Test Bank Answers Chapter 9 Regional Economic Integration

Student name:__________

1) Explain organizational structure.

2) Why should a firm centralize its decision making?

3) Explain the five reasons a firm should decentralize its decision making.

4) Describe the situation where an international division makes sense. How common is this structure? What are the disadvantages of the structure?

5) What are the main strengths and weaknesses of the worldwide product division structure?

6) What is a knowledge network? What is the advantage of such a system?

7) Consider the use of personal controls in international firms. In which type of firm is this control most common?

8) Discuss the characteristics of a firm that is pursuing an international strategy.

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

10) What are the basic principles for successful organizational change?

11) Discuss the issues involved in unfreezing an organization.

12) Discuss the issues involved in refreezing an organization.

13) A firm’s organizational culture refers to the

A) norms and value systems that are shared among the employees of an organization.
B) formal organizational structure of the company.
C) control systems and incentives in place.
D) human resources component.

14) Organizational structure includes several elements. Which of the following is one of them?

A) The establishment of integrating mechanisms to coordinate the activities of subunits.
B) The horizontal decision making that occurs daily, for example, on the plant floor to improve operations.
C) The manner in which decisions are made and work is performed by individuals.
D) The informal division of the organization into cultural groups.

15) Which of the following terms refers to the metrics used to measure the performance of subunits and make judgments about how well managers are running those subunits?

A) key processes
B) control systems
C) knowledge networks
D) job evaluations

16) Historically, Unilever measured the performance of national operating subsidiary companies according to profitability. In this example, profitability is

A) a control system.
B) a process.
C) an integrating mechanism.
D) an incentive.

17) 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.

18) 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.

19) _____ are the metrics used to measure the performance of subunits and make judgments about how well managers are running those subunits.

A) Cultural controls
B) Control systems
C) Output controls
D) Incentives

20) A firm’s _____ determines where in its hierarchy the decision-making power is concentrated.

A) organizational architecture
B) vertical differentiation
C) organizational structure
D) horizontal differentiation

21) By centralizing decision making, a firm

A) allows managers to respond to environmental changes more quickly.
B) runs the risk of not being able to respond to environmental changes quickly.
C) can avoid the duplication of activities that occurs when similar activities are carried on by various subunits within the organization.
D) often has issues with duplication of activities that occurs when similar activities are carried on by various subunits within the organization.

22) _____ gives top-level managers the power and authority to be able to bring about needed major organizational changes.

A) Personal control
B) Decentralization
C) Bureaucratic control
D) Centralization

23) A firm pursuing _____ will have a strong incentive to decentralize decision making.

A) a localization strategy
B) a transnational strategy
C) a global standardization strategy
D) an international strategy

24) In firms pursuing _____, some operating decisions are relatively centralized, while others are relatively decentralized.

A) a global standardization strategy
B) a transnational strategy
C) a localization strategy
D) an international strategy

25) Regardless of a firm’s domestic structure, its international division tends to be

A) organized on economy.
B) decentralized.
C) organized on geography.
D) centralized.

26) The _____ tends to be favored by firms with a low level of diversification whose domestic structures are based on functions.

A) global matrix structure
B) worldwide product division structure
C) performance structure
D) worldwide area structure

27) A _____ tends to be adopted by firms that are reasonably diversified and originally had domestic structures based on product divisions.

A) worldwide product division structure
B) global matrix structure
C) worldwide area structure
D) performance structure

28) In a _____, individual managers belong to two hierarchies (a divisional hierarchy and an area hierarchy) and have two bosses (a divisional boss and an area boss).

A) worldwide product division structure
B) classic matrix structure
C) worldwide area structure
D) performance structure

29) The need for coordination is greatest in

A) firms trying to pursue localization strategies.
B) international firms.
C) firms trying to profit from location and experience curve economies.
D) domestic corporations.

30) In a _____, all roles are viewed as integrating roles.

A) worldwide area structure
B) process structure
C) worldwide product division structure
D) global matrix structure

31) _____ control is a type of control that tends to be most widely used in small firms.

A) Personal
B) Output
C) Bureaucratic
D) Cultural

32) In a company using _____, employees tend to control their own behavior, which reduces the need for direct supervision.

A) bureaucratic controls
B) cultural controls
C) personal controls
D) output controls

33) _____ can be defined as the amount of time top management must devote to monitoring and evaluating subunits’ performance.

A) Performance ambiguity
B) The formal matrix
C) The costs of control
D) Differentiation

34) Firms pursuing a global standardization strategy must cope with a higher level of _____, and this raises their costs of control.

A) vertical differentiation
B) cultural division
C) horizontal differentiation
D) performance ambiguity

35) Which of the following is most difficult for a leader?

A) to change an established organizational culture
B) to import an organizational culture into a new venture
C) to create an organizational culture from scratch in a new venture
D) to export an organizational culture

36) A firm’s _____ determines where in its hierarchy the decision-making power is concentrated.

A) integrating mechanism
B) vertical differentiation
C) knowledge network
D) horizontal differentiation

37) What is horizontal differentiation?

