ch13

ch13Student: ___________________________________________________________________________

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

2. A firm's organizational culture refers to the formal organizational structure of the company, the control

systems and incentives in place, and the human resources component. True False

3. Formulating strategy, deciding how to allocate resources within a firm, and evaluating the performance of

managers and giving feedback are examples of control systems. True False

4. The bonus a manager might receive if her subsidiary performance exceeds its performance target is an

example of an incentive. True False

5. The term people refers to not just the employees of the organization, but also the strategy used to recruit,

compensate, and retain those individuals and the type of people that they are in terms of their skills, values, and orientation. True False

6. A firm's vertical differentiation determines where in its hierarchy the decision-making power is

concentrated. True False

7. By centralizing decision making, a firm can avoid the duplication of activities that occurs when similar

activities are carried on by various subunits within the organization. True False

8. A firm pursuing a localization strategy will have a strong incentive to centralize decision- making.

True False

9. A decentralized organization allows managers to respond to environmental changes more quickly than in a

centralized organization. True False

10. By concentrating power and authority in one individual or a management team, centralization can give top-

level managers the means to bring about needed major organizational changes. True False

11. Beyond the initial functional division of the organization, further horizontal differentiation may be required if the firm significantly diversifies its product offering, which takes the firm into different business areas. True False

12. Regardless of a firm's domestic structure, its international division tends to be organized on economy.

True False

13. The worldwide structure tends to be adopted by firms with a low level of diversification whose domestic

structures are based on functions. True False

14. In a worldwide area structure, each area tends to be a self-contained, largely autonomous entity with its

own set of value creation activities. True False

15. A key disadvantage of the worldwide area structure is that it limits local responsiveness.

True False

16. In a worldwide product divisional structure, each division is a self-contained, largely autonomous entity

with full responsibility for its own value creation activities. True False

17. The worldwide product division structure facilitates local responsiveness.

True False

18. The need for coordination between subunits is highest in firms pursuing a localization strategy.

True False

19. A global standardization strategy is well suited to firms with a worldwide area structure.

True False

20. The need for coordination between units is greatest in transnational firms.

True False

21. The simplest integrating mechanism in an MNE is direct contact between managers.

True False

22. The matrix structure is designed to facilitate maximum integration among subunits.

True False

23. A knowledge network is a network for transmitting information within an organization that is based on

formal organizational structure. True False

24. Bureaucratic control involves personal contact with subordinates. True False

25. In a company using cultural controls, employees tend to control their own behavior.

True False

26. The basic principle behind incentive systems is to ensure that the incentive scheme for an individual

employee is linked to an output target that he or she has some control over and can influence. True False

27. Performance ambiguity raises the cost of control.

True False

28. The costs of control can be defined as the amount of time top management must devote to monitoring and

evaluating subunits' performance. True False

29. When we survey the systems that corporations use to control their subunits, we find that not all

multinational firms use output and bureaucratic controls. True False

30. Norms are abstract ideas about what a group believes to be good, right, and desirable.

True False

31. It is more difficult for a leader to create an organizational culture from scratch in a new venture than it is to

change an established one. True False

32. An organizational culture can be strong but bad.

True False

33. A strong organizational culture always leads to strong performance.

True False

34. A strong organizational culture might be beneficial at one point, leading to high performance, but

inappropriate at another time. True False

35. It is more important to have a common culture in firms employing a localization strategy than a

transnational strategy. True False

36. Firms pursuing a localization strategy have a high need for coordination between subunits. True False

37. Firms pursuing a global standardization strategy are more centralized than enterprises pursuing a

localization or international strategy. True False

38. To survive, a firm must strive to achieve a fit between its environment, its strategy, and its organizational

architecture. True False

39. Movement to a new state requires a substantial change in the form of a multinational's organization

architecture so that it matches the desired new strategic posture. True False

40. It is important to realize that organizational change will occur regardless of the commitment of senior

managers to it. True False

41. Which of these terms means the totality of a firm's organization, including formal organization structure,

control systems and incentives, processes, organizational culture, and people? A. Organizational ethicsB. Organizational architectureC. Organizational normsD. Organizational hierarchy

42. According to the text, superior enterprise profitability requires all of the following conditions to be fulfilled

except: A. the different elements of a firm's organizational architecture must be internally consistent.B. the organizational architecture must match the strategy of the firm.C.

the strategy and architecture of the firm must not only be consistent with each other, but also consistent with the competitive environment of the firm.

D. the firm's formal organizational structure must revolve around the indigenous population in each subunit.

43. Organizational structure means all of the following, except:

A. the establishment of integrating mechanisms to coordinate the activities of subunits.B. the location of decision-making responsibilities with a structure.C. the manner in which decisions are made and work is performed by individuals.D. the formal division of the organization into subunits such as product divisions and functions.

44. Which term refers to the metrics used to measure the performance of subunits and make judgments about how well managers are running those subunits? A. Key processesB. Control systemsC. Knowledge networksD. Job assignments

45. When a company measures the performance of its national operating subsidiaries according to profitability,

the company is using: A. control systems.B. lean processes.C. incentives.D. organizational culture.

46. The manner in which decisions are made and work is performed within the organization is known as the

firm's: A. organizational culture.B. incentives.C. control systems.D. processes.

47. Incentives are:

A. the metrics used to measure the performance of subunits and make judgments about how well managers

are running those subunits.B. the devices used to reward appropriate managerial behavior.C. the manner in which decisions are made and work is performed within the organization.D. the norms and value systems that are shared among the employees of an organization.

