Chapter 5-Global Organization Design: Multiple Choice

CHAPTER 5—GLOBAL ORGANIZATION DESIGN
MULTIPLE CHOICE
1. Building a global presence expands an organization's scale of operations, enabling it to realize:

a. economies of scale.
b. economies of scope.
c. factors of production.
d. its international development stage.
ANS: A PTS: 1
NAT: AACSB Reflective Thinking | AACSB Environmental Influence
2. Which of the following is not a primary factor that motivates companies to expand internationally?
a. Cheaper production factors
b. Smaller number of distribution channels
c. Economies of scale
d. Economies of scope
ANS: B PTS: 1
NAT: AACSB Analytic | AACSB Environmental Influence
3. ____ refers to the number and variety of products and services a company offers, as well as the
number and variety of regions, countries, and markets it serves.
a. Economies of scale
b. Market potential
c. Scope
d. Development stage
ANS: C PTS: 1
4. One of the earliest, and still one of the most powerful, motivations for U.S. companies to invest abroad
relates to ____: obtaining raw materials, labor, and other resources at the lowest possible cost.
a. factors of production
b. economies of scope
c. economies of scale
d. technological factors
ANS: A PTS: 1
5. Which stage is export-oriented and in a competitive position?

a. Multinational
b. Global
c. Domestic
d. International
ANS: D PTS: 1
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6. In the ____ stage of international evolution, explosion occurs as international operations take off.
a. global
b. domestic
c. multinational
d. international
ANS: C PTS: 1
NAT: AACSB Reflective Thinking | AACSB Operations Management
7. Which of these operates in truly global fashion, and the entire world is their marketplace?
a. Multidomestic firms
b. Domestic organizations
c. Governmental agencies
d. Global companies
ANS: D PTS: 1
8. In the ____ stage, an international division has replaced the export department, and specialists are
hired to handle sales, service, and warehousing abroad.
a. domestic
b. international
c. global
d. multinational
ANS: B PTS: 1
9. The worldwide geographic or product structures are most likely to appear during the ____ stage of
international evolution.
a. domestic
b. international
c. multinational
d. global
ANS: C PTS: 1
NAT: AACSB Reflective Thinking | AACSB Creation of Value
10. All of the following except ____ are typical alliances used for global expansion.
a. wholly-owned subsidiaries
b. joint ventures
c. consortia
d. licensing
ANS: A PTS: 1 NAT: AACSB Analytic | AACSB Creation of Value
11. ____ is a popular approach to sharing development and production costs and penetrating new markets.
a. Consortia
b. Licensing
c. Joint ventures
d. Franchising
ANS: C PTS: 1
12. ____ are groups of independent companies that join together to share skills, resources, costs, and
access to one another's markets.
a. Joint ventures
b. Franchising
c. Licensing
d. Consortia
ANS: D PTS: 1
13. Which of the following means that product design, manufacturing, and marketing strategy are
standardized throughout the world?
a. Globalization strategy
b. Standardization strategy
c. Multidomestic strategy
d. Transnational strategy
ANS: A PTS: 1 NAT: AACSB Analytic | AACSB Strategy
14. A ____ strategy would encourage production design, assembly, and marketing tailored to the specific
needs of each country.
a. focused
b. multidomestic
c. globalization
d. joint venture
ANS: B PTS: 1 NAT: AACSB Reflective Thinking | AACSB Strategy
15. When a company such as Coca-Cola decides to use the same product design and advertising strategy
throughout the world, it is following the ____ strategy.
a. multidomestic
b. consortia
c. focused
d. globalization
ANS: D PTS: 1 NAT: AACSB Analytic | AACSB Strategy
16. Which of the following strategies should an organization pursue if the forces for national
responsiveness and the forces for global integration are high?
a. Export
b. Multidomestic
c. Globalization
d. Globalization and multidomestic
ANS: D PTS: 1 NAT: AACSB Analytic | AACSB Strategy
Organization Chart 6.2
17. Reference Organization Chart 6.2. This structure is:

