Incoterms 2010 and International Business - 101
Incoterms 2010 and International Business - Wild - Chapter 11 - QUIZ
Incoterms 2010 and International Business - 101
International Business: The Challenges of Globalization, 8th Edition, Wild & Wild
Incoterms 2010 and International Business - Wild - Chapter 11 - QUIZ
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International Business, 8e (Wild/Wild)
Chapter 11 International Strategy and Organization
1) ________ is the process of identifying and selecting an organization's objectives and deciding how the organization will achieve those objectives.
- A) Stratification
- B) Planning
- C) Economic transition
- D) Value chain analysis
Answer: B
Skill: Concept
Difficulty: Easy
LO: 11.1: Explain the company analysis techniques that precede strategy selection.
2) A ________ is a set of planned actions taken by managers to help a company meet its objectives.
- A) mission statement
- B) vision
- C) strategy
- D) core competency
Answer: C
AACSB: Application of knowledge
Skill: Concept
Difficulty: Easy
LO: 11.1: Explain the company analysis techniques that precede strategy selection.
3) Which of the following refers to a written statement of why a company exists and what it plans to accomplish?
- A) memorandum of association
- B) mission statement
- C) vision statement
- D) articles of association
Answer: B
AACSB: Application of knowledge
Skill: Concept
Difficulty: Easy
LO: 11.1: Explain the company analysis techniques that precede strategy selection.
4) Which of the following is the first stage of the strategy-formulation process?
- A) identification of value-creating activities
- B) formulation of strategies
- C) identification of company mission and goals
- D) identification of core competency
Answer: C
AACSB: Application of knowledge
Skill: Concept
Difficulty: Easy
LO: 11.1: Explain the company analysis techniques that precede strategy selection.
5) Which of the following statements is true of objectives?
- A) Objectives of individual business units in a company tend to be stated in the most general terms.
- B) Objectives become more precise at the level of individual departments.
- C) Objectives at the highest level in an organization tend to be more specific.
- D) Objectives at the highest level in an organization are more concrete as they contain numerical targets.
Answer: B
AACSB: Application of knowledge
Skill: Concept
Difficulty: Moderate
LO: 11.1: Explain the company analysis techniques that precede strategy selection.
6) The objectives at the ________ of an organization are typically more precise and contain numerical targets of performance.
- A) department-level
- B) business-level
- C) global-level
- D) corporate-level
Answer: A
Skill: Concept
Difficulty: Easy
LO: 11.1: Explain the company analysis techniques that precede strategy selection.
7) Which of the following statements is true of the environmental forces that affect strategy formulation?
- A) Socialist economic systems normally levy light taxes on business profits.
- B) Countries that excessively spend on R&D tend to have lower levels of prosperity.
- C) Approval of the host government is almost always necessary for making direct investments.
- D) Free-market economies tend to levy high taxes on business profits.
Answer: C
AACSB: Application of knowledge
Skill: Concept
Difficulty: Moderate
LO: 11.1: Explain the company analysis techniques that precede strategy selection.
8) Adapting products and their marketing strategies in each of the national markets of a company to suit local preferences is called a ________ strategy.
- A) multinational
- B) blue ocean
- C) global
- D) retrenchment
Answer: A
AACSB: Application of knowledge
Skill: Concept
Difficulty: Easy
LO: 11.1: Explain the company analysis techniques that precede strategy selection.
9) Companies often establish largely independent, self-contained units in each of its national markets to implement a ________ strategy.
- A) retrenchment
- B) global
- C) multinational
- D) blue ocean
Answer: C
Skill: Concept
Difficulty: Easy
LO: 11.1: Explain the company analysis techniques that precede strategy selection.
10) Which of the following strategies is appropriate for companies in industries where buyer preferences do not converge across national borders?
- A) retrenchment strategy
- B) global strategy
- C) multidomestic strategy
- D) mass customization strategy
Answer: C
Skill: Concept
Difficulty: Easy
LO: 11.1: Explain the company analysis techniques that precede strategy selection.
11) The main benefit of a multidomestic strategy is that it ________.
- A) exploits scale economies in product development and marketing
- B) is cost-saving due to product and marketing standardization
- C) takes advantage of location economies
- D) responds quickly and effectively to emerging buyer preferences
Answer: D
Skill: Concept
Difficulty: Moderate
LO: 11.1: Explain the company analysis techniques that precede strategy selection.
12) The main drawback of a multinational strategy is that it does not allow a company to ________.
- A) exploit scale economies in product development or marketing
- B) closely monitor buyer preferences in each local market
- C) modify its products except for the most superficial features
- D) respond quickly and effectively to emerging buyer preferences
Answer: A
AACSB: Application of knowledge
Skill: Concept
Difficulty: Moderate
LO: 11.1: Explain the company analysis techniques that precede strategy selection.
Scenario: Beanstalk International
Beanstalk International is a rapidly growing company with well-established subsidiaries in several nations. The company wants to follow a strategy of adapting its products and marketing activities in each national market to suit local preferences. This strategy aims at creating value for its customers.
13) Which of the following should managers at Beanstalk conduct to identify and distinguish between the primary and support activities in the organization?
- A) fundamental analysis
- B) structural analysis
- C) value chain analysis
- D) technical analysis
Answer: C
AACSB: Analytical thinking
Skill: Application
Difficulty: Easy
LO: 11.1: Explain the company analysis techniques that precede strategy selection.
14) Strategy is the set of planned actions that managers take to help a company meet its objectives.
Answer: TRUE
AACSB: Application of knowledge
Skill: Concept
Difficulty: Easy
LO: 11.1: Explain the company analysis techniques that precede strategy selection.
15) All parties ranging from suppliers and employers to consumers who are affected by a company's activities are called its stockholders.
Answer: FALSE
AACSB: Reflective thinking
Skill: Concept
Difficulty: Easy
LO: 11.1: Explain the company analysis techniques that precede strategy selection.
16) Objectives at the highest level in a company are always stated in the most specific terms.
Answer: FALSE
AACSB: Application of knowledge
Skill: Concept
Difficulty: Easy
LO: 11.1: Explain the company analysis techniques that precede strategy selection.
17) Objectives of individual business units in an organization exclusively contain numerical targets of performance.
Answer: TRUE
AACSB: Application of knowledge
Skill: Concept
Difficulty: Moderate
LO: 11.1: Explain the company analysis techniques that precede strategy selection.
18) Core competencies of organizations are the special skills of certain employees that give a company an edge over other organizations.
Answer: FALSE
Skill: Concept
Difficulty: Easy
LO: 11.1: Explain the company analysis techniques that precede strategy selection.
19) Core competencies are developed by organizations over long periods of time.
Answer: TRUE
AACSB: Application of knowledge
Skill: Concept
Difficulty: Easy
LO: 11.1: Explain the company analysis techniques that precede strategy selection.
20) Technology development is an example of a primary activity in the value chain of an organization.
Answer: FALSE
AACSB: Reflective thinking
Skill: Concept
Difficulty: Easy
LO: 11.1: Explain the company analysis techniques that precede strategy selection.
21) Customer service is an example of a support activity in the value chain of an organization.
Answer: FALSE
Skill: Concept
Difficulty: Easy
LO: 11.1: Explain the company analysis techniques that precede strategy selection.
22) Support activities assist companies in performing their primary activities.
Answer: TRUE
AACSB: Application of knowledge
Skill: Concept
Difficulty: Easy
LO: 11.1: Explain the company analysis techniques that precede strategy selection.
23) The scope of a corporation's operations refers to the size of its operations.
Answer: FALSE
AACSB: Application of knowledge
Skill: Concept
Difficulty: Easy
LO: 11.1: Explain the company analysis techniques that precede strategy selection.