48. The norms and values systems that are shared among the employees of a company are referred to as:

A. processes.B. control systems.C. incentives.D. organizational culture.

49. A firm's _____ determines where in its hierarchy the decision-making power is concentrated.

A. integrating mechanismB. vertical differentiationC. knowledge networkD. horizontal differentiation

50. What is horizontal differentiation?

A. The mechanisms that enable each subunit to operate independentlyB. The formal division of the organization into subunitsC. The location of decision-making responsibilities within a structureD. The mechanisms for coordinating subunits

51. Integration mechanisms are: A. the formal division of the organization into subunits.B. the mechanisms that enable each subunit to operate independently.C. the mechanisms for coordinating subunits.D. the location of decision making responsibilities within a structure.

52. Which of the following is an argument favoring centralization?

A. It permits greater flexibility.B. Motivational research favors it.C. It can avoid the duplication of activities.D. It gives top management time to focus on critical issues by delegating routine issues to lower-level

managers. 53. Which of the following is an argument favoring decentralization?

A. It can facilitate coordination.B. It can help ensure that decisions are consistent with organizational objectives.C. It can give top-level managers the means to bring about needed major organizational changes.D. It permits greater flexibility.

54. Centralization:

A. gives top management time to focus on critical issues by delegating more routine issues to lower-level

managers.B.

can give top-level managers the means to bring about needed major organizational changes by concentrating power and authority in one individual or a management team.

C. permits greater flexibility because decisions do not have to be "referred up the hierarchy"D. unless they are exceptional in nature.E. can be used to establish relatively autonomous, self-contained subunits within an organization.

55. A firm that needs greater flexibility should choose _____ for its decision-making.

A. vertical differentiationB. centralizationC. horizontal differentiationD. decentralization

56. Behavioral scientists have long argued that people are willing to give more to their jobs when they have a

greater degree of individual freedom and control over their work. This suggests that: A. motivational research favors decentralization.B. centralization can facilitate coordination.C. centralization can ensure that decisions are consistent with organizational objectives.D. decentralization permits total flexibility with no control.

57. Which of the following decisions is typically centralized at a firm's headquarters?

A. Production decisionsB. Human resource managementC. Marketing decisionsD. Overall firm strategy

58. The emphasis on local responsiveness in firms pursuing a local responsiveness strategy creates strong pressures for: A. decentralizing all decisions to foreign subsidiaries.B. decentralizing operating decisions to foreign subsidiaries.C. centralizing all operating decisions.D. centralizing all decisions.

59. Global learning based on the multidirectional transfer of skills between subsidiaries and the corporate

center is a central feature of a firm pursuing a(n) _____ strategy. A. localizationB. global standardizationC. transnationalD. international

60. Which of the following would be a typical responsibility of a product division in a product divisional

structure? A. Operating decisionsB. Overall strategic development of the firmC. Financial control of the various divisionsD. None. All decisions are typically centralized.

61. Regardless of a firm's domestic structure, its international division tends to be organized on:

A. product.B. geography.C. people.D. economy.

62. In a domestic firm with a product divisional structure, each division is responsible for a distinct:

A. product line.B. individual product.C. product assortment.D. product design.

63. Which of the following is a problem that arises due to an international division structure?

A.

The need to get an area and a product division to reach a decision can slow decision making and produce an inflexible organization unable to respond quickly to innovate.

B. It gives limited voice to area or country managers, since it makes them subservient to product division managers.

C. The heads of foreign subsidiaries are not given as much voice in the organization as the heads of domestic functions or divisions.

D.

The dual-hierarchy structure can lead to conflict and perpetual power struggles between the areas and the product divisions, catching many managers in the middle.

64. The implied lack of coordination between domestic operations and foreign operations, which are isolated from each other in separate parts of the structural hierarchy, is a problem encountered with a(n): A. global matrix structure.B. international division structure.C. worldwide product division structure.D. worldwide area structure.

65. Which of the following is not true regarding a worldwide area structure?

A. It tends to be favored by firms with a low degree of diversification.B. It facilitates local responsiveness.C. It tends to be favored by firms with a domestic structure based on function.D. Decision-making responsibilities are centralized.

66. This structure encourages fragmentation of the organization into highly autonomous entities.

A. Worldwide area structureB. Global matrix structureC. Worldwide product structureD. Global network structure

67. Which of the following is a potential drawback of the worldwide area structure?

A. It encourages fragmentation of the organization into highly autonomous entities.B. It is inconsistent with a localization strategy.C. It discourages local responsiveness.D. It is not suitable for firms with a low degree of diversification and a domestic structure based on

functions. 68. Firms structured on this basis may encounter significant problems if local responsiveness is less critical

than reducing costs or transferring core competencies for establishing a competitive advantage. A. International division structureB. Worldwide area structureC. Global matrix structureD. Worldwide product division structure

69. A(n) _____ tends to be adopted by firms that are reasonably diversified and, accordingly, originally had

domestic structures based on product divisions. A. worldwide area structureB. international division structureC. worldwide product division structureD. global matrix structure

70. The main problem with this structure is the limited voice it gives to area or country managers, since it

makes them subservient to product division managers. A. Worldwide product divisional structureB. Worldwide area structureC. International structureD. Global matrix structure

71. The worldwide product division structure: A. is weak in local responsiveness.B. inhibits the realization of location economies.C. inhibits the realization of experience curve economies.D. limits the transfer of core competencies between areas.

72. In the classic global matrix structure, horizontal differentiation proceeds along two dimensions. These

dimensions are: A. hierarchy and overall strategy.B. target returns and sales potential.C. marketing strategy and sales potential.D. product division and geographic area.

73. In practice, the global matrix structure:

A. works as well as the theory predicts.B. is often clumsy and bureaucratic.C. makes it easy to ascertain accountability.D. results in quick decision making.

74. In practice, the dual-hierarchy structure:

A. lessens all forms of conflict.B. makes it easy to ascertain accountability.C. results in extremely quick decision making.D. can lead to perpetual power struggles.