a. Global geographic division structure
b. Global matrix structure
c. Global product division structure
d. Global functional structure
ANS: C PTS: 1 NAT: AACSB Analytic | AACSB Strategy
18. The global product structure works best when a division handles products that:
a. are technologically dissimilar.
b. can be standardized for marketing worldwide.
c. obsolete in one country, but not in another.
d. cheap and easy to produce.
ANS: B PTS: 1
19. The global product structure:

a. utilizes country managers who are accountable for profit and loss of every product.
b. fits well with customization of production or marketing.
c. may result in competition among product divisions.
d. will insure that all countries are covered well.
ANS: C PTS: 1
20. The global geographic division structure:

a. is most useful for new product lines.
b. works well for products with rapidly changing technologies.
c. works best if there are similar needs for the product across countries.
d. may cause product planning on a global scale to be challenging.
ANS: D PTS: 1
21. The global matrix structure:

a. will increase horizontal coordination, but will decrease vertical coordination.
b. works best when there is pressure for decision making that balances the interests of both
product standardization and geographical localization.
c. commonly utilizes matrix bosses as functional and product heads.
d. is usually found in firms that have reached the "international stage" of international
evolution.
ANS: B PTS: 1
22. ____ are typical in highly volatile environments.

a. Hybrid structures
b. Global geographic structures
c. Global matrix structures
d. Transnational structures
ANS: A PTS: 1
23. Which of the following is not a primary segment of the global organizational challenge?
a. The problem of transferring knowledge across a global firm
b. Greater complexity and differentiation
c. The need for coordination
d. The need for KSAs
ANS: D PTS: 1
24. As organizations become more differentiated, with multiple products, divisions, departments, and
positions scattered across numerous countries, managers face a tremendous ____ challenge.
a. knowledge transfer
b. differentiation
c. coordination
d. development
ANS: C PTS: 1
25. All of the following are reasons why many organizations tap only a fraction of the potential that is
available from cross-border transfer of knowledge and innovation except:
a. barriers of language, cultural, and geographic distances.
b. lack of trust among people at different locations.
c. divisions sometimes view knowledge and innovation as power and want to hold onto it.
d. economies of scope can increase a company's market power as compared to competitors.
ANS: D PTS: 1 NAT: AACSB Analytic | AACSB Creation of Value
26. ____ teams are cross-border work groups made up of multiskilled, multinational members whose
activities span multiple countries.
a. Management
b. Global
c. Functional
d. Focus
ANS: B PTS: 1
27. In one survey, 70 percent of global companies reported that the most important function of corporation
headquarters was to:
a. make shareholders happy.
b. provide enterprise leadership.
c. provide extensive training.
d. develop new goals and visions for the company frequently.
ANS: B PTS: 1
NAT: AACSB Reflective Thinking | AACSB Leadership Principles
28. Some organizations create formal ____ positions to coordinate information and activities related to key
customer accounts.
a. functional manager
b. transnational team
c. network coordinator
d. division network
ANS: C PTS: 1
29. High ____ means that people accept inequality in power among institutions, organizations, and people.
a. uncertainty avoidance
b. power distance
c. employee empowerment
d. integration
ANS: B PTS: 1
30. The ____ model reflects the ultimate in both organizational complexity, with many diverse units, and
organizational coordination, with mechanisms for integrating the varied parts.
a. transformative
b. transnational
c. global
d. multidomestic
ANS: B PTS: 1
NAT: AACSB Diversity | AACSB Environmental Influence
31. All of the following are characteristics that distinguish the transnational organization from other global
organization forms except:
a. assets and resources are dispersed worldwide into highly specialized operations that are
linked together through interdependent relationships.
b. structures are stable.
c. subsidiary managers initiate strategy and innovations that become strategy for the
corporation as a whole.
d. unification and coordination are achieved primarily through corporate culture, shared
vision and values, and management style rather than through formal structures and
systems.
ANS: B PTS: 1
32. The transnational model is characterized by:

a. using shared vision and values to achieve coordination in this horizontal structure.
b. being one step short of the matrix in exploiting both global and local advantages for the
corporation as well as multiple interrelated competitive issues.
c. has a single headquarters and a single center of control for each country and for each
product line.
d. there is no single corporate headquarters, but there is a clear hierarchical responsibility.
ANS: A PTS: 1 NAT: AACSB Analytic | AACSB Creation of Value
33. Thomas Friedman outlines 10 forces that flattened the world, which he calls Flatteners. Many of these
forces are directly or indirectly related to advanced tecnhology, including all of the following except:
a. work flow software.
b. supply-chaining.
c. power distance.
d. the “steroids.”
ANS: C PTS: 1
NAT: AACSB Technology | AACSB Environmental Influence
34. In the _____ stage of international development, the company is domestically oriented, but managers
are aware of the global environment and may want to consider initial foreign investment.
a. international
b. domestic
c. multinational
d. global
ANS: B PTS: 1
35. Nestle SA gets most of its sales from outside the “home” country of Switzerland, and its employees are
spread all over the world. The CEO is Belgian, and the chairman was born in Austria, and more than
half of the company’s managers are non-Swiss. Nestle has hundreds of brands and has production
facilities or other operations in almost every country in the world. Nestle is in the _____ stage of
international development.
a. multinational
b. international
c. domestic
d. global
ANS: D PTS: 1
36. A _____ strategy means that competition in each country is handled independently of competition in
other countries.
a. globalization
b. focused
c. multidomestic
d. joint venture
ANS: C PTS: 1 NAT: AACSB Reflective Thinking | AACSB Strategy
37. Wheras the _____ divisions are typically organized along functional or product lines, the _____
division is organized according to geographic interests.
a. transnational; multidomestic
b. multidomestic; transnational
c. domestic; international
d. international; domestic
ANS: C PTS: 1 NAT: AACSB Reflective Thinking | AACSB Strategy
38. The _____ structure divides the world into geographic reasons.
a. global geographic
b. global matrix
c. global product
d. international
ANS: A PTS: 1
39. Which of the following is not a benefit that results from inter-unit collaboration?
a. Cost savings
b. Better decision making
c. Greater revenues
d. Decreased innovation
ANS: D PTS: 1
40. Which of the following is not true regarding approaches to coordination and control?
a. European countries take a decentralized approach
b. Japanese countries take a decentralized approach
c. The United States uses formalization
d. Chinese companies take a traditional approach
ANS: B PTS: 1
TRUE/FALSE
1. Four primary factors motivate companies to expand internationally: profitability, economies of scale,
economies of scope, and low-cost production factors.
ANS: F PTS: 1
2. Building a global presence expands an organization's scale of operations, enabling it to realize