24) Differentiate between primary and support activities that create value for a company's customers. How can managers determine whether an activity enhances customer value?
Answer: Value-chain analysis divides a company's activities into primary activities and support activities that are central to creating customer value. Primary activities include inbound and outbound logistics, production (goods and services), marketing and sales, and customer service. Primary activities involve the creation of the product, its marketing and delivery to buyers, and its after-sales support and service. Support activities include business infrastructure, human resource management, technology development, and procurement (sourcing). Each of these activities provides the inputs and infrastructure required by the primary activities.
Each primary and support activity is a source of strength or weakness for a company. Managers determine whether each activity enhances or detracts from customer value, and they incorporate this knowledge into the strategy-formulation process. Analysis of primary and support activities often involves finding activities in which improvements can be made with large benefits.
Primary Activities-When analyzing primary activities, managers often look for areas in which the company can increase the value provided to its customers. For example, managers might examine production processes and discover new, more efficient manufacturing methods to reduce production costs and improve quality. Customer satisfaction might be increased by improving logistics management that shortens the time it takes to get a product to the buyer or by providing better customer service.
Support Activities-Support activities assist companies in performing their primary activities. For example, the actions of any company's employees are crucial to its success. Production, logistics, marketing, sales, and customer service all benefit when employees are qualified and well trained. International companies can often improve the quality of their products by investing in worker training and management development. In turn, ensuring quality can increase the efficiency of a firm's manufacturing, marketing and sales, and customer service activities. Effective procurement (or sourcing) can locate low-cost, high-quality raw materials or intermediate products and ensure on-time delivery to production facilities. Finally, a sophisticated infrastructure not only improves internal communication but also supports organizational culture and each primary activity.
AACSB: Reflective thinking
Skill: Concept
Difficulty: Moderate
LO: 11.1: Explain the company analysis techniques that precede strategy selection.
25) Explain the differences between a mission statement and a business-level strategy.
Answer: Mission statements often spell out how a company's operations affect its stakeholders–all parties, ranging from suppliers and employees to stockholders and consumers, who are affected by a company's activities. Some companies place corporate brands center stage and take on the mission of creating well-liked brands above all else. The mission statements of other businesses focus on other issues, including superior shareholder returns, profitability, market share, and corporate social responsibility. Still other companies make their mission to be the interests of consumers.
Managers must formulate separate business-level strategies for each business unit. For some companies, this means creating just one strategy. This is the case when the business-level strategy and the corporate-level strategy are one and the same because the corporation is involved in just one line of business. For other companies, this can mean creating dozens of strategies.
The key to developing an effective business-level strategy is deciding on a general competitive strategy in the marketplace. Each business unit must decide whether to sell the lowest-priced product in an industry or to integrate special attributes into its products. A business unit can use one of three generic business-level strategies for competing in its industry–low-cost leadership, differentiation, or focus. These strategies can be applied to practically all firms in all markets worldwide.
AACSB: Reflective thinking
Skill: Synthesis
Difficulty: Hard
LO: 11.1: Explain the company analysis techniques that precede strategy selection.
26) Which of the following is a special ability of a company that competitors find extremely difficult to equal?
- A) comparative advantage
- B) absolute advantage
- C) core competency
- D) economy of scale
Answer: C
AACSB: Application of knowledge
Skill: Concept
Difficulty: Easy
LO: 11.2: Describe the various strategies that companies use to reach their goals.
27) ________ is the process of dividing a company's activities into primary and support activities and identifying those that create value for customers.
- A) Fundamental analysis
- B) Technical analysis
- C) Structural analysis
- D) Value-chain analysis
Answer: D
AACSB: Application of knowledge
Skill: Concept
Difficulty: Easy
LO: 11.2: Describe the various strategies that companies use to reach their goals.
28) Which of the following is considered as a primary activity in an organization?
- A) infrastructure
- B) marketing and sales
- C) procurement
- D) human resource management
Answer: B
AACSB: Application of knowledge
Skill: Concept
Difficulty: Easy
LO: 11.2: Describe the various strategies that companies use to reach their goals.
29) According to value-chain analysis, inbound and outbound logistics are considered as ________.
- A) tertiary activities
- B) primary activities
- C) support activities
- D) core competencies
Answer: B
Skill: Concept
Difficulty: Easy
LO: 11.2: Describe the various strategies that companies use to reach their goals.
30) Which of the following is considered as a support activity in an organization?
- A) inbound logistics
- B) marketing and sales
- C) procurement
- D) customer service
Answer: C
AACSB: Application of knowledge
Skill: Concept
Difficulty: Easy
LO: 11.2: Describe the various strategies that companies use to reach their goals.
31) A ________ strategy typically increases the cost structure for international companies and forces them to charge higher prices to recover such costs.
- A) retrenchment
- B) global
- C) multidomestic
- D) blue ocean
Answer: C
Skill: Concept
Difficulty: Easy
LO: 11.2: Describe the various strategies that companies use to reach their goals.
32) Offering the same products using the same marketing strategy in all national markets of an organization is referred to as a ________ strategy.
- A) global
- B) retrenchment
- C) multinational
- D) blue ocean
Answer: A
Skill: Concept
Difficulty: Easy
LO: 11.2: Describe the various strategies that companies use to reach their goals.
33) Companies that produce entire inventories of products or components in one or very few optimal locations are most likely to follow a ________ strategy.
- A) retrenchment
- B) global
- C) blue ocean
- D) multinational
Answer: B
Skill: Concept
Difficulty: Easy
LO: 11.2: Describe the various strategies that companies use to reach their goals.
34) Companies that typically design promotional campaigns and advertising strategies at their headquarters are most likely to follow a ________ strategy.
- A) retrenchment
- B) global
- C) blue ocean
- D) multidomestic
Answer: B
AACSB: Application of knowledge
Skill: Concept
Difficulty: Easy
LO: 11.2: Describe the various strategies that companies use to reach their goals.
35) Global products are most commonly seen in industries where there is ________.
- A) little convergence of buyer preference across national borders
- B) low pressure to contain costs
- C) high demand for customized products
- D) significant price competition
Answer: D
Skill: Concept
Difficulty: Moderate
LO: 11.2: Describe the various strategies that companies use to reach their goals.
36) A ________ strategy can create cost savings due to product and marketing standardization.
- A) retrenchment
- B) multidomestic
- C) blue ocean
- D) global
Answer: D
Skill: Concept
Difficulty: Easy
LO: 11.2: Describe the various strategies that companies use to reach their goals.
37) The main benefit of a global strategy is that it allows a company to ________.
- A) closely monitor buyer preferences in each local market
- B) save costs due to product and marketing standardization
- C) customize its products and services
- D) respond effectively to emerging buyer preferences
Answer: B
AACSB: Application of knowledge
Skill: Concept
Difficulty: Moderate
LO: 11.2: Describe the various strategies that companies use to reach their goals.
38) Organic growth refers to an organization's corporate strategy that relies on growth ________.
- A) through mergers and acquisitions
- B) based on strategic alliances
- C) generated internally
- D) achieved from joint ventures
Answer: C
Skill: Concept
Difficulty: Easy
LO: 11.2: Describe the various strategies that companies use to reach their goals.
39) A strategy designed to reduce the scale or scope of a corporation's business is called a ________ strategy.
- A) growth
- B) differentiation
- C) retrenchment
- D) stability
Answer: C
Skill: Concept
Difficulty: Easy
LO: 11.2: Describe the various strategies that companies use to reach their goals.
40) A retrenchment strategy is designed to ________.