75. The need for coordination between subunits is lowest in firms pursuing a(n):

A. localization strategy.B. international strategy.C. global strategy.D. transnational strategy.

76. The need for coordination between subunits is highest in firms pursuing a(n)

A. localization strategy.B. international strategy.C. global strategy.D. transnational strategy.

77. The simplest integrating mechanism in an MNE is:

A. direct contact between managers.B. the use of teams.C. the introduction of liaisons.D. the establishment of the matrix structure.

78. A(n) _____ is valuable because it can be used as a nonbureaucratic conduit for information flows within a multinational enterprise. A. liaison networkB. matrix structureC. organizational structureD. knowledge network

79. Firms traditionally have tried to achieve coordination by adopting:

A. informal integrating mechanisms.B. formal integrating mechanisms.C. vertical differentiation.D. horizontal differentiation.

80. The main types of control systems used in MNEs include all of the following, except:

A. personal controls.B. bureaucratic controls.C. input controls.D. cultural controls.

81. Which control system is most widely used by small firms?

A. PersonalB. OutputC. BureaucraticD. Cultural

82. Control through a system of rules and procedures that directs the actions of subunits is:

A. personal control.B. bureaucratic control.C. output control.D. cultural control.

83. Budgets and capital spending are the most important _____ in subunits within multinational firms.

A. cultural controlsB. output controlsC. personal controlsD. bureaucratic controls

84. A company using _____ achieves control by comparing actual performance against targets and intervening

selectively to take corrective action. A. personal controlB. output controlC. bureaucratic controlD. cultural control

85. There is low interdependence, performance ambiguity, and costs of control in firms pursuing a(n): A. localization strategy.B. international strategy.C. transnational strategy.D. global strategy.

86. Due to the high level of interdependence, the costs of controlling _____ firms are higher than the costs of

controlling firms that pursue other strategies. A. localizedB. transnationalC. internationalD. global

87. In firms pursuing either global or transnational strategies, the usefulness of _____ controls is limited by

substantial performance ambiguities. A. bureaucraticB. culturalC. personalD. output

88. These refer to abstract ideas about what a group believes to be good, right, and desirable.

A. ValuesB. NormsC. ThoughtsD. Ideas

89. Mechanisms to maintain culture include all of the following except:

A. the hiring and promotional practices of the organization.B. reward strategies.C. socialization processes.D. ongoing cultural assessments.

90. Which of the following is not true of a strong corporate culture?

A. Almost all managers share a relatively consistent set of values and norms that have a clear impact on the

way work is performed.B. A strong culture leads to a high performance.C. Outsiders see firms with a strong culture as having a certain way of doing things.D. A strong culture can be a bad culture.

91. Sources of organizational inertia include all of the following, except:

A. the existing distribution of power within the organization.B. environmental influences.C. the existing culture.D. senior managers' preconceptions about the appropriate business model.

92. What are the three challenges related to strategy and structure that firms must accomplish if they are to achieve superior profitability?

93. Explain organizational structure.

94. Discuss the relationship between a firm's control systems and a firm's incentive system. Why is this

relationship important?

95. What are the three dimensions of organizational structure?

96. Why should a firm centralize its decision-making?

97. Explain the five reasons why a firm should decentralize its decision-making.

98. Discuss the location of decision-making in a firm that is following a transnational strategy.

99. Describe the situation where an international division makes sense. How common is this structure? What

are the disadvantages of the structure?

100.What type of firms favor the worldwide area structure and why? What are the disadvantages of this type of

structure?

101.Discuss the type of firm that uses the worldwide product division structure. What are the main strengths

and weaknesses with this type of structure?

102.What is a knowledge network? What is the advantage of such a system?

103.Consider the use of personal controls in international firms. In which type of firm is this control most

common?

104.What are the two conditions with regard to firm architecture and strategy that are necessary for a firm to

succeed?

105.Discuss the sources of inertia in organizations. Is it easy to make organizational changes?

106.What are the basic principles for successful organizational change?

ch13 Key

1.(p. 433)

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

AACSB: Analytic Skills

Bloom's: KnowledgeDifficulty: Easy

Hill - Chapter 13 #1Learning Objective: 13-1

2.(p. 434)

A firm's organizational culture refers to the formal organizational structure of the company, the control systems and incentives in place, and the human resources component. FALSE




3.(p. 433)

Formulating strategy, deciding how to allocate resources within a firm, and evaluating the performance of managers and giving feedback are examples of control systems. FALSE




4.(p. 433)

The bonus a manager might receive if her subsidiary performance exceeds its performance target is an example of an incentive. TRUE




5.(p. 434)

The term people refers to not just the employees of the organization, but also the strategy used to recruit, compensate, and retain those individuals and the type of people that they are in terms of their skills, values, and orientation. TRUE


Bloom's: KnowledgeDifficulty: Medium


6.(p. 434)

A firm's vertical differentiation determines where in its hierarchy the decision-making power is concentrated. TRUE




7.(p. 434)

By centralizing decision making, a firm can avoid the duplication of activities that occurs when similar activities are carried on by various subunits within the organization. TRUE

AACSB: Reflective Thinking Skills

Bloom's: ComprehensionDifficulty: Easy


8.(p. 434)

A firm pursuing a localization strategy will have a strong incentive to centralize decision- making. FALSE




9.(p. 435)

A decentralized organization allows managers to respond to environmental changes more quickly than in a centralized organization. TRUE




10.(p. 435)

By concentrating power and authority in one individual or a management team, centralization can give top-level managers the means to bring about needed major organizational changes. TRUE




11.(p. 437)

Beyond the initial functional division of the organization, further horizontal differentiation may be required if the firm significantly diversifies its product offering, which takes the firm into different business areas. TRUE




12.(p. 438)

Regardless of a firm's domestic structure, its international division tends to be organized on economy. FALSE




13.(p. 439)

The worldwide structure tends to be adopted by firms with a low level of diversification whose domestic structures are based on functions. TRUE




14.(p. 439)