economies of scale.
ANS: T PTS: 1
3. Having a presence in multiple countries provides marketing power and synergy compared to the same
size firm that has presence in fewer countries.
ANS: T PTS: 1 NAT: AACSB Analytic | AACSB Creation of Value
4. The second stage of international evolution, "International Stage," will usually be structured with a
domestic structure with an export department.
ANS: F PTS: 1 NAT: AACSB Analytic | AACSB Creation of Value
5. A company typically shifts its interest from domestic activity to exporting in the 3rd stage
(multinational) of international development.
6. The international stage of international development means that exports are taken seriously and that
the company deals with the competitive issues of each country separately.
ANS: T PTS: 1
7. Stage two is the global stage which means the company takes exports seriously and begins to think
multidomestically.
ANS: F PTS: 1
8. Truly global companies no longer think of themselves as having a single home country and have been
called stateless corporations.
ANS: T PTS: 1
9. A joint venture is a separate entity created with two or more active firms as sponsors.
ANS: T PTS: 1
10. Managers and organizations all over the world are very reluctant to cooperate to achieve competitive
advantage on a global scale.
ANS: F PTS: 1 NAT: AACSB Analytic | AACSB Individual Dynamics
11. The globalization strategy means that product design, manufacturing, and marketing strategy are
standardized throughout the world, whereas a multidomestic strategy means that competition in each
country is handled independently of competition in other countries.
ANS: T PTS: 1 NAT: AACSB Analytic | AACSB Strategy
12. In parts of Mexico, laundry detergent is used to wash dishes, not clothes, pointing out the need for a
multidomestic strategy.
13. In many instances, companies will need to respond to both global and local opportunities
simultaneously. In this case, the global matrix structure can be used.
ANS: T PTS: 1
14. As companies begin to explore international opportunities, they typically start with an international
division that grows into an export department.
15. Functional structures are found more frequently in a worldwide business than in a domestic business.
16. With a global geographic division structure, each division's manager is responsible for planning,
organizing, and controlling all functions for the production and distribution of its products for any
market around the world.
17. The product-based structure works best when a division handles products that are technologically
similar and can be standardized for marketing around the world.
ANS: T PTS: 1
18. The global geographic structure divides the world into geographical regions, with each geographical
division reporting to the CEO.
ANS: T PTS: 1
19. To meet new competitive threats, many manufacturing firms are emphasizing the ability to customize
their products to meet specific needs which requires a greater emphasis on global responsiveness.
20. The global product division structure works best when pressure for decision-making balances the
interests of both product standardization and geographical localization and when coordination to share
resources is important.
21. Hybrid structures are typical in highly volatile environments.
ANS: T PTS: 1
22. Innovation refers to the quality of collaboration across organizational units.
ANS: F PTS: 1
23. The "not-invented-here" syndrome makes some managers reluctant to tap into the know-how and
expertise of other units.
ANS: T PTS: 1 NAT: AACSB Analytic | AACSB Individual Dynamics
24. A transnational team is a work group made up of multinational members whose activities span
multiple countries.
ANS: T PTS: 1
NAT: AACSB Reflective Thinking | AACSB Group Dynamics
25. Functional managers coordinate across functions whereas country managers coordinate among
countries.
ANS: F PTS: 1 NAT: AACSB Analytic | AACSB Individual Dynamics
26. Network coordinators would enable a manufacturing organization to provide knowledge and integrated
solutions across multiple business, divisions, and countries for a large customer.
ANS: T PTS: 1
NAT: AACSB Reflective Thinking | AACSB Information Technologies
27. High uncertainty avoidance means that people accept inequality in power among institutions,
organizations, and people.
28. Low uncertainty avoidance means that people have a high tolerance for the unstructured, the unclear,
and the unpredictable.
29. Many large international companies are moving toward a multidomestic model of organization.
ANS: F PTS: 1
30. The transnational model reflects the ultimate in both organizational complexity, with many diverse
units, and organizational coordination, with mechanisms for integrating the varied parts.
31. The management philosophy of transnational model is based on interdependence rather than either full
divisional independence or total dependence of these units on headquarters for decision making and
control.
ANS: T PTS: 1
32. Only a few decades ago, many companies could afford to ignore the international environment.
ANS: T PTS: 1
33. The trend toward large organizations was initially sparked by the Industrial Revolution.
ANS: T PTS: 1
34. In the global stage of international development, the market potential of a firm is mostly domestic.
ANS: F PTS: 1
35. The fourth and ultimate stage of international development is the multinational stage.
ANS: F PTS: 1
36. In general, services are less suitable for globalization because different customs and habits often
require a different approach to providing service.
37. The only way an organization can reasonably expect to be successful in different countries is to
customize its products and services to suit the local interests, preferences, and values in each country.