- A) encourage growth through joint ventures
- B) reduce the scale or scope of a corporation's operations
- C) focus exclusively on internally generated growth
- D) guard against organizational change
Answer: B
Skill: Concept
Difficulty: Easy
LO: 11.2: Describe the various strategies that companies use to reach their goals.
41) A company that is closing factories with unused capacity and laying-off workers is most likely following a ________ strategy.
- A) growth
- B) retrenchment
- C) stability
- D) combined
Answer: B
Skill: Concept
Difficulty: Easy
LO: 11.2: Describe the various strategies that companies use to reach their goals.
42) A company that is selling unprofitable business units is most likely following a ________ strategy.
- A) growth
- B) retrenchment
- C) stability
- D) combined
Answer: B
Skill: Concept
Difficulty: Easy
LO: 11.2: Describe the various strategies that companies use to reach their goals.
43) Which of the following strategies is designed to guard an organization against change?
- A) stability strategy
- B) growth strategy
- C) retrenchment strategy
- D) differentiation strategy
Answer: A
AACSB: Application of knowledge
Skill: Concept
Difficulty: Easy
LO: 11.2: Describe the various strategies that companies use to reach their goals.
44) Which of the following strategies works best for an organization that practices mass production and mass-marketing?
- A) differentiation strategy
- B) focus strategy
- C) low-cost leadership strategy
- D) retrenchment strategy
Answer: C
Skill: Concept
Difficulty: Easy
LO: 11.2: Describe the various strategies that companies use to reach their goals.
45) A business-level strategy in which a company exploits economies of scale is called a ________.
- A) differentiation strategy
- B) stability strategy
- C) low-cost leadership strategy
- D) retrenchment strategy
Answer: C
Skill: Concept
Difficulty: Easy
LO: 11.2: Describe the various strategies that companies use to reach their goals.
46) Decreasing levels of customer loyalty to an organization's products is a major disadvantage of the ________ strategy.
- A) blue ocean
- B) stability
- C) low-cost leadership
- D) growth
Answer: C
Skill: Concept
Difficulty: Easy
LO: 11.2: Describe the various strategies that companies use to reach their goals.
47) A ________ strategy is one in which a company designs its products to be perceived by buyers as unique throughout its industry.
- A) differentiation
- B) stability
- C) low-cost leadership
- D) retrenchment
Answer: A
Skill: Concept
Difficulty: Easy
LO: 11.2: Describe the various strategies that companies use to reach their goals.
48) Which of the following business-level strategies should a company follow in order to charge a higher price for its products and enjoy greater customer loyalty?
- A) differentiation strategy
- B) stability strategy
- C) mass customization strategy
- D) retrenchment strategy
Answer: A
AACSB: Application of knowledge
Skill: Concept
Difficulty: Easy
LO: 11.2: Describe the various strategies that companies use to reach their goals.
49) Which of the following is a characteristic based on which products are typically differentiated?
- A) brand loyalty
- B) brand equity
- C) product design
- D) product cost
Answer: C
Skill: Concept
Difficulty: Easy
LO: 11.2: Describe the various strategies that companies use to reach their goals.
50) A ________ strategy is one in which a company emphasizes on serving the needs of a narrowly defined market segment by being the low-cost leader, differentiating its product, or both.
- A) global
- B) focus
- C) stability
- D) retrenchment
Answer: B
AACSB: Application of knowledge
Skill: Concept
Difficulty: Easy
LO: 11.2: Describe the various strategies that companies use to reach their goals.
51) A ________ strategy often means designing products and promotions aimed at consumers who are either dissatisfied with existing choices or who want something distinctive.
- A) global
- B) stability
- C) low-cost leadership
- D) focus
Answer: D
AACSB: Application of knowledge
Skill: Concept
Difficulty: Easy
LO: 11.2: Describe the various strategies that companies use to reach their goals.
52) A(n) ________ strategy deals with the primary and supports activities in an organization that create value for customers.
- A) business-level
- B) department-level
- C) corporate-level
- D) international
Answer: B
AACSB: Application of knowledge
Skill: Concept
Difficulty: Easy
LO: 11.2: Describe the various strategies that companies use to reach their goals.
Scenario: Beanstalk International
Beanstalk International is a rapidly growing company with well-established subsidiaries in several nations. The company wants to follow a strategy of adapting its products and marketing activities in each national market to suit local preferences. This strategy aims at creating value for its customers.
53) Which of the following is a primary activity that creates value for Beanstalk's customers?
- A) firm infrastructure
- B) procurement
- C) human resource management
- D) inbound logistics
Answer: D
AACSB: Application of knowledge
Skill: Concept
Difficulty: Easy
LO: 11.2: Describe the various strategies that companies use to reach their goals.
54) Which of the following is a support activity that creates value for Beanstalk's customers?
- A) production
- B) marketing and sales
- C) customer service
- D) technology development
Answer: D
AACSB: Application of knowledge
Skill: Concept
Difficulty: Easy
LO: 11.2: Describe the various strategies that companies use to reach their goals.
55) The strategy that Beanstalk would most likely want to follow is called a ________ strategy.
- A) multinational
- B) retrenchment
- C) global
- D) stability
Answer: A
AACSB: Analytical thinking
Skill: Application
Difficulty: Hard
LO: 11.2: Describe the various strategies that companies use to reach their goals.
Scenario: TeleToys Inc.
TeleToys Inc., a U.S.-based company, recently opened eighteen new toy stores in Brazil, acquired a women's clothing company in Canada, and closed its men's clothing line in Australia. The company has a structure that organizes its global operations into geographic regions.
56) TeleToys recently opened eighteen new toy stores in Brazil. This move can best be described as a ________ strategy.
- A) growth
- B) stability
- C) retrenchment
- D) differentiation
Answer: A
AACSB: Reflective thinking
Skill: Concept
Difficulty: Easy
LO: 11.2: Describe the various strategies that companies use to reach their goals.
57) The closing of TeleToys' Australian men's clothing line can best be described as a(n) ________ strategy.
- A) organic growth
- B) stability
- C) retrenchment
- D) global
Answer: C
AACSB: Reflective thinking
Skill: Concept
Difficulty: Easy
LO: 11.2: Describe the various strategies that companies use to reach their goals.
58) Free-market economies tend to levy high taxes on business profits whereas socialist economic systems normally levy lighter taxes.
Answer: FALSE
AACSB: Application of knowledge
Skill: Concept
Difficulty: Moderate
LO: 11.2: Describe the various strategies that companies use to reach their goals.
59) A multinational strategy is most appropriate for companies that do not have foreign direct investments but rather export their products to foreign markets.
Answer: FALSE
AACSB: Reflective thinking
Skill: Concept
Difficulty: Moderate
LO: 11.2: Describe the various strategies that companies use to reach their goals.
60) A multinational strategy entails having a separate strategy for each nation in which a company markets its products.
Answer: TRUE
AACSB: Application of knowledge
Skill: Concept
Difficulty: Easy
LO: 11.2: Describe the various strategies that companies use to reach their goals.
61) A multinational strategy is best suited to industries in which price competitiveness is a key success factor.
Answer: FALSE
AACSB: Application of knowledge
Skill: Concept
Difficulty: Moderate
LO: 11.2: Describe the various strategies that companies use to reach their goals.
62) The main benefit of a global strategy is that it allows companies to monitor buyer preferences closely in each local market.
Answer: FALSE
AACSB: Reflective thinking
Skill: Concept
Difficulty: Moderate
LO: 11.2: Describe the various strategies that companies use to reach their goals.
63) A global strategy does not allow a company to modify its products except for the most superficial features.
Answer: TRUE
AACSB: Application of knowledge
Skill: Concept
Difficulty: Moderate
LO: 11.2: Describe the various strategies that companies use to reach their goals.