In a worldwide area structure, each area tends to be a self-contained, largely autonomous entity with its own set of value creation activities. TRUE




15.(p. 439)

A key disadvantage of the worldwide area structure is that it limits local responsiveness. FALSE




16.(p. 440)

In a worldwide product divisional structure, each division is a self-contained, largely autonomous entity with full responsibility for its own value creation activities. TRUE




17.(p. 441)

The worldwide product division structure facilitates local responsiveness. FALSE




18.(p. 444)

The need for coordination between subunits is highest in firms pursuing a localization strategy. FALSE




19.(p. 444)

A global standardization strategy is well suited to firms with a worldwide area structure. FALSE




20.(p. 444)

The need for coordination between units is greatest in transnational firms. TRUE




21.(p. 445)

The simplest integrating mechanism in an MNE is direct contact between managers. TRUE




22.(p. 446)

The matrix structure is designed to facilitate maximum integration among subunits. TRUE




23.(p. 446)

A knowledge network is a network for transmitting information within an organization that is based on formal organizational structure. FALSE




24.(p. 448)

Bureaucratic control involves personal contact with subordinates. FALSE




25.(p. 449)

In a company using cultural controls, employees tend to control their own behavior. TRUE




26.(p. 450)

The basic principle behind incentive systems is to ensure that the incentive scheme for an individual employee is linked to an output target that he or she has some control over and can influence. TRUE




27.(p. 451)

Performance ambiguity raises the cost of control. TRUE




28.(p. 451-452)

The costs of control can be defined as the amount of time top management must devote to monitoring and evaluating subunits' performance. TRUE




29.(p. 452)

When we survey the systems that corporations use to control their subunits, we find that not all multinational firms use output and bureaucratic controls. FALSE




30.(p. 454)

Norms are abstract ideas about what a group believes to be good, right, and desirable. FALSE




31.(p. 454)

It is more difficult for a leader to create an organizational culture from scratch in a new venture than it is to change an established one. FALSE


Bloom's: ComprehensionDifficulty: Medium


32.(p. 455)

An organizational culture can be strong but bad. TRUE




33.(p. 455)

A strong organizational culture always leads to strong performance. FALSE




34.(p. 455)

A strong organizational culture might be beneficial at one point, leading to high performance, but inappropriate at another time. TRUE




35.(p. 458)

It is more important to have a common culture in firms employing a localization strategy than a transnational strategy. FALSE




36.(p. 458)

Firms pursuing a localization strategy have a high need for coordination between subunits. FALSE




37.(p. 459)

Firms pursuing a global standardization strategy are more centralized than enterprises pursuing a localization or international strategy. TRUE




38.(p. 460)

To survive, a firm must strive to achieve a fit between its environment, its strategy, and its organizational architecture. TRUE




39.(p. 462)

Movement to a new state requires a substantial change in the form of a multinational's organization architecture so that it matches the desired new strategic posture. TRUE




40.(p. 462)

It is important to realize that organizational change will occur regardless of the commitment of senior managers to it. FALSE




41.(p. 432)

Which of these terms means the totality of a firm's organization, including formal organization structure, control systems and incentives, processes, organizational culture, and people? A. Organizational ethicsB. Organizational architectureC. Organizational normsD. Organizational hierarchy

Superior enterprise profitability requires three conditions to be fulfilled. First, the different elements of a firm's organizational architecture must be internally consistent. Second, the organizational architecture must match or fit the strategy of the firm. Third, the strategy and architecture of the firm must also be consistent with competitive conditions prevailing in the firm's market.




42.(p. 432)

According to the text, superior enterprise profitability requires all of the following conditions to be fulfilled except: A. the different elements of a firm's organizational architecture must be internally consistent.B. the organizational architecture must match the strategy of the firm.C.

the strategy and architecture of the firm must not only be consistent with each other, but also consistent with the competitive environment of the firm.

D. the firm's formal organizational structure must revolve around the indigenous population in each subunit.

Superior enterprise profitability requires three conditions to be fulfilled. First, the different elements of a firm's organizational architecture must be internally consistent. Second, the organizational architecture must match or fit the strategy of the firm. Third, the strategy and architecture of the firm must also be consistent with competitive conditions prevailing in the firm's market.




43.(p. 433)

Organizational structure means all of the following, except: A. the establishment of integrating mechanisms to coordinate the activities of subunits.B. the location of decision-making responsibilities with a structure.C. the manner in which decisions are made and work is performed by individuals.D. the formal division of the organization into subunits such as product divisions and functions.

Processes are the manner in which decisions are made and work is performed within the organization.




44.(p. 433)

Which term refers to the metrics used to measure the performance of subunits and make judgments about how well managers are running those subunits? A. Key processesB. Control systemsC. Knowledge networksD. Job assignments

For example, historically Unilever measured the performance of national operating subsidiary companies according to profitability—profitability was the metric.




45.(p. 433)

When a company measures the performance of its national operating subsidiaries according to profitability, the company is using: A. control systems.B. lean processes.C. incentives.D. organizational culture.

Control systems are the metrics used to measure the performance of subunits and make judgments about how well managers are running those subunits.




46.(p. 433)

The manner in which decisions are made and work is performed within the organization is known as the firm's: A. organizational culture.B. incentives.C. control systems.D. processes.

Processes are conceptually distinct from the location of decision-making responsibilities within an organization, although both involve decisions. Examples are the processes for formulating strategy, for deciding how to allocate resources within a firm, or for evaluating the performance of managers and giving feedback.




47.(p. 433)

Incentives are: A. the metrics used to measure the performance of subunits and make judgments about how well

managers are running those subunits.B. the devices used to reward appropriate managerial behavior.C. the manner in which decisions are made and work is performed within the organization.D. the norms and value systems that are shared among the employees of an organization.

Incentives are very closely tied to performance metrics.