ANS: F PTS: 1 NAT: AACSB Diversity | AACSB Strategy
38. When forces for both global standardization and local responsiveness in many countries are low,
simply using an international division with the domestic structure is an appropriate way to handle
international business.
ANS: T PTS: 1 NAT: AACSB Reflective Thinking | AACSB Strategy
39. Service companies cannot use a divisional structure.
ANS: F PTS: 1 NAT: AACSB Analytic | AACSB Strategy
40. European companies typically take a decentralized approach to coordination and control.
ANS: T PTS: 1
NAT: AACSB Diversity | AACSB Environmental Influence
ESSAY
Case 6.0
It was reported in the Wall Street Journal that Ford Motor Co. was reorganizing to place its functions
such as product development, sales, and engine/transmissions under their own executives with global
authority. Alexander Trotman, chairman and CEO, wanted to create a structure that would avoid costly
duplication in different parts of the world and that would foster Ford's developing models such as its
Mondeo (Europe) and Contour (U.S.) which could sell worldwide with few modifications. Trotman
wanted a company that was strong internationally in product development, manufacturing, and
purchasing that could take advantage of where Ford's strength was around the world.
The company had been organized geographically into three relatively independent divisions--Ford
North America, Ford of Europe, and Ford Asia/Pacific. The new product cited above, the Mondeo and
Contour, sapped $6 billion in development costs because of expensive coordination time between the
sometimes-conflicting European and North American divisions. Elimination of duplication was a goal
of the new structure.
Simultaneously a new "program team facility" was being constructed so that all of Ford's new product
development would be by teams. The new coupe Mustang was borne from an experimental cross-
functional team that designed the product in less than three years compared to Ford's normal four to
five year development cycle. Trotman emphasized that he wanted to change the process, not just the
structure, by which new products were developed. Ford apparently found the team process convincing
because the Mustang was developed on a budget about 30% lower than comparable project budgets.
SOURCE: "Ford to Realign With a System of Global Chiefs," The Wall Street Journal, March 31,
1994, pages A3-A4.
1. Reference Case 6.0. Identify the strategy given in our textbook that Ford appeared to be adopting.
Describe advantages and disadvantages of that strategy for Ford. Why do you think CEO Trotman
moved to that strategy?
ANS:
Answer not provided.
PTS: 1 NAT: AACSB Analytic | AACSB Strategy
2. Why has globalization and global experience in management become so important to organizations?
ANS:
PTS: 1 NAT: AACSB Analytic | AACSB Leadership Principles
3. Discuss each of the motivations for global expansion.
ANS:
PTS: 1 NAT: AACSB Reflective Thinking | AACSB Motivation Concepts
4. Select any organization with which you are familiar--your college, the Toyota dealership down the
road, a corporation where you work, etc. Analyze the global forces that influence the organization you
selected. How should the organization respond to those global forces in order to gain international
competitive advantage?
ANS:
PTS: 1 NAT: AACSB Analytic | AACSB Environmental Influence
5. Describe the stages of international evolution in terms of their strategic orientation.
ANS:
PTS: 1 NAT: AACSB Reflective Thinking | AACSB Strategy
6. What are the international strategic alliances that companies can choose from to expand globally?
Discuss and give an example of each.
ANS:
PTS: 1 NAT: AACSB Reflective Thinking | AACSB Creation of Value
7. Which type of international strategic alliance, if any, would you recommend for a business that wanted
to gain entry into China? Explain the reasons behind your choice.
ANS:
PTS: 1 NAT: AACSB Analytic | AACSB Creation of Value
8. Compare and contrast the typical alliances: licensing, joint ventures, and consortia.
ANS:
9. Compare and contrast the globalization strategy and the multidomestic strategy. Give an example of
effective use of each strategy.
ANS:
PTS: 1 NAT: AACSB Analytic | AACSB Strategy
10. When should a company begin using an international division? What problems are likely to be solved?
As the company progresses in its international development, what problems will likely not be solved
by this structure?
ANS:
11. Under what conditions should an organization consider a global geographic structure as opposed to a
global product structure?
ANS:
PTS: 1 NAT: AACSB Reflective Thinking | AACSB Environmental Influence
12. Discuss the global geographic division structure.
ANS:
13. Compare and contrast the global product division structure and global matrix structure. Draw a
diagram of each.
ANS:
14. Discuss the global matrix structure. Give an example.
ANS:
15. What are the three primary segments of the global organizational challenge? Discuss each.
ANS:
16. List the reasons why most organizations tap only a fraction of the potential that is available from the
cross-border transfer of knowledge.
ANS:
17. The most advanced and competitive use of global teams involves simultaneous contributions in three
strategic areas. List these three areas.
ANS:
18. List the benefits that result from interunit collaboration.
ANS:
19. Discuss the national value systems.
ANS:
20. Discuss the three primary approaches to coordination and control as represented by Japanese,
American, and European companies.
ANS:
PTS: 1 NAT: AACSB Diversity | AACSB Environmental Influence
21. List and discuss the characteristics that distinguish the transnational organization from other global
organization forms.
ANS:

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CHAPTER 5—GLOBAL ORGANIZATION DESIGN

1. Building a global presence expands an organization's scale of operations, enabling it to realize:

5. Which stage is export-oriented and in a competitive position?

17. Reference Organization Chart 6.2. This structure is:

19. The global product structure:

20. The global geographic division structure:

21. The global matrix structure:

22. ____ are typical in highly volatile environments.

32. The transnational model is characterized by:

2. Building a global presence expands an organization's scale of operations, enabling it to realize

ANS: T PTS: 1 NAT: AACSB Analytic | AACSB Creation of Value

ANS: F PTS: 1 NAT: AACSB Analytic | AACSB Creation of Value

ANS: F PTS: 1 NAT: AACSB Analytic | AACSB Creation of Value

ANS: F PTS: 1 NAT: AACSB Analytic | AACSB Individual Dynamics

ANS: T PTS: 1 NAT: AACSB Analytic | AACSB Strategy

ANS: T PTS: 1 NAT: AACSB Analytic | AACSB Strategy

ANS: F PTS: 1 NAT: AACSB Analytic | AACSB Creation of Value

ANS: F PTS: 1 NAT: AACSB Analytic | AACSB Creation of Value

ANS: F PTS: 1 NAT: AACSB Analytic | AACSB Creation of Value

ANS: F PTS: 1 NAT: AACSB Analytic | AACSB Creation of Value

ANS: F PTS: 1 NAT: AACSB Analytic | AACSB Creation of Value

22. Innovation refers to the quality of collaboration across organizational units.

ANS: T PTS: 1 NAT: AACSB Analytic | AACSB Individual Dynamics

ANS: F PTS: 1 NAT: AACSB Analytic | AACSB Individual Dynamics

ANS: F PTS: 1 NAT: AACSB Analytic | AACSB Creation of Value

ANS: T PTS: 1 NAT: AACSB Analytic | AACSB Creation of Value

ANS: T PTS: 1 NAT: AACSB Analytic | AACSB Creation of Value

ANS: T PTS: 1 NAT: AACSB Analytic | AACSB Strategy

ANS: F PTS: 1 NAT: AACSB Diversity | AACSB Strategy

ANS: T PTS: 1 NAT: AACSB Reflective Thinking | AACSB Strategy

39. Service companies cannot use a divisional structure.

ANS: F PTS: 1 NAT: AACSB Analytic | AACSB Strategy

PTS: 1 NAT: AACSB Analytic | AACSB Strategy

PTS: 1 NAT: AACSB Analytic | AACSB Leadership Principles

3. Discuss each of the motivations for global expansion.

PTS: 1 NAT: AACSB Reflective Thinking | AACSB Motivation Concepts

PTS: 1 NAT: AACSB Analytic | AACSB Environmental Influence

5. Describe the stages of international evolution in terms of their strategic orientation.

PTS: 1 NAT: AACSB Reflective Thinking | AACSB Strategy

PTS: 1 NAT: AACSB Analytic | AACSB Creation of Value

PTS: 1 NAT: AACSB Reflective Thinking | AACSB Strategy

PTS: 1 NAT: AACSB Analytic | AACSB Strategy

PTS: 1 NAT: AACSB Analytic | AACSB Creation of Value

PTS: 1 NAT: AACSB Reflective Thinking | AACSB Environmental Influence

12. Discuss the global geographic division structure.

PTS: 1 NAT: AACSB Reflective Thinking | AACSB Environmental Influence

PTS: 1 NAT: AACSB Reflective Thinking | AACSB Environmental Influence

14. Discuss the global matrix structure. Give an example.

PTS: 1 NAT: AACSB Reflective Thinking | AACSB Environmental Influence

PTS: 1 NAT: AACSB Reflective Thinking | AACSB Environmental Influence

PTS: 1 NAT: AACSB Reflective Thinking | AACSB Creation of Value

PTS: 1 NAT: AACSB Reflective Thinking | AACSB Strategy

18. List the benefits that result from interunit collaboration.

PTS: 1 NAT: AACSB Reflective Thinking | AACSB Creation of Value

19. Discuss the national value systems.

PTS: 1 NAT: AACSB Reflective Thinking | AACSB Creation of Value

PTS: 1 NAT: AACSB Diversity | AACSB Environmental Influence

PTS: 1 NAT: AACSB Analytic | AACSB Creation of Value

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