64) A growth strategy is designed to increase the scale or scope of a corporation's operations.
Answer: TRUE
AACSB: Application of knowledge
Skill: Concept
Difficulty: Easy
LO: 11.2: Describe the various strategies that companies use to reach their goals.
65) A joint venture is an example of a retrenchment strategy of an organization.
Answer: FALSE
Skill: Concept
Difficulty: Moderate
LO: 11.2: Describe the various strategies that companies use to reach their goals.
66) The closing of factories with unused capacity is an example of a stability strategy.
Answer: FALSE
Skill: Concept
Difficulty: Moderate
LO: 11.2: Describe the various strategies that companies use to reach their goals.
67) The purpose of a combination strategy is to mix growth, retrenchment, and stability strategies across a corporation's business units.
Answer: TRUE
Skill: Concept
Difficulty: Easy
LO: 11.2: Describe the various strategies that companies use to reach their goals.
68) A low-cost leadership strategy typically requires a company to have a large market share.
Answer: TRUE
Skill: Concept
Difficulty: Easy
LO: 11.2: Describe the various strategies that companies use to reach their goals.
69) A negative aspect of a low-cost leadership strategy is low customer loyalty.
Answer: TRUE
AACSB: Application of knowledge
Skill: Concept
Difficulty: Easy
LO: 11.2: Describe the various strategies that companies use to reach their goals.
70) A differentiation strategy is often implemented when a company wants to exploit economies of scale to have the lowest cost structure.
Answer: FALSE
AACSB: Application of knowledge
Skill: Concept
Difficulty: Moderate
LO: 11.2: Describe the various strategies that companies use to reach their goals.
71) A focus strategy works best with mass-marketed products aimed at price-sensitive buyers.
Answer: FALSE
AACSB: Application of knowledge
Skill: Concept
Difficulty: Moderate
LO: 11.2: Describe the various strategies that companies use to reach their goals.
72) Centralized decision making is beneficial when fast-changing national business environments put a premium on local responsiveness.
Answer: FALSE
AACSB: Application of knowledge
Skill: Concept
Difficulty: Moderate
LO: 11.2: Describe the various strategies that companies use to reach their goals.
73) Briefly describe the strategy formulation process of international organizations.
Answer: The strategy-formulation process involves both planning and strategy. Strategy formulation permits managers to step back from day-to-day activities and get a fresh perspective on the current and future direction of the company and its industry.
Identify Company Mission and Goals-Most companies have a general purpose for why they exist that they express in a mission statement–a written statement of why a company exists and what it plans to accomplish. For example, one company might set out to supply the highest level of service in a market segment–a clearly identifiable group of potential buyers. Another might strive to be the lowest-cost supplier in its segment worldwide. The mission statement often guides decisions such as which industries to enter or exit and how to compete in chosen segments.
Identify Core Competency and Value-Creating Activities-Before managers formulate effective strategies, they must analyze the company, its industry (or industries), and the national business environments in which it is involved. They should also examine industries and countries being targeted for potential future entry. A value-chain analysis is the process of dividing a company's activities into primary and support activities and identifying those that create value for customers. Primary activities include inbound and outbound logistics, production (goods and services), marketing and sales, and customer service. Primary activities involve the creation of the product, its marketing and delivery to buyers, and its after-sales support and service. Support activities include business infrastructure, human resource management, technology development, and procurement (sourcing). Each of these activities provides the inputs and infrastructure required by the primary activities.
Formulate Strategies-the strengths and special capabilities of an international company, along with the environmental forces it faces, strongly influence its strategy. Companies engaged in international business activities can approach the market using either a multinational or a global strategy.
- Multinational Strategy-Some international companies choose to follow a multinational (multidomestic) strategy which involves adapting products and their marketing strategies in each national market to suit local preferences. In other words, a multinational strategy is a separate strategy for each of the multiple nations in which a company markets its products. To implement a multinational strategy, companies often establish largely independent, self-contained units (or subsidiaries) in each national market.
- Global Strategy-Other companies decide that what suits their operations is a global strategy. This strategy involves offering the same products using the same marketing strategy in all national markets. Companies that follow a global strategy often take advantage of scale and location economies by producing entire inventories of products or components in a few optimal locations.
AACSB: Reflective thinking
Skill: Synthesis
Difficulty: Hard
LO: 11.2: Describe the various strategies that companies use to reach their goals.
74) Briefly describe the three generic business-level strategies, providing an example of each.
Answer: In addition to stipulating the overall corporate strategy, managers must also formulate separate business-level strategies for each business unit. For some companies, this means creating just one strategy. This is the case when the business level strategy and the corporate-level strategy are one and the same because the corporation is involved in just one line of business. For other companies, this can mean creating dozens of strategies.
The key to developing an effective business-level strategy is deciding on a general competitive strategy in the marketplace. Each business unit must decide whether to sell the lowest-priced product in an industry or to integrate special attributes into its products. A business unit can use one of three generic business-level strategies for competing in its industry–low-cost leadership, differentiation, or focus. These strategies can be applied to practically all firms in all markets worldwide.
Low-Cost Leadership Strategy-A strategy in which a company exploits economies of scale to have the lowest cost structure of any competitor in its industry is called a low-cost leadership strategy. Companies that pursue this position also try to contain administrative costs and the costs of their various primary activities, including marketing, advertising, and distribution. Although cutting costs is important for firms that pursue a low-cost leadership position, other important competitive factors such as product quality and customer service cannot be ignored. Factors underlying the low-cost leadership position (efficient production in large quantities) help guard against attack by competitors because of the large upfront cost of getting started. The strategy typically requires a company to have a large market share because achieving low-cost leadership tends to rely on large-scale production to contain costs. One negative aspect of the low-cost leadership strategy is low customer loyalty.
Differentiation Strategy-A differentiation strategy is one in which a company designs its products to be perceived as unique by buyers throughout its industry. The perception of uniqueness can allow a company to charge a higher price and enjoy greater customer loyalty than it could as a low-cost leader. But a perception of exclusivity, or meeting the needs of a small group of buyers, tends to force a company into a lower market-share position. A company using this strategy must develop a loyal customer base to offset its smaller market share and higher costs of producing and marketing a unique product.
Focus Strategy-A focus strategy is one in which a company focuses on serving the needs of a narrowly defined market segment by being the low-cost leader, by differentiating its product, or both. Increasing competition often means more products distinguished by price or differentiated by quality, design, and so forth. In turn, a greater product range leads to the continuous refinement of market segments. Today many industries consist of large numbers of market segments and even smaller subsegments. For example, some firms try to serve the needs of one ethnic or racial group, whereas others, often entrepreneurs and small businesses, focus on a single geographic area.
AACSB: Application of knowledge
Skill: Concept
Difficulty: Moderate
LO: 11.2: Describe the various strategies that companies use to reach their goals.
75) Explain how a global strategy complements a corporate growth strategy.
Answer: Some companies decide that what suits their operations is a global strategy–a strategy of offering the same products using the same marketing strategy in all national markets. Companies that follow a global strategy often take advantage of scale and location economies by producing entire inventories of products or components in a few optimal locations. They also tend to perform product research and development in one or a few locations and typically design promotional campaigns and advertising strategies at headquarters. So-called global products are most common in industries characterized by price competition and, therefore, pressure to contain costs. They include certain electronic components, a wide variety of industrial goods such as steel, and some consumer goods such as paper and writing instruments.
The main benefit of a global strategy is cost savings due to product and marketing standardization. These cost savings can then be passed on to consumers to help the company gain market share in its market segment. A global strategy also allows managers to share lessons learned in one market with managers at other locations.