48.(p. 434)

The norms and values systems that are shared among the employees of a company are referred to as: A. processes.B. control systems.C. incentives.D. organizational culture.

Organizations are societies of individuals who come together to perform collective tasks. They have their own distinctive patterns of culture and subculture.




49.(p. 434)

A firm's _____ determines where in its hierarchy the decision-making power is concentrated. A. integrating mechanismB. vertical differentiationC. knowledge networkD. horizontal differentiation

Centralization or decentralization of production and marketing decisions, responsibility for R&D decisions, strategic and financial decisions, etc. are some of the key questions in this regard.




50.(p. 434)

What is horizontal differentiation? A. The mechanisms that enable each subunit to operate independentlyB. The formal division of the organization into subunitsC. The location of decision-making responsibilities within a structureD. The mechanisms for coordinating subunits

The decision of differentiation into subunits is normally made on the basis of function, type of business, or geographical area.




51.(p. 434)

Integration mechanisms are: A. the formal division of the organization into subunits.B. the mechanisms that enable each subunit to operate independently.C. the mechanisms for coordinating subunits.D. the location of decision making responsibilities within a structure.

Higher-level managers responsible for achieving coordination can soon become overwhelmed by the volume of work required to coordinate the activities of various subunits, particularly if the subunits are large, diverse, and/or geographically dispersed.




52.(p. 435)

Which of the following is an argument favoring centralization? A. It permits greater flexibility.B. Motivational research favors it.C. It can avoid the duplication of activities.D. It gives top management time to focus on critical issues by delegating routine issues to lower-level

managers.

For example, many international firms centralize their R&D functions at one or two locations to ensure that R&D work is not duplicated. Production activities may be centralized at key locations for the same reason.




53.(p. 435)

Which of the following is an argument favoring decentralization? A. It can facilitate coordination.B. It can help ensure that decisions are consistent with organizational objectives.C. It can give top-level managers the means to bring about needed major organizational changes.D. It permits greater flexibility.

In a decentralized firm, more rapid response to environmental changes are possible because decisions do not have to be "referred up the hierarchy" unless they are exceptional in nature.




54.(p. 435)

Centralization: A. gives top management time to focus on critical issues by delegating more routine issues to lower-

level managers.B.

can give top-level managers the means to bring about needed major organizational changes by concentrating power and authority in one individual or a management team.

C. permits greater flexibility because decisions do not have to be "referred up the hierarchy"D. unless they are exceptional in nature.E. can be used to establish relatively autonomous, self-contained subunits within an organization.

This is one of the arguments favoring centralization.


Bloom's: ComprehensionDifficulty: Hard


55.(p. 435)

A firm that needs greater flexibility should choose _____ for its decision-making. A. vertical differentiationB. centralizationC. horizontal differentiationD. decentralization

Decentralization permits greater flexibility—more rapid response to environmental changes—because decisions do not have to be "referred up the hierarchy" unless they are exceptional in nature.




56.(p. 435)

Behavioral scientists have long argued that people are willing to give more to their jobs when they have a greater degree of individual freedom and control over their work. This suggests that: A. motivational research favors decentralization.B. centralization can facilitate coordination.C. centralization can ensure that decisions are consistent with organizational objectives.D. decentralization permits total flexibility with no control.

This is one of the arguments favoring decentralization.




57.(p. 435)

Which of the following decisions is typically centralized at a firm's headquarters? A. Production decisionsB. Human resource managementC. Marketing decisionsD. Overall firm strategy

Operating decisions, such as those relating to production, marketing, R&D, and human resource management, may or may not be centralized depending on the firm's strategy.




58.(p. 435)

The emphasis on local responsiveness in firms pursuing a local responsiveness strategy creates strong pressures for: A. decentralizing all decisions to foreign subsidiaries.B. decentralizing operating decisions to foreign subsidiaries.C. centralizing all operating decisions.D. centralizing all decisions.

Firms pursuing an international strategy also tend to maintain centralized control over their core competency and to decentralize other decisions to foreign subsidiaries.




59.(p. 437)

Global learning based on the multidirectional transfer of skills between subsidiaries and the corporate center is a central feature of a firm pursuing a(n) _____ strategy. A. localizationB. global standardizationC. transnationalD. international

The concept of global learning is predicated on the notion that foreign subsidiaries within a multinational firm have significant freedom to develop their own skills and competencies.




60.(p. 438)

Which of the following would be a typical responsibility of a product division in a product divisional structure? A. Operating decisionsB. Overall strategic development of the firmC. Financial control of the various divisionsD. None. All decisions are typically centralized.

Typically, each product division is a self-contained, largely autonomous entity with its own functions. The responsibility for operating decisions is typically decentralized to product divisions, which are then held accountable for their performance.




61.(p. 438)

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

When firms initially expand abroad, they often group all their international activities into an international division.




62.(p. 438)

In a domestic firm with a product divisional structure, each division is responsible for a distinct: A. product line.B. individual product.C. product assortment.D. product design.

To solve the problems of coordination and control of a functional structure, most firms switch to a product divisional structure.




63.(p. 438)

Which of the following is a problem that arises due to an international division structure? A.

The need to get an area and a product division to reach a decision can slow decision making and produce an inflexible organization unable to respond quickly to innovate.

B. It gives limited voice to area or country managers, since it makes them subservient to product division managers.

C. The heads of foreign subsidiaries are not given as much voice in the organization as the heads of domestic functions or divisions.

D.

The dual-hierarchy structure can lead to conflict and perpetual power struggles between the areas and the product divisions, catching many managers in the middle.

The dual structure of an international creates contains inherent potential for conflict and coordination problems between domestic and foreign operations.




64.(p. 439)

The implied lack of coordination between domestic operations and foreign operations, which are isolated from each other in separate parts of the structural hierarchy, is a problem encountered with a(n): A. global matrix structure.B. international division structure.C. worldwide product division structure.D. worldwide area structure.