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

38) Integration mechanisms are the

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

39) Which of the following is one of the four main arguments 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.

40) Which of the following is one of the five main arguments 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.

41) Centralization

A) gives top management time to focus on critical issues by delegating more routine issues to lower-level managers.
B) can give top-level managers the means to bring about needed major organizational changes by concentrating power and authority in one individual or a management team.
C) permits greater flexibility because decisions do not have to be “referred up the hierarchy” unless they are exceptional in nature.
D) can be used to establish relatively autonomous, self-contained subunits within an organization.

42) A firm that needs greater flexibility should choose _____ for its decision making.

A) horizontal differentiation
B) decentralization
C) localization strategy
D) control systems

43) Centralization and decentralization differ because centralization

A) hinders coordination, while decentralization facilitates coordination.
B) prevents top-level managers from making required organizational changes, while decentralization gives top-level managers greater power to make organizational changes.
C) ensures that decisions are consistent with organizational objectives, while decentralization can result in decisions at variance with organizational goals.
D) promotes flexibility, while decentralization reduces flexibility.

44) Which of the following decisions is typically centralized at a firm’s headquarters?

A) production decisions
B) human resource management
C) marketing decisions
D) overall firm strategy

45) The emphasis on local responsiveness in firms pursuing a localization strategy creates strong pressures for

A) centralizing all decisions regarding marketing, R&D, and human resource management.
B) decentralizing operating decisions to foreign subsidiaries.
C) centralizing all operating decisions.
D) global learning.

46) Global learning based on the multidirectional transfer of skills between subsidiaries and the corporate center is a central feature of a firm pursuing _____ strategy.

A) a localization
B) a global standardization
C) a transnational
D) an international

47) Which of the following would be a typical responsibility of a product division in a worldwide product divisional structure?

A) operating decisions
B) overall strategic development of the firm
C) financial control of the various divisions
D) decisions regarding legal issues

48) Which of the following statements is true about a product divisional structure?

A) In a product divisional structure, the responsibility for the financial control of the firm is typically decentralized.
B) A product divisional structure tends to be organized on geography.
C) In a product divisional structure, each product division is set up as a self-contained, largely autonomous entity with its own functions.
D) In a product divisional structure, the responsibility for operating decisions is typically centralized.

49) Regardless of a firm’s domestic structure, its international division tends to be organized on

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

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

A) In an international division structure, a firm’s international division tends to be organized on products.
B) The heads of domestic functions are presumed to be able to represent the interests of all countries to headquarters.
C) The heads of foreign subsidiaries are not given as much voice in the organization as the heads of domestic functions or divisions.
D) The dual-hierarchy structure can lead to conflict and perpetual power struggles between the areas and the product divisions.

51) In which of the following organizational structures are the domestic operations and foreign operations isolated from each other leading to coordination problems?

A) global matrix structure
B) international division structure
C) worldwide product division structure
D) worldwide area structure

52) Which of the following is true regarding a worldwide area structure?

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

53) A _____ encourages fragmentation of the organization into highly autonomous entities.

A) worldwide area structure
B) global matrix structure
C) worldwide product structure
D) global network structure

54) _____ tends to be adopted by firms that are reasonably diversified.

A) A worldwide area structure
B) An international division structure
C) A worldwide product division structure
D) A global matrix structure

55) 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.

56) 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.

57) In practice, the dual hierarchy in a global matrix structure

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

58) The need for coordination between subunits is lowest in firms pursuing

A) a localization strategy.
B) an international strategy.
C) a global strategy.
D) a transnational strategy.

59) The need for coordination between subunits is greatest in firms pursuing

A) a localization strategy.
B) an international strategy.
C) a global strategy.
D) a transnational strategy.

60) _____ refers to giving a person in each subunit responsibility for coordinating with another subunit on a regular basis.

A) Global learning
B) Liaison roles
C) Knowledge network
D) Matrix structures

61) _____ is valuable because it can be used as a nonbureaucratic conduit for information flows within a multinational enterprise.

A) A liaison network
B) A matrix structure
C) An organizational structure
D) A knowledge network

62) Which control system is most widely used by small firms?

A) personal
B) output
C) bureaucratic
D) cultural

63) _____ control is achieved by comparing actual performance against targets and intervening selectively to take corrective action.

A) Personal
B) Output
C) Bureaucratic
D) Cultural

64) There is low interdependence, performance ambiguity, and costs of control in firms pursuing

A) a localization strategy.
B) an international strategy.
C) a transnational strategy.
D) a global strategy.

65) Which of the following is true of a strong corporate culture?

A) Almost all managers share a relatively consistent set of values and norms that have a clear impact on the way work is performed.
B) A strong culture leads to high performance.
C) Outsiders see firms with a strong culture as being autocratic and inflexible.
D) A strong culture is always a good culture.

66) _____ refers to the location of decision-making responsibilities within a structure.

A) Vertical differentiation
B) Integrating mechanisms
C) Horizontal integration
D) Horizontal differentiation

67) What type of control system achieves control through a system of rules and procedures that directs the actions of subunits?

