introduce further layers of complication.
Diff: 2
Chapter: 8
Skill: Concept
Objective: 1
28
92) List the typical ways in which firms organize their international activities.
Answer: The typical ways in which firms organize their international activities are shown in the
following list. Larger companies often use several of these structures in different regions or parts
of their organization.
1. Domestic structure plus export department
2. Domestic structure plus foreign subsidiary
3. International division
4. Global functional structure
5. Global product structure
6. Matrix structure
Diff: 2
Chapter: 8
Skill: Concept
Objective: 1
93) Briefly describe the characteristics of the global geographic structure.

Answer: In the global geographic (area) structure—the most common form of organizing
foreign operations—divisions are created to cover geographic regions. Each regional manager is
responsible for the operations and performance of the countries within a given region. In this
way, country and regional needs and relative market knowledge take precedence over product
expertise. Local managers are familiar with the cultural environment, government regulations,
and business transactions. In addition, their language skills and local contacts facilitate daily
transactions and responsiveness to the market and the customer. While this is a good structure for
consolidating regional expertise, problems of coordination across regions may arise.
Diff: 2
Chapter: 8
Skill: Concept
Objective: 2
94) Why are global companies increasingly abandoning rigid structures? How are they adapting
to the changing global environment?
Answer: Companies are increasingly abandoning rigid structures in an attempt to be more
flexible and responsive to the dynamic global environment. Some of the ways they are adapting
are by transitioning to formats known as interorganizational networks, global e-corporation
network structures, and transnational corporation network structures.
Diff: 1
Chapter: 8
Skill: Concept
Objective: 4
29
95) Describe the organizational structure and characteristics of transnational corporations.
Answer: A transnational corporation has the ability to manage across national boundaries,
retaining local flexibility while achieving global integration. This ability involves linking foreign
operations to each other and to headquarters in a flexible way so as to leverage local and central
capabilities.
This structure is less a matter of boxes on an organizational chart and more a matter of a network
of the company's units and their system of horizontal communication. This involves lateral
communication across networks of units and alliances rather than in a hierarchy. The system
requires the dispersal of responsibility and decision making to local subsidiaries and alliances.
The effectiveness of that localized decision making depends a great deal on the ability and
willingness to share current and new learning and technology across the network of units. The
matrix structure typical of the transnational company creates a complex coordination and control
system as it attempts to combine: (1) the capabilities and resources of a multinational
corporation, (2) the economies of scale of a global corporation, (3) the local responsiveness of a
domestic company, and
(4) the ability to transfer technology efficiently typical of the international structure
Diff: 2
Chapter: 8
Skill: Concept
Objective: 4
96) What are the changes necessitating new structural designs for organizations?
Answer: The changes that may necessitate new structural designs for organizations are as
follows:
1. New management with different goals and strategies
2. Downturn in profitability or finances
3. Lack of competitiveness, failure to meet goals or capitalize on opportunities
4. Poor management, leadership, communication, delegation, or morale
5. New strategic directions: growth, alliances, retrenchment; global expansion from directing
export activities to controlling overseas manufacturing and marketing units; a change in the size
of operations on a country, regional, or worldwide basis; or failure of foreign operations to grow
in accordance with plans and expectations
6. Clashes among divisions, subsidiaries, or individuals over territories or customers in the field
7. Divisive conflicts between overseas units and domestic division staff or corporate staff
8. Underutilization of overseas manufacturing or distribution facilities
9. Duplication of sales offices or geographic operational units within an area
10. An increase in overseas customer service complaints
11. Breakdowns in communications within and among organizations
12. Bottlenecks, too many reporting layers, and ill-defined executive responsibilities
13. Lack of innovation
Diff: 2
Chapter: 8
Skill: Concept
Objective: 5
30
97) What are direct and indirect coordinating mechanisms?
Answer: Direct mechanisms that provide the basis for the overall guidance and management of
foreign operations include the design of appropriate structures and the use of effective staffing
practices. Such decisions proactively set the stage for operations to meet goals, rather than
troubleshooting deviations or problems after they have occurred.
Expatriates from "headquarters" exert control over the foreign affiliate through the expectations
of the national and corporate culture of the parent company. If the staffing assignment is handled