This can inhibit the worldwide introduction of new products, the transfer of core competencies between domestic and foreign operations, and the consolidation of global production at key locations so as to realize location and experience curve economies.




65.(p. 439)

Which of the following is not true regarding a worldwide area structure? A. It tends to be favored by firms with a low degree of diversification.B. It facilitates local responsiveness.C. It tends to be favored by firms with a domestic structure based on function.D. Decision-making responsibilities are centralized.

The worldwide area structure facilitates local responsiveness. Because decision-making responsibilities are decentralized, each area can customize product offerings, marketing strategy, and business strategy to the local conditions.




66.(p. 439)

This structure encourages fragmentation of the organization into highly autonomous entities. A. Worldwide area structureB. Global matrix structureC. Worldwide product structureD. Global network structure

In a worldwide area structure, operations authority and strategic decisions relating to each of these activities are typically decentralized to each area, with headquarters retaining authority for the overall strategic direction of the firm and financial control.




67.(p. 439-440)

Which of the following is a potential drawback of the worldwide area structure? A. It encourages fragmentation of the organization into highly autonomous entities.B. It is inconsistent with a localization strategy.C. It discourages local responsiveness.D. It is not suitable for firms with a low degree of diversification and a domestic structure based on

functions.

Under the worldwide area structure, the world is divided into geographic areas. An area may be a country (if the market is large enough) or a group of countries. Each area tends to be a self-contained, largely autonomous entity with its own set of value creation activities.




68.(p. 440)

Firms structured on this basis may encounter significant problems if local responsiveness is less critical than reducing costs or transferring core competencies for establishing a competitive advantage. A. International division structureB. Worldwide area structureC. Global matrix structureD. Worldwide product division structure

Under the worldwide area structure, fragmentation into autonomous units can make it difficult to transfer core competencies and skills between areas and to realize location and experience curve economies.




69.(p. 440)

A(n) _____ tends to be adopted by firms that are reasonably diversified and, accordingly, originally had domestic structures based on product divisions. A. worldwide area structureB. international division structureC. worldwide product division structureD. global matrix structure

As with the domestic product divisional structure, in a worldwide product division structure, each division is a self-contained, largely autonomous entity with full responsibility for its own value creation activities.




70.(p. 441)

The main problem with this structure is the limited voice it gives to area or country managers, since it makes them subservient to product division managers. A. Worldwide product divisional structureB. Worldwide area structureC. International structureD. Global matrix structure

The result of this can be a lack of local responsiveness, which can lead to performance problems.




71.(p. 441)

The worldwide product division structure: A. is weak in local responsiveness.B. inhibits the realization of location economies.C. inhibits the realization of experience curve economies.D. limits the transfer of core competencies between areas.

The main problem with the worldwide product division structure is the limited voice it gives to area or country managers, since they are seen as subservient to product division managers. The result can be a lack of local responsiveness.




72.(p. 441)

In the classic global matrix structure, horizontal differentiation proceeds along two dimensions. These dimensions are: A. hierarchy and overall strategy.B. target returns and sales potential.C. marketing strategy and sales potential.D. product division and geographic area.

The philosophy behind this is that the product division and the various areas of the firm should share responsibility for operating decisions pertaining to a particular product.




73.(p. 441)

In practice, the global matrix structure: A. works as well as the theory predicts.B. is often clumsy and bureaucratic.C. makes it easy to ascertain accountability.D. results in quick decision making.

Under this structure, it can require so many meetings that it is difficult to get any work done. The need to get an area and a product division to reach a decision can slow decision making and produce an inflexible organization unable to respond quickly to market shifts or to innovate.




74.(p. 443)

In practice, the dual-hierarchy structure: A. lessens all forms of conflict.B. makes it easy to ascertain accountability.C. results in extremely quick decision making.D. can lead to perpetual power struggles.

It can prove difficult to ascertain accountability in this structure. When all critical decisions are the product of negotiation between divisions and areas, one side can always blame the other when things go wrong.




75.(p. 444)

The need for coordination between subunits is lowest in firms pursuing a(n): A. localization strategy.B. international strategy.C. global strategy.D. transnational strategy.

Firms pursuing a localization strategy are primarily concerned with local responsiveness. Such firms are likely to operate with a worldwide area structure in which each area has considerable autonomy and its own set of value creation functions. Because each area is established as a stand-alone entity, the need for coordination between areas is minimized.




76.(p. 444)

The need for coordination between subunits is highest in firms pursuing a(n) A. localization strategy.B. international strategy.C. global strategy.D. transnational strategy.

The need for coordination is greatest in transnational firms, which simultaneously pursue location and experience curve economies, local responsiveness, and the multidirectional transfer of core competencies and skills among all of the firm's subunits (referred to as global learning).




77.(p. 463)

The simplest integrating mechanism in an MNE is: A. direct contact between managers.B. the use of teams.C. the introduction of liaisons.D. the establishment of the matrix structure.

By this "mechanism," managers of the various subunits simply contact each other whenever they have a common concern.




78.(p. 446)

A(n) _____ is valuable because it can be used as a nonbureaucratic conduit for information flows within a multinational enterprise. A. liaison networkB. matrix structureC. organizational structureD. knowledge network

The great strength of such a network is that it can be used as a nonbureaucratic conduit for knowledge flows within a multinational enterprise.




79.(p. 448)

Firms traditionally have tried to achieve coordination by adopting: A. informal integrating mechanisms.B. formal integrating mechanisms.C. vertical differentiation.D. horizontal differentiation.

Formal integrating mechanisms do not always work, however, since they tend to be bureaucratic and do not necessarily address the problems that arise from differing subunit orientations.




80.(p. 448)

The main types of control systems used in MNEs include all of the following, except: A. personal controls.B. bureaucratic controls.C. input controls.D. cultural controls.