The main problem with a global strategy is it can cause a company to overlook important differences in buyer preferences from one market to another. A global strategy does not allow a company to modify its products except for the most superficial features, such as the color of paint applied to a finished product or a small add-on feature. This can present a competitor with an opportunity to step in and satisfy unmet needs of local buyers, thereby creating a niche market.
A growth strategy is designed to increase the scale or scope of a corporation's operations. Scale refers to the size of a corporation's activities, scope to the kinds of activities it performs. Yardsticks commonly used to measure growth include geographic coverage, number of business units, market share, sales revenue, and number of employees. Organic growth refers to a corporate strategy of relying on internally generated growth. For example, management at 3M strongly encourages entrepreneurial activity, often spinning off business units to nurture the best ideas and carry them to completion.
Other methods of growth include mergers and acquisitions, joint ventures, and strategic alliances. These tactics are used when companies do not wish to invest in developing certain skills internally or when other companies already do what managers are trying to achieve. Common partners in implementing these strategies include competitors, suppliers, and buyers. Corporations typically join forces with competitors to reduce competition, expand product lines, or expand geographically. A common motivation for joining forces with suppliers is to increase control over the quality, cost, and timing of inputs.
AACSB: Application of knowledge
Skill: Concept
Difficulty: Moderate
LO: 11.2: Describe the various strategies that companies use to reach their goals.
76) Explain the different ways in which products can be differentiated, providing an example of each.
Answer: A differentiation strategy is one in which a company designs its products to be perceived as unique by buyers throughout its industry. The perception of uniqueness can allow a company to charge a higher price and enjoy greater customer loyalty than it could as a low-cost leader. But a perception of exclusivity, or meeting the needs of a small group of buyers, tends to force a company into a lower market-share position. A company using this strategy must develop a loyal customer base to offset its smaller market share and higher costs of producing and marketing a unique product.
One way products can be differentiated is by improving their reputation for quality. Ceramic tableware for everyday use is found at department stores in almost every country. But the ceramic tableware made by Japanese producer Noritake differentiates itself from common tableware by emphasizing its superior quality. The perception of higher quality allows manufacturers to charge higher prices for their products worldwide.
Other products are differentiated by distinctive brand images. Armani and DKNY, for example, are relatively pricey global clothing labels appealing to a young, fashionable clientele. Each is continually introducing new textures and colors that are at once stylish and functional. Another example is Italian carmaker Alfa Romeo, which does not compete in the fiercely competitive mass-consumer segment of the global automobile industry. If it were to do so, it would have to be price-competitive and offer a wider selection of cars. Instead, Alfa Romeo offers a high-quality product with a brand image that rewards the Alfa Romeo owner with status and prestige.
Another differentiating factor is product design–the sum of the features by which a product looks and functions according to customer requirements. Special features differentiate both goods and services in the minds of consumers who value those features. Manufacturers can also combine several differentiation factors in formulating their strategies.
AACSB: Application of knowledge
Skill: Concept
Difficulty: Easy
LO: 11.2: Describe the various strategies that companies use to reach their goals.
77) Companies involved in more than one line of business must first formulate a ________ strategy.
- A) business-level
- B) department-level
- C) corporate-level
- D) global-level
Answer: C
Skill: Concept
Difficulty: Easy
LO: 11.3: Outline the key issues behind the selection of organizational structure.
78) A growth strategy is designed to ________.
- A) guard against organizational change
- B) increase the scale or scope of a corporation's operations
- C) support the stability strategies of an organization
- D) support the retrenchment strategies of an organization
Answer: B
Skill: Concept
Difficulty: Easy
LO: 11.3: Outline the key issues behind the selection of organizational structure.
79) Which of the following strategies is designed to increase the scale or scope of a corporation's operations?
- A) differentiation strategy
- B) growth strategy
- C) stability strategy
- D) retrenchment strategy
Answer: B
Skill: Concept
Difficulty: Easy
LO: 11.3: Outline the key issues behind the selection of organizational structure.
80) The way in which a company divides its activities among separate units and coordinates activities among those units is referred to as ________.
- A) organizational structure
- B) organizational network analysis
- C) organizational diagnostics
- D) organizational climate
Answer: A
Skill: Concept
Difficulty: Easy
LO: 11.3: Outline the key issues behind the selection of organizational structure.
81) ________ decision making occurs at a high organizational level in one location, such as an organization's headquarters.
- A) Centralized
- B) Facilitative
- C) Participative
- D) Consultative
Answer: A
Skill: Concept
Difficulty: Easy
LO: 11.3: Outline the key issues behind the selection of organizational structure.
82) ________ decision making disperses decisions to lower organizational levels, such as to international subsidiaries.
- A) Decentralized
- B) Top-down
- C) Authoritative
- D) Top management
Answer: A
Skill: Concept
Difficulty: Easy
LO: 11.3: Outline the key issues behind the selection of organizational structure.
83) Decentralized decision making is beneficial when ________.
- A) all subsidiaries use the same inputs in production
- B) fast-changing national business environments put a premium on local responsiveness
- C) one subsidiary's output is another's input
- D) it aims to create a single global organizational culture
Answer: B
Skill: Concept
Difficulty: Moderate
LO: 11.3: Outline the key issues behind the selection of organizational structure.
84) The lines of authority in an organization that run from top management to individual employees and specify internal reporting relationships is called ________.
- A) grapevine communication
- B) symbolic interactionism
- C) value chain
- D) chains of command
Answer: D
AACSB: Application of knowledge
Skill: Concept
Difficulty: Easy
LO: 11.3: Outline the key issues behind the selection of organizational structure.
Scenario: Beanstalk International
Beanstalk International is a rapidly growing company with well-established subsidiaries in several nations. The company wants to follow a strategy of adapting its products and marketing activities in each national market to suit local preferences. This strategy aims at creating value for its customers.
85) Beanstalk managers know that the drawback of such an adaptive strategy is that it ________.
- A) does not allow companies to exploit scale economies in product development, manufacturing, and marketing
- B) can cause a company to overlook important differences in buyer preferences across various markets
- C) is applicable only to industries in which price-competitiveness is a key success factor
- D) does not allow a company to modify its products except for the most superficial features
Answer: A
AACSB: Analytical thinking
Skill: Application
Difficulty: Hard
LO: 11.3: Outline the key issues behind the selection of organizational structure.
Scenario: TeleToys Inc.
TeleToys Inc., a U.S.-based company, recently opened eighteen new toy stores in Brazil, acquired a women's clothing company in Canada, and closed its men's clothing line in Australia. The company has a structure that organizes its global operations into geographic regions.
86) Which of the following strategies should TeleToys follow if it wants buyers to perceive its products as unique?
- A) retrenchment strategy
- B) global strategy
- C) differentiation strategy
- D) low-cost leadership strategy
Answer: C
AACSB: Reflective thinking
Skill: Concept
Difficulty: Easy
LO: 11.3: Outline the key issues behind the selection of organizational structure.
87) Which of the following features is TeleToys least likely to use in order to create a perception of having unique products?
- A) brand image
- B) reputation for quality
- C) product design
- D) low cost
Answer: D
AACSB: Reflective thinking
Skill: Concept
Difficulty: Easy
LO: 11.3: Outline the key issues behind the selection of organizational structure.
88) TeleToys' organizational structure can best be referred to as a(n) ________ structure.
- A) international division
- B) global product
- C) global matrix
- D) international area
Answer: D
AACSB: Analytical thinking
Skill: Application
Difficulty: Hard
LO: 11.3: Outline the key issues behind the selection of organizational structure.
89) Decentralization can help foster participative management practices.
Answer: TRUE
AACSB: Application of knowledge
Skill: Concept
Difficulty: Easy
LO: 11.3: Outline the key issues behind the selection of organizational structure.