A) personal controls
B) bureaucratic controls
C) cultural controls
D) output controls

68) Which of the following is a potential drawback of the worldwide area structure?

A) This structure discourages division of the organization into autonomous entities.
B) This structure makes it difficult to decentralize decisions regarding operations authority.
C) This structure makes it difficult to realize location and experience curve economies.
D) This structure reduces local responsiveness.

69) The establishment of integrating mechanisms that coordinate subunits is a dimension of

A) horizontal differentiation.
B) organizational culture.
C) vertical differentiation.
D) organizational structure.

70) In Firm A, each division is a self-contained, largely autonomous entity with full responsibility for its own value creation activities. What type of structure does Firm A employ?

A) worldwide product division structure
B) global matrix structure
C) worldwide area structure
D) knowledge network structure

71) In the _____, the philosophy is that responsibility for operating decisions pertaining to a particular product should be shared by the product division and the various areas of the firm.

A) worldwide product division structure
B) classic global matrix structure
C) worldwide area structure
D) knowledge network structure

72) When the need to integrate subunits is very high and complex, firms may

A) use direct contact between subunit managers.
B) give a person in each subunit responsibility for coordinating with another subunit on a regular basis.
C) institute a matrix structure, in which all roles are viewed as integrating roles.
D) use temporary or permanent teams composed of individuals from the subunits that need to achieve coordination.

73) _____ is achieved by comparing actual performance against targets and intervening selectively to take corrective action.

A) Personal control
B) Cultural control
C) Bureaucratic control
D) Output control

74) _____ exists when the causes of a subunit's poor performance are not clear.

A) Performance ambiguity
B) Vertical differentiation
C) Output controls
D) Horizontal differentiation

75) Which of the following is a disadvantage of a worldwide area structure?

A) Firms that use this structure tend to have a high degree of diversification.
B) Decision making is centralized and subsidiaries cannot customize to local marketing needs.
C) The structure encourages fragmentation of the organization into highly autonomous entities.
D) It does not facilitate local responsiveness.

76) All of the following are strategies that multinational firms pursue except a ________ strategy.

A) localization
B) domestic
C) transnational
D) global

77) Firms pursuing _____ attempt to create value by transferring core competencies from home to foreign subsidiaries.

A) a localization strategy
B) an international strategy
C) a transnational strategy
D) a global strategy

78) A firm that operates with matrix-type structures in which both product divisions and geographic areas have significant influence would use which of the following strategies?

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

79) Firms pursuing a transnational strategy

A) have a low need for coordination.
B) require very few integrating mechanisms.
C) need to cultivate a strong culture.
D) operate with a worldwide product division structure.

80) Firms pursuing _____ strategy have a low need for coordination between subunits.

A) a global standardization
B) a localization
C) A transnational
D) an international

81) Firms pursuing _____ strategyare more centralized than enterprises pursuing a localization or international strategy.

A) a localization
B) an international
C) a global standardization
D) a transnational

82) Which of the following is a required step for implementing organizational change?

A) Physically move the organization to a new state.
B) Keep the organizational structure.
C) Refreeze the organizational structure.
D) Slowly, through incremental changes, rearrange the organizational structure.

83) Because of inertia forces, _____ is often no change.

A) big bang change
B) cultural change
C) shock therapy change
D) incremental change

84) To unfreeze the established culture of an organization, the company

A) must take bold steps such as shaking up the management structure in order to implement change.
B) is best served by taking incremental steps.
C) should employ the existing structural organization to integrate changes.
D) implement a rewards or incentive program.

85) Organizational structure refers to the totality of a firm’s organization.

⊚ true
⊚ false

86) A manager receives a bonus because the national operating subsidiary that she is in charge of exceeds its performance target. This is an example of an incentive.

⊚ true
⊚ false

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

⊚ true
⊚ false

88) The choice between centralization and decentralization is absolute.

⊚ true
⊚ false

89) 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

90) 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

91) 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

92) The worldwide product division structure may create a lack of local responsiveness.

⊚ true
⊚ false

93) It is difficult to ascertain accountability in the global matrix structure.

⊚ true
⊚ false

94) The need for coordination between units is greatest in firms pursuing a localization strategy.

⊚ true
⊚ false

95) Direct contact between subunit managers is the simplest integrating mechanism.

⊚ true
⊚ false

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

⊚ true
⊚ false

97) 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

98) Performance ambiguity lowers the cost of control.

⊚ true
⊚ false

99) New processes that might lead to a competitive advantage can be developed anywhere within the organization’s global network of operations.

⊚ true
⊚ false

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

⊚ true
⊚ false

101) An organizational culture can be strong but bad.

⊚ true
⊚ false

102) Firm ABC is pursuing a localization strategy that is focused on local responsiveness. Therefore, the need for integration and coordination between self-contained country subsidiaries is low.

⊚ true
⊚ false

103) Firms pursuing a localization strategy tend to operate with an array of formal and informal integrating mechanisms.

⊚ true
⊚ false

104) A firm’s organizational architecture must be consistent with its strategy.

⊚ true
⊚ false

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

⊚ true
⊚ false