Four main types of control systems are used in multinational firms: personal controls, bureaucratic controls, output controls, and cultural controls. Most firms use all four, but their relative emphasis varies with the strategy of the firm.




81.(p. 448)

Which control system is most widely used by small firms? A. PersonalB. OutputC. BureaucraticD. Cultural

In small firms, it is seen in the direct supervision of subordinates' actions. It also structures the relationships between managers at different levels in multinational enterprises.




82.(p. 448)

Control through a system of rules and procedures that directs the actions of subunits is: A. personal control.B. bureaucratic control.C. output control.D. cultural control.

The most important bureaucratic controls in subunits within multinational firms are budgets and capital spending rules.




83.(p. 448)

Budgets and capital spending are the most important _____ in subunits within multinational firms. A. cultural controlsB. output controlsC. personal controlsD. bureaucratic controls

Budgets are essentially a set of rules for allocating a firm's financial resources. A subunit's budget specifies with some precision how much the subunit may spend. Headquarters uses budgets to influence the behavior of subunits.




84.(p. 449)

A company using _____ achieves control by comparing actual performance against targets and intervening selectively to take corrective action. A. personal controlB. output controlC. bureaucratic controlD. cultural control

The performance of subunit managers is then judged by their ability to achieve the goals. If goals are met or exceeded, subunit managers will be rewarded. If goals are not met, top management will normally intervene to find out why and take appropriate corrective action.




85.(p. 451)

There is low interdependence, performance ambiguity, and costs of control in firms pursuing a(n): A. localization strategy.B. international strategy.C. transnational strategy.D. global strategy.

In an international firm, the level of interdependence is somewhat higher. Integration is required to facilitate the transfer of core competencies and skills. Since the success of a foreign operation is partly dependent on the quality of the competency transferred from the home country, performance ambiguity can exist.




86.(p. 452)

Due to the high level of interdependence, the costs of controlling _____ firms are higher than the costs of controlling firms that pursue other strategies. A. localizedB. transnationalC. internationalD. global

Unless there is some way of reducing these costs, the higher profitability associated with a transnational strategy could be canceled out by the higher costs of control.




87.(p. 452)

In firms pursuing either global or transnational strategies, the usefulness of _____ controls is limited by substantial performance ambiguities. A. bureaucraticB. culturalC. personalD. output

As a result, these firms place greater emphasis on cultural controls—by encouraging managers to want to assume the organization's norms and value systems—which gives managers of interdependent subunits an incentive to look for ways to work out problems that arise between them.




88.(p. 454)

These refer to abstract ideas about what a group believes to be good, right, and desirable. A. ValuesB. NormsC. ThoughtsD. Ideas

Values and norms express themselves as the behavior patterns or style of an organization that new employees are automatically encouraged to follow by their fellow employees.




89.(p. 455)

Mechanisms to maintain culture include all of the following except: A. the hiring and promotional practices of the organization.B. reward strategies.C. socialization processes.D. ongoing cultural assessments.

The goal is to recruit people whose values are consistent with those of the company. To further reinforce values, a company may promote individuals whose behavior is consistent with the core values of the organization.




90.(p. 455)

Which of the following is not true of a strong corporate culture? A. Almost all managers share a relatively consistent set of values and norms that have a clear impact on

the way work is performed.B. A strong culture leads to a high performance.C. Outsiders see firms with a strong culture as having a certain way of doing things.D. A strong culture can be a bad culture.

A strong culture might be beneficial at one point, leading to high performance, but inappropriate at another time. The appropriateness of the culture depends on the context.




91.(p. 461)

Sources of organizational inertia include all of the following, except: A. the existing distribution of power within the organization.B. environmental influences.C. the existing culture.D. senior managers' preconceptions about the appropriate business model.

A source of organizational inertia is the existing culture, as expressed in norms and value systems.




92.(p. 432)

What are the three challenges related to strategy and structure that firms must accomplish if they are to achieve superior profitability? Superior enterprise profitability requires that firms fulfill three conditions. First, the different elements of a firm's organizational architecture must be internally consistent. Second, the organizational architecture of the firm must be consistent with its strategy. Third, the strategy and the structure must not only be consistent with each other, they must also be consistent with the competitive conditions prevailing in the marketplace.




93.(p. 433)

Explain organizational structure. A firm's organizational structure refers to three things. First, the term refers to the formal division of the organization into subunits such as product divisions, national operations, and functions. Second, the term refers to the location of decision-making responsibilities within the formal structure. Third, organizational structure refers to the establishment of integrating mechanisms to coordinate the activities of subunits including cross-functional teams and/or pan-regional committees.




94.(p. 433)

Discuss the relationship between a firm's control systems and a firm's incentive system. Why is this relationship important? The relationships between a firm's control systems and incentive systems is a close one.Control systems are the metrics used to measure the performance of subunits and make judgments about how well managers are running those subunits. Incentives are the devices used to reward appropriate managerial behavior. The relationship between these two areas is important because incentives are very closely tied to performance metrics. For example, the incentives of a manager in charge of a national operating subsidiary might be linked to the performance of that company. Specifically, he/she might receive a bonus if her subsidiary exceeds its performance targets.




95.(p. 434)

What are the three dimensions of organizational structure? Organizational structure can be thought of in terms of three dimensions: First, vertical differentiation, or the location of decision- making responsibilities within the firm. Second, horizontal differentiation, or the formal division of the organization into subunits. Finally, the establishment of integrating mechanisms that coordinate subunits.




96.(p. 434-435)

Why should a firm centralize its decision-making? Firms should centralize their decision-making for four main reasons. First, centralization can facilitate coordination. Second, centralization can help ensure that decisions are consistent with organizational objectives. Third, by concentrating power and authority in one individual or a management team, centralization can give top-level managers the means to bring about needed major organizational changes. Finally, centralization can avoid the duplication of activities that occurs when similar activities are carried on by various subunits within the organization.