90) An international area structure separates domestic from international business activities by creating a separate international division with its own manager.
Answer: FALSE
AACSB: Application of knowledge
Skill: Concept
Difficulty: Easy
LO: 11.3: Outline the key issues behind the selection of organizational structure.
91) An international division structure reduces the authority of country managers in an organization's subsidiaries.
Answer: TRUE
AACSB: Application of knowledge
Skill: Concept
Difficulty: Moderate
LO: 11.3: Outline the key issues behind the selection of organizational structure.
92) A main goal of the global product structure is to bring together geographic and product area managers in joint decision making.
Answer: FALSE
AACSB: Application of knowledge
Skill: Concept
Difficulty: Moderate
LO: 11.3: Outline the key issues behind the selection of organizational structure.
93) A global matrix structure is an organizational structure that divides worldwide operations according to a company's product areas.
Answer: FALSE
AACSB: Application of knowledge
Skill: Concept
Difficulty: Easy
LO: 11.3: Outline the key issues behind the selection of organizational structure.
94) The main purpose of self-managed teams is to help break down barriers between departments.
Answer: FALSE
AACSB: Application of knowledge
Skill: Concept
Difficulty: Moderate
LO: 11.3: Outline the key issues behind the selection of organizational structure.
95) Differentiate between a multinational and a global strategy. Identify the main benefits and the main drawbacks of each.
Answer: Some international companies choose to follow a multinational (multidomestic) strategy–a strategy of adapting products and their marketing strategies in each national market to suit local preferences. In other words, a multinational strategy is a separate strategy for each of the multiple nations in which a company markets its products. To implement a multinational strategy, companies often establish largely independent, self-contained units (or subsidiaries) in each national market. Each subsidiary typically undertakes its own product research and development, production, and marketing. In many ways, each unit functions largely as an independent company. Multinational strategies are often appropriate for companies in industries in which buyer preferences do not converge across national borders, such as certain food products and some print media.
The main benefit of a multinational strategy is that it allows companies to monitor buyer preferences closely in each local market and to respond quickly and effectively to emerging buyer preferences. Companies hope that customers will perceive a tailored product as delivering greater value than do competitors' products. A multinational strategy, then, should allow a company to charge higher prices and/or gain market share.
The main drawback of a multinational strategy is that companies cannot exploit scale economies in product development, manufacturing, or marketing. The multinational strategy typically increases the cost structure for international companies and forces them to charge higher prices to recover such costs. As such, a multinational strategy is usually poorly suited to industries in which price competitiveness is a key success factor. The high degree of independence with which each unit operates also may reduce opportunities to share knowledge among units within a company.
Other companies decide that what suits their operations is a global strategy–a strategy of offering the same products using the same marketing strategy in all national markets. Companies that follow a global strategy often take advantage of scale and location economies by producing entire inventories of products or components in a few optimal locations. They also tend to perform product research and development in one or a few locations and typically design promotional campaigns and advertising strategies at headquarters. So-called global products are most common in industries characterized by price competition and, therefore, pressure to contain costs. They include certain electronic components, a wide variety of industrial goods such as steel, and some consumer goods such as paper and writing instruments.
The main benefit of a global strategy is cost savings due to product and marketing standardization. These cost savings can then be passed on to consumers to help the company gain market share in its market segment. A global strategy also allows managers to share lessons learned in one market with managers at other locations.
The main problem with a global strategy is it can cause a company to overlook important differences in buyer preferences from one market to another. A global strategy does not allow a company to modify its products except for the most superficial features, such as the color of paint applied to a finished product or a small add-on feature. This can present a competitor with an opportunity to step in and satisfy unmet needs of local buyers, thereby creating a niche market.
AACSB: Application of knowledge
Skill: Concept
Difficulty: Moderate
LO: 11.3: Outline the key issues behind the selection of organizational structure.
96) Describe the four key approaches to corporate strategy, providing an example of each.
Answer: Companies involved in more than one line of business must first formulate a corporate-level strategy. This means, in part, identifying the national markets and industries in which the company will operate. It also involves developing overall objectives for the company's different business units and specifying the role that each unit will play in reaching those objectives. The four key approaches to corporate strategy are growth, retrenchment, stability, and combination.
- A growth strategy is designed to increase the scale or scope of a corporation's operations. Scale refers to the size of a corporation's activities, scope to the kinds of activities it performs. Yardsticks commonly used to measure growth include geographic coverage, number of business units, market share, sales revenue, and number of employees. Organic growth refers to a corporate strategy of relying on internally generated growth. For example, management at 3M strongly encourages entrepreneurial activity, often spinning off business units to nurture the best ideas and carry them to completion.
Other methods of growth include mergers and acquisitions, joint ventures, and strategic alliances. These tactics are used when companies do not wish to invest in developing certain skills internally or when other companies already do what managers are trying to achieve. Common partners in implementing these strategies include competitors, suppliers, and buyers. Corporations typically join forces with competitors to reduce competition, expand product lines, or expand geographically. A common motivation for joining forces with suppliers is to increase control over the quality, cost, and timing of inputs.
- The exact opposite of a growth strategy is a retrenchment strategy–a strategy designed to reduce the scale or scope of a corporation's businesses. Corporations often cut back the scale of their operations when economic conditions worsen or competition increases. They may do so by closing factories with unused capacity and laying off workers. Corporations can also reduce the scale of their operations by laying off managers and salespeople in national markets that are not generating adequate sales revenue. Corporations reduce the scope of their activities by selling unprofitable business units or those no longer directly related to their overall aims. Weaker competitors often resort to retrenchment when national business environments grow more competitive.
- A stability strategy is designed to guard against change. Corporations often use a stability strategy when trying to avoid either growth or retrenchment. Such corporations have typically met their stated objectives or are satisfied with what they have already accomplished. They believe that their strengths are being fully exploited and their weaknesses fully protected against. They also see the business environment as posing neither profitable opportunities nor threats. They have no interest in expanding sales, increasing profits, increasing market share, or expanding the customer base; at present, they want simply to maintain their present positions.
- The purpose of a combination strategy is to mix growth, retrenchment, and stability strategies across a corporation's business units. For example, a corporation can invest in units that show promise, retrench in those for which less exposure is desired, and stabilize others. In fact, corporate combination strategies are quite common because international corporations rarely follow identical strategies in each of their business units.
AACSB: Application of knowledge
Skill: Concept
Difficulty: Moderate
LO: 11.3: Outline the key issues behind the selection of organizational structure.
97) How do national and international business environments influence multinational strategy formulation?
Answer: National differences in language, religious beliefs, customs, traditions, and climate complicate strategy formulation. Language differences can increase the cost of operations and administration. Manufacturing processes must sometimes be adapted to the supply of local workers and to local customs, traditions, and practices. Marketing activities sometimes can result in costly mistakes if they do not incorporate cultural differences.
Differences in political and legal systems also complicate international strategies. Legal and political processes often differ in target countries to such an extent that firms must hire outside consultants to teach them about the local system. Such knowledge is important to international companies because the approval of the host government is almost always necessary for making direct investments. Companies need to know which ministry or department has the authority to grant approval for a big business deal–a process that can become extremely cumbersome.
Different national economic systems further complicate strategy formulation. Negative attitudes of local people toward the impact of direct investment can generate political unrest. Economic philosophy affects the tax rates that governments impose. Whereas socialist economic systems normally levy high taxes on business profits, free-market economies tend to levy lighter taxes. The need to work in more than one currency also complicates international strategy. To minimize losses from currency fluctuations, companies must develop strategies to deal with exchange-rate risk.