through third country nationals, it is likely that somewhat less of the corporate culture might be
present locally, and certainly less of the national culture of the parent. Other direct mechanisms
are visits by head-office personnel and regular meetings to allow employees around the world to
consult and troubleshoot. Increasingly, those meetings comprise videoconferences to allow face-
to-face, if not physical, interaction among managers around the world to enable faster and less-
expensive frequent meetings.
Indirect coordinating mechanisms typically include sales quotas, budgets, and other financial
tools, as well as feedback reports, which give information about the sales and financial
performance of the subsidiary for the last quarter or year.
Diff: 2
Chapter: 8
Skill: Concept
Objective: 6
98) What are the major challenges presented by information systems in less-developed
countries?
Answer: The accuracy and timeliness of information systems are often less than perfect,
especially in less-developed countries, where managers typically operate under conditions of
extreme uncertainty. Government information, for example, is often filtered or fabricated; other
sources of data for decision making are usually limited. Employees are not used to the kinds of
sophisticated information generation, analysis, and reporting systems common in developed
countries. Their work norms and sense of necessity and urgency may also confound the problem.
In addition, their available technology, and the ability to manipulate and transmit data are usually
limited.
Diff: 2
Chapter: 8
Skill: Concept
Objective: 6
31
99) Briefly describe the problems faced by headquarter managers attempting to maintain
efficient coordination of activities across countries.
Answer: The MIS adequacy in foreign affiliates is a sticky problem for headquarters managers
attempting to maintain efficient coordination of activities and consolidation of results. Another
problem is the noncomparability of performance data across countries—the control problem
caused by the difficulty of comparing performance data across various countries because of the
variables that make that information appear different—which hinders the evaluation process.
Diff: 2
Chapter: 8
Skill: Concept
Objective: 6
100) Why is it difficult for managers to evaluate and compare performance across subsidiaries?
How can managers overcome these difficulties?
Answer: A major problem that arises when evaluating the performance of foreign affiliates is the
tendency by headquarters managers to judge subsidiary managers as if all of the evaluation data
were comparable across countries. Unfortunately, many variables can make the evaluation
information from one country look very different from that of another country, owing to
circumstances beyond the control of a subsidiary manager. For example, one country may
experience considerable inflation, significant fluctuations in the price of raw materials, political
uprisings, or governmental actions. These factors are beyond the manager's control and are likely
to have a downward effect on profitability—and yet, that manager may, in fact, have maximized
the opportunity for long-term stability and profitability compared with a manager of another
subsidiary who was not faced with such adverse conditions. Other variables influencing
profitability patterns include transfer pricing, currency devaluation, exchange-rate fluctuations,
taxes, and expectations of contributions to local economies.
One way to ensure more meaningful performance measures is to adjust the financial statements
to reflect the uncontrollable variables peculiar to each country where a subsidiary is located. This
provides a basis for the true evaluation of the comparative return on investment (ROI), which is
an overall control measure. Another way to provide meaningful, long-term performance
standards is to take into account other nonfinancial measures. These measures include market
share, productivity, sales, relations with the host-country government, public image, employee
morale, union relations, and community involvement.
Diff: 2
Chapter: 8
Skill: Concept
Objective: 6
32

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International Management, 8e (Deresky)

Chapter 8 Organization Structure and Control Systems

2) Historically, a firm reorganizes as it internationalizes to ________.

3) Usually, smaller firms start their international involvement by ________.

28) Which of the following refers to the coordination of specific markets?

31) The downside of rationalization is ________.

35) Centralized global product responsibility implies that ________.

38) Which of the following is true with regard to born globals?

49) In a ________ strategy, the need to coordinate is low.

50) At persistent signs of ineffective work, a company should ________.

56) To be effective, an organizational structure should ________.

57) ________ is most likely to reduce the effectiveness of an organizational structure.

69) The noncomparability of performance data across countries ________.

76) A matrix structure is a hybrid organization of overlapping responsibilities.

80) Organizing to facilitate a globalization strategy does not involve rationalization.

81) By transitioning to formats such as interorganizational networks, companies are abandoning

93) Briefly describe the characteristics of the global geographic structure.

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