97.(p. 435)

Explain the five reasons why a firm should decentralize its decision-making. Firms should decentralize their decision-making for five main reasons. First, top management can become overburdened when decision-making authority is centralized, and this can result in poor decisions. Second, motivational research favors decentralization - behavioral scientists have long argued that people are willing to give more to their jobs when they have a greater degree of individual freedom and control over their work. Third, decentralization permits greater flexibility - more rapid response to environmental changes - because decisions do not have to be "referred up the hierarchy" unless they are exceptional. Fourth, decentralization can result in better decisions because decisions are made closer to the spot by individuals who have better information than managers several levels up in a hierarchy. Finally, decentralization can increase control.




98.(p. 435-437)

Discuss the location of decision-making in a firm that is following a transnational strategy. Decision-making in a firm pursuing a transnational strategy is complex. The need to realize location and experience curve economies requires some centralized control over global production centers. Yet, the need for local responsiveness requires the decentralization of many operating decisions, particularly those for marketing, to foreign subsidiaries. Decentralization of decision-making is also needed to allow subsidiaries the freedom to develop their own skills and competencies—a requirement that is necessary for the global learning component of the transnational strategy.




99.(p. 438-439)

Describe the situation where an international division makes sense. How common is this structure? What are the disadvantages of the structure? When firms initially expand abroad, they often group all their international activities into an international division. In fact, according to a Harvard study, some 60 percent of all firms that have expanded internationally have initially adopted the international division structure.This type of structure does have problems however. One problem is that the heads of foreign subsidiaries are not given as much voice in the organization as the heads of domestic functions. Second, the isolation between domestic and foreign operations can inhibit the introduction of new products, the transfer of core competencies, and the consolidation of global production at key locations.




100.(p. 439-440)

What type of firms favor the worldwide area structure and why? What are the disadvantages of this type of structure? The worldwide area structure tends to be favored by firms with a low degree of diversification and a domestic structure based on functions. This structure divides the world into geographic areas, each area being a self-contained, largely autonomous unit. Firms choose this structure because it facilitates local responsiveness. Decision-making is decentralized, allowing subsidiaries to customize marketing to local needs. A key disadvantage of this structure, however, is the fragmentation of the organization that ensues, making it difficult to realize location and experience curve economies. Firms that choose this structure find it difficult to respond to pressures for cost reductions or to transfer core competencies within the firm.




101.(p. 440-441)

Discuss the type of firm that uses the worldwide product division structure. What are the main strengths and weaknesses with this type of structure? Firms that adopt the worldwide product division structure are reasonably diversified and originally had domestic structures based on product divisions. In the worldwide product division structure, each division is a self-contained, largely autonomous entity with full responsibility for its own value creation activities. The headquarters retains the responsibility for the overall strategic development and financial controls of the firm. The primary strength of the worldwide product division structure is that it provides an organizational context in which it is easier to pursue the consolidation of value creation activities at key locations necessary for realizing location and experience curve economies. It also facilitates the transfer of core competencies within a division's worldwide operations and the simultaneous worldwide introduction of new products. The main weakness of the structure is the limited voice it gives to area or country managers, since they are seen as subservient to the product division managers. This can lead to a lack of local responsiveness.




102.(p. 446)

What is a knowledge network? What is the advantage of such a system? A knowledge network is a network for transmitting information within an organization that is based not on formal organizational structure, but on informal contacts between managers within an enterprise and on distributed information systems.The great strength of such a network is that it can be used as a nonbureaucratic conduit for knowledge flows within an organization.




103.(p. 448)

Consider the use of personal controls in international firms. In which type of firm is this control most common? Personal control is control by personal contact with subordinates. This type of control tends to be most widely used in small firms, where it is seen in the direct supervision of subordinates' actions. However, it also structures the relationships between managers at different levels in multinational enterprises. For example, the CEO may use a great deal of personal control to influence the behavior of his or her immediate subordinates, such as the heads of worldwide product divisions or major geographic areas. In turn, these heads may use personal control to influence the behavior of their subordinates, and so on down through the organization.




104.(p. 460)

What are the two conditions with regard to firm architecture and strategy that are necessary for a firm to succeed? The fit between strategy and firm architecture suggests that two conditions must be fulfilled if a firm is to be successful. First, the firm's strategy must be consistent with the environment in which the firm operates. Second, the firm's organization architecture must be consistent with its strategy. Without these fits, the firm is likely to experience performance problems.




105.(p. 461)

Discuss the sources of inertia in organizations. Is it easy to make organizational changes? Organizations are difficult to change. Within most organizations are strong inertia forces. These forces come from a number of sources. One source of inertia is the existing distribution of power and influence within an organization. Managers who are not happy with the changes are likely to resist and slow the process. A second source of inertia is the existing culture. Since value systems reflect deeply held beliefs, they can be very hard to change. A third source of inertia derives from senior managers' preconceptions about the appropriate business model or paradigm. Managers may not recognize the value in a given business model that has been successful in the past. Finally, institutional constraints may act as a source of inertia. In some cases, local content rules or regulations pertaining to layoffs can make it difficult for firms to adopt the most effective strategy and architecture.




106.(p. 462)

What are the basic principles for successful organizational change? There are three basic principles for organizational change. First, unfreeze the organization through shock therapy and change the distribution of power and influence. Second, move the organization to a new state through proactive change in the architecture, so that it matches the desired new strategic posture. Finally, refreeze the organization in its new state and socialize employees into the new way of doing things.




ch13 Summary

Category # of Questions

AACSB: Analytic Skills 51

AACSB: Reflective Thinking Skills 55

Bloom's: Comprehension 55

Bloom's: Knowledge 51

Difficulty: Easy 35

Difficulty: Hard 16

Difficulty: Medium 55

Hill - Chapter 13 106

Learning Objective: 13-1 21




Documents

ch13