Finally, apart from complicating strategy, the national business environment can affect the location in which a company chooses to perform an activity. For example, a nation that spends a high portion of its GDP on research and development attracts high-tech industries and high-wage jobs and, as a result, prospers. By contrast, countries that spend relatively little in the way of R&D tend to have lower levels of prosperity.
Some international companies choose to follow a multinational (multidomestic) strategy–a strategy of adapting products and their marketing strategies in each national market to suit local preferences. In other words, a multinational strategy is just what its name implies–a separate strategy for each of the multiple nations in which a company markets its products. To implement a multinational strategy, companies often establish largely independent, self-contained units (or subsidiaries) in each national market. Each subsidiary typically undertakes its own product research and development, production, and marketing. In many ways, each unit functions largely as an independent company. Multinational strategies are often appropriate for companies in industries in which buyer preferences do not converge across national borders, such as certain food products and some print media.
AACSB: Reflective thinking
Skill: Synthesis
Difficulty: Moderate
LO: 11.3: Outline the key issues behind the selection of organizational structure.
98) When should managers consider decentralized decision making? What benefits might emerge?
Answer: Decentralized decision making is beneficial when fast-changing national business environments put a premium on local responsiveness. Decentralized decisions can result in products that are better suited to the needs and preferences of local buyers because subsidiary managers are in closer contact with the local business environment. Local managers are more likely to perceive environmental changes that managers at headquarters might not notice. By contrast, central managers may not perceive such changes or would likely get a secondhand account of local events. Delayed response and misinterpreted events could then result in lost orders, stalled production, and weakened competitiveness.
Decentralization can also help foster participative management practices. The morale of employees is likely to be higher if subsidiary managers and subordinates are involved in decision making. Subsidiary managers and workers can grow more dedicated to the organization when they are involved in decisions related to production, promotion, distribution, and pricing strategies. Decentralization also can increase personal accountability for business decisions. When local managers are rewarded (or punished) for their decisions, they are likely to invest more effort in making and executing them. Conversely, if local managers must do nothing but implement policies dictated from above, they can attribute poor performance to decisions that were ill suited to the local environment. When managers are held accountable for decision making and implementation, they typically delve more deeply into research and consider all available options. The results are often better decisions and improved performance.
AACSB: Application of knowledge
Skill: Concept
Difficulty: Easy
LO: 11.3: Outline the key issues behind the selection of organizational structure.
99) Discuss the major points of differences between centralization and decentralization, and explain the differences between an international area structure and a global product structure.
Answer: A vital issue for top managers is determining the degree to which decision making in the organization will be centralized or decentralized. Centralized decision making concentrates decision making at a high organizational level in one location, such as at headquarters. Decentralized decision making disperses decisions to lower organizational levels, such as to international subsidiaries.
In a discussion of centralization versus decentralization of decision making, it is important to remember two points:
- Companies rarely centralize or decentralize all decision making. Rather, they seek an approach that will result in the greatest efficiency and effectiveness.
- International companies may centralize decision making in certain geographic markets while decentralizing it in others. Numerous factors influence this decision, including the need for product modification and the abilities of managers at each location.
An international area structure organizes a company's entire global operations into countries or geographic regions. The greater the number of countries in which a company operates, the greater the likelihood it will organize into regions–say, Asia, Europe, and the Americas–instead of countries. Typically, a general manager is assigned to each country or region. Under this structure, each geographic division operates as a self-contained unit, with most decision making decentralized in the hands of the country or regional managers. Each unit has its own set of departments–purchasing, production, marketing and sales, R&D, and accounting. Each also tends to handle much of its own strategic planning. Management at the parent-company headquarters makes decisions regarding overall corporate strategy and coordinates the activities of various units.
The international area structure is best suited to companies that treat each national or regional market as unique. It is particularly useful when there are vast cultural, political, or economic differences between nations or regions. When they enjoy a great deal of control over activities in their own environments, general managers become experts on the unique needs of their buyers. On the other hand, because units act independently, allocated resources may overlap and cross-fertilization of knowledge from one unit to another may be less than desirable.
A global product structure divides worldwide operations according to a company's product areas. Each product division is then divided into domestic and international units. Each function–R&D, marketing, and so forth–is thus duplicated in both the domestic and international units of each product division.
The global product structure is suitable for companies that offer diverse sets of products or services because it overcomes some coordination problems of the international division structure. Because the primary focus is on the product, activities must be coordinated among a product division's domestic and international managers so they do not conflict.
AACSB: Reflective thinking
Skill: Synthesis
Difficulty: Hard
LO: 11.3: Outline the key issues behind the selection of organizational structure.
100) When should managers consider decentralized decision making? What type of work teams might emerge in organizations that practice decentralized decision making?
Answer: Decentralized decision making is beneficial when fast-changing national business environments put a premium on local responsiveness. Decentralized decisions can result in products that are better suited to the needs and preferences of local buyers because subsidiary managers are in closer contact with the local business environment. Local managers are more likely to perceive environmental changes that managers at headquarters might not notice. By contrast, central managers may not perceive such changes or would likely get a secondhand account of local events. Delayed response and misinterpreted events could then result in lost orders, stalled production, and weakened competitiveness.
Decentralization can also help foster participative management practices. The morale of employees is likely to be higher if subsidiary managers and subordinates are involved in decision making. Subsidiary managers and workers can grow more dedicated to the organization when they are involved in decisions related to production, promotion, distribution, and pricing strategies. Decentralization also can increase personal accountability for business decisions. When local managers are rewarded (or punished) for their decisions, they are likely to invest more effort in making and executing them. Conversely, if local managers must do nothing but implement policies dictated from above, they can attribute poor performance to decisions that were ill suited to the local environment. When managers are held accountable for decision making and implementation, they typically delve more deeply into research and consider all available options. The results are often better decisions and improved performance.
Globalization is forcing companies to respond more quickly to changes in the business environment. The formation of teams can be highly useful in improving responsiveness by cutting across functional boundaries, such as that between production and marketing, that slow decision making in an organization. Although a matrix organization accomplishes this by establishing cross-functional cooperation, companies do not always want to change their entire organizational structure to reap the benefits that cross-functional cooperation provides. In such cases, companies can implement several different types of teams without changing the overall company structure.
Decentralized decision making promotes the emergence of self-managed teams.
A self-managed team is one in which employees from a single department take on the responsibilities of their former supervisors. When used in production, such teams often reorganize the methods and flow of production processes. Because they are "self-managed," they reduce the need for managers to watch over their every activity. The benefits of self-managed teams typically include increased productivity, product quality, customer satisfaction, employee morale, and company loyalty. In fact, the most common self-managed teams in many manufacturing companies are quality-improvement teams, which help reduce waste in the production process and, therefore, lower costs.
A cross-functional team is one composed of employees who work at similar levels in different functional departments. These teams work to develop changes in operations and are well suited to projects that require coordination across functions, such as reducing the time needed to get a product from the idea stage to the marketplace. International companies also use cross-functional teams to improve quality by having employees from purchasing, manufacturing, and distribution (among other functions) work together to address specific quality issues. For the same reason, cross-functional teams can help break down barriers between departments and reorganize operations around processes rather than by functional departments.
Finally, large international corporations are creating so-called global teams–groups of top managers from both headquarters and international subsidiaries who meet to develop solutions to company-wide problems. For example, Nortel Networks of Canada created a global team of top executives from Britain, Canada, France, and the United States that traveled to Asia, Europe, and North America looking for ways to improve product-development practices.
AACSB: Reflective thinking
Skill: Synthesis
Difficulty: Hard
LO: 11.3: Outline the key issues behind the selection of organizational structure.
101) A(n) ________ structure separates domestic from international business activities by creating a separate global branch with its own manager.
- A) international area
- B) international division
- C) global matrix
- D) global product
Answer: B
AACSB: Application of knowledge
Skill: Concept
Difficulty: Easy
LO: 11.4: Describe various international organizational structures and types of work teams.
102) An organizational structure that organizes a company's entire global operations into countries or geographic regions is referred to as a(n) ________ structure.
- A) international area
- B) international division
- C) global matrix
- D) global product
Answer: A
Skill: Concept
Difficulty: Easy
LO: 11.4: Describe various international organizational structures and types of work teams.
103) A(n) ________ structure is best suited to companies that treat each national market as unique due to the vast cultural, political, or economic differences between nations.
- A) international division
- B) international area
- C) global matrix
- D) global product
Answer: B
AACSB: Application of knowledge
Skill: Concept
Difficulty: Easy
LO: 11.4: Describe various international organizational structures and types of work teams.
104) Which of the following is a disadvantage of a company with an international area structure?
- A) Country managers have very little authority.
- B) The subsidiaries fail to develop organizational cultures suited to their locations.
- C) Individual responsibility and accountability is foggy.
- D) Cross-fertilization of knowledge from one unit to another may be less than desirable.
Answer: D
Skill: Concept
Difficulty: Moderate
LO: 11.4: Describe various international organizational structures and types of work teams.
105) An organizational structure that splits the chain of command between product and area divisions is referred to as a(n) ________ structure.
- A) international area
- B) international division
- C) global matrix
- D) global product
Answer: C
AACSB: Application of knowledge
Skill: Concept
Difficulty: Easy
LO: 11.4: Describe various international organizational structures and types of work teams.
106) A team in which employees from a single department take on responsibilities of their former supervisors is called a ________ team.
- A) cross-functional
- B) self-managed
- C) global
- D) virtual
Answer: B
AACSB: Application of knowledge
Skill: Concept
Difficulty: Easy
LO: 11.4: Describe various international organizational structures and types of work teams.
107) ________ teams are self-managed teams that help reduce waste in the production processes of many manufacturing companies.
- A) Cross-functional
- B) Quality-improvement
- C) Interdependent
- D) Virtual
Answer: B
AACSB: Application of knowledge
Skill: Concept
Difficulty: Easy
LO: 11.4: Describe various international organizational structures and types of work teams.
108) A ________ team is one composed of employees who work at similar levels in different operative departments in an organization.
- A) self-managed
- B) global
- C) virtual
- D) cross-functional
Answer: D
AACSB: Application of knowledge
Skill: Concept
Difficulty: Easy
LO: 11.4: Describe various international organizational structures and types of work teams.
109) ________ teams can help break down barriers between departments and reorganize operations around processes in an organization.
- A) Cross-functional
- B) Self-managed
- C) Global
- D) Virtual
Answer: A
AACSB: Application of knowledge
Skill: Concept
Difficulty: Easy
LO: 11.4: Describe various international organizational structures and types of work teams.
110) A team of top managers from both headquarters and international subsidiaries who meet to develop solutions to company-wide problems is referred to as a ________ team.
- A) virtual
- B) global team
- C) cross-functional team
- D) self-managed team
Answer: B
AACSB: Application of knowledge
Skill: Concept
Difficulty: Easy
LO: 11.4: Describe various international organizational structures and types of work teams.
111) Describe any three organizational structures that are common for a vast majority of international companies.
Answer: An international division structure separates domestic from international business activities by creating a separate international division with its own manager. In turn, the international division is typically divided into units corresponding to the countries in which a company is active–say, China, Indonesia, and Thailand. Within each country, a general manager controls the manufacture and marketing of the firm's products. Each country unit typically carries out all of its own activities with its own departments such as marketing and sales, finance, and production.
Because the international division structure concentrates international expertise in one division, divisional managers become specialists in a wide variety of activities such as foreign exchange, export documentation, and host government relations. By consigning international activities to a single division, a firm can reduce costs, increase efficiency, and prevent international activities from disrupting domestic operations. These are important criteria for firms new to international business and whose international operations account for a small percentage of their total business.
An international area structure organizes a company's entire global operations into countries or geographic regions. The greater the number of countries in which a company operates, the greater the likelihood it will organize into regions–say, Asia, Europe, and the Americas–instead of countries. Typically, a general manager is assigned to each country or region. Under this structure, each geographic division operates as a self-contained unit, with most decision making decentralized in the hands of the country or regional managers. Each unit has its own set of departments–purchasing, production, marketing and sales, R&D, and accounting. Each also tends to handle much of its own strategic planning. Management at the parent-company headquarters makes decisions regarding overall corporate strategy and coordinates the activities of various units.
The international area structure is best suited to companies that treat each national or regional market as unique. It is particularly useful when there are vast cultural, political, or economic differences between nations or regions. When they enjoy a great deal of control over activities in their own environments, general managers become experts on the unique needs of their buyers. On the other hand, because units act independently, allocated resources may overlap and cross-fertilization of knowledge from one unit to another may be less than desirable.
A global product structure divides worldwide operations according to a company's product areas. For example, divisions in a computer company might be Internet and Communications, Software Development, and New Technologies. Each product division is then divided into domestic and international units. Each function–R&D, marketing, and so forth–is thus duplicated in both the domestic and international units of each product division.
The global product structure is suitable for companies that offer diverse sets of products or services because it overcomes some coordination problems of the international division structure. Because the primary focus is on the product, activities must be coordinated among a product division's domestic and international managers so they do not conflict.
AACSB: Application of knowledge
Skill: Concept
Difficulty: Moderate
LO: 11.4: Describe various international organizational structures and types of work teams.
112) Explain participative management and accountability in a decentralized organization, and discuss the probable accountability issues in a global matrix structure. Include a description of the global matrix structure in your answer.
Answer: Decentralization can help foster participative management practices. The morale of employees is likely to be higher if subsidiary managers and subordinates are involved in decision making. Subsidiary managers and workers can grow more dedicated to the organization when they are involved in decisions related to production, promotion, distribution, and pricing strategies.
Decentralization also can increase personal accountability for business decisions. When local managers are rewarded (or punished) for their decisions, they are likely to invest more effort in making and executing them. Conversely, if local managers must do nothing but implement policies dictated from above, they can attribute poor performance to decisions that were ill suited to the local environment. When managers are held accountable for decision making and implementation, they typically delve more deeply into research and consider all available options. The results are often better decisions and improved performance.
A global matrix structure splits the chain of command between product and area divisions. Each manager reports to two bosses–the president of the product division and the president of the geographic area. A main goal of the matrix structure is to bring together geographic area managers and product area managers in joint decision making. In fact, bringing together specialists from different parts of the organization creates a sort of team organization. The popularity of the matrix structure has grown among companies trying to increase local responsiveness, reduce costs, and coordinate worldwide operations.
The matrix structure resolves some of the shortcomings of other organizational structures, especially by improving communication among divisions and increasing the efficiency of highly specialized employees. At its best, the matrix structure can increase coordination while simultaneously improving agility and local responsiveness.
However, the global matrix structure suffers from two major shortcomings. First, the matrix form can be quite cumbersome. Numerous meetings are required simply to coordinate the actions of the various division heads, let alone the activities within divisions. In turn, the need for complex coordination tends to make decision making time consuming and slows the reaction time of the organization. Second, individual responsibility and accountability can become foggy in the matrix organization structure. Because responsibility is shared, managers can attribute poor performance to the actions of the other manager. Moreover, the source of problems in the matrix structure can be hard to detect and corrective action difficult to take.
AACSB: Reflective thinking
Skill: Synthesis
Difficulty: Hard
LO: 11.4: Describe various international organizational structures and types of work teams.
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