DRS, IBEO 12 Chapter 15 The Organization of International Business

Chapter 15 The Organization of International Business Multiple Choice Questions

STUDY QUESTION 1: What is the challenge of organization in international business? Why do managers increasingly worry about it? What trends drive current change? 1. Once managers have specified the company's strategy, their jobs turn to converting strategic plan into actions. This task begins by _____. a. devising an organization that can create value while mediating the pressures for worldwide integration versus local differentiation (interpretation, page 520) b. configuring the subsidiary network to create the optimal value chain c. adjusting the strategy to avoid conflicts with company traditions d. precisely mapping the responsibilities for each subsidiary and every manager 2. The task of organization in the international company to execute its strategy is becoming more challenging because of the growing importance of _____. a. formally outlining the structure of the organization b. overcoming resistance to product change c. building knowledge-generating and decision-making relationships (interpretation, page 521) d. reengineering inefficient units of the company 3. _____ and _____ trends pose new challenges to building an organization that helps managers implement their chosen strategy a. Demographic; technological b. Institutional; cognitive c. Social; political. d. Environmental; workplace (definition, page 521) 4. The three components of building a capable organization include all of the following except _____. a. formal structure that specifies the framework for work b. systems that coordinate and control what gets done c. developing a set of shared values among employees around the world d. leadership and training programs to develop the staff of the company (definition, page 523) 5. Changes in social contract between employees and organizations are characterized by _____________ and ______________. a. Increased job security, pay, and benefits; increased professional mobility b. Decreased job security, pay, and benefits; decreased professional mobility. c. Decreased job security, pay, and benefits; increased professional mobility 26

DRS, IBEO 12 Chapter 15 The Organization of International Business

d. Increased job security, pay, and benefits; decreased professional mobility. STUDY QUESTION 2: What is meant by vertical differentiation? 6. The degree of _____ in a company determines where it has opted to assign decision-making authority within the context of its organization structure. a. systemic differentiation b. horizontal differentiation c. schematic differentiation d. vertical differentiation (definition, page 524) 7. The_____ the level of the company at which managers make decisions, the more that organization is _____. a. higher; decentralized b. lower; centralized c. higher; centralized (interpretation, page 524) d. higher; unimportant 8. Concerns about cost, expediency, and uncertainty encourage a MNE to _____. a. decentralize decision-making b. centralize decision-making (interpretation, page 524) c. expand the number of levels of the organization involved in decision-making d. consult more subsidiary personnel 9. Decentralized decision-making is most appropriate when _____. a. success in international operations depends on the quality of local adaptation (interpretation, page 524) b. decisions involve moving goods or resources internationally c. global standardization is required to contain costs d. decisions must be made that will impact the entire company 10. A decision made at the Citigroup Panama level, a foreign subsidiary of Citigroup, would be a ___ decision. a. Centralized b. Collectivist c. Decentralized d. Individualist STUDY QUESTION 3: What is meant by horizontal differentiation? How can one define the properties and purposes of structure? 11. The term _____ refers to the formal arrangement of roles, responsibilities, and relationships within an organization. a. structure (definition, page 524) b. systems

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c. culture d. strategy 12. The idea of _____ describes how the company specifies organizational tasks, divides those tasks into jobs, departments, subsidiaries, and divisions, and then assigns authority and authority relationships. a. systemic differentiation b. horizontal differentiation (definition, page 526) c. vertical differentiation d. schematic differentiation 13. An organization chartthe system of lines and boxes that represents its formal structure depicts all of the following except _____. a. division of labor within an organization b. linkages among the various units of an organization c. when subsidiaries report to headquarters (definition, page 524) d. the arrangement of management positions 14. _____ is the matter of how the company balances centralization versus decentralization of decision-making whereas _____ is the matter of how the company opts to divide itself into specific units to do specific jobs. a. Horizontal differentiation; vertical differentiation b. Vertical differentiation; systemic differentiation c. Schematic differentiation; schematic differentiation d. Vertical differentiation; horizontal differentiation (interpretation, page 524) 15. Which of the following statements is not an advantage of decentralization? a. Entourages lower-level managers to exercise initiative b. Enable more flexible response to rapid environmental changes c. Gives senior executives the authority to direct major change pg. 527* d. Decisions made by those who directly deal with customers, competitors, and markets STUDY QUESTION 4: What are the features, properties, and practices of the functional structure? 16. A _____ is the ideal way to organize work when a company's products share a common technology and competitive pressures push for a cost-leadership strategy. a. centralized structure. b. matrix structure. c. divisional structure d. functional structure (definition, page 526) 17. Organizing departments and units around discrete business activities, such as finance, production, marketing, and human resources, results in a _____. a. network structure

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b. matrix structure c. functional structure (definition, page 526) d. divisional structure 18. Decision-making in a functional structure tends to be _____. a. decentralized b. centralized (definition, page 526) c. vertical d. lateral 19. Functional structures for international operations are most likely found among those companies that _____. a. face competitive pressures for a cost-leadership strategy (interpretation, page 526) b. offer a broad range of products that share few common technologies c. rely on differentiated production and marketing methods d. compete in stable industries 20. _____ STUDY QUESTION 5: What are the features, properties, and practices of the divisional structure? 21. Whereas executives specify roles and relationships in a functional structure in terms of _____, they use the divisional structure format to specify them according to _____. a. inputs; outputs (interpretation, page 527) b. buyers; supplies c. markets; countries d. politics; economics 22. A major benefit of the international division structure is _____. a. the creation of incentives for domestic divisions to contribute resources for international operations b. the formation of a critical mass of international expertise (definition, page 527) c. that it is well suited to firms with diverse product groups d. that it is located abroad 23. Historically, when firms have expanded abroad, they have typically grouped all their international activities in a(n) _____ division. a. customer b. functional c. international (interpretation, page 528) d. manufacturing 24. A major benefit of the international division structure is _____. a. that it is well suited to firms with diverse product lines b. its ability to exploit economies of scale or scope

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c. the creation of incentives for domestic divisions to contribute resources for international operations d. the creation of a critical mass of managers that can wield power within the larger organization (interpretation, page 526) 25. Which type of divisional structure is most common for a company pursuing a Multidomestic Strategy? a. International Structure b. Product Structure c. Geographic Structure STUDY QUESTION 6: What are the features, properties, and practices of the product and area structures? 26. Which of the following organizational structures is particularly popular among companies that make a variety of diverse products? a. international division structure b. functional division structure c. geographic division structure d. product division structure (interpretation, page 528) 27. A _____ tends to be adopted by firms that are reasonably diversified and likely use a range of distribution channels and supply chains. a. international division structure b. geographic division structure c. product division structure (interpretation, page 528) d. functional division structure 28. The _____, given that both the foreign and domestic operations report to the same manager, is designed to help overcome the coordination problems that arise with the international division and worldwide area structures. a. matrix division structure b. product division structure (interpretation, page 528) c. hierarchy division structure d. functional division structure 29. The primary limitation with the worldwide product division structure is _____. a. the cost of duplicated functions and international activities among the product divisions (definition, page 528) b. that it complicates finding synergies between foreign and domestic value activities c. that it does not facilitate the transfer of core competencies within a division's worldwide operations d. the difficulty it creates in a selling or spinning-off product lines 30. _____

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STUDY QUESTION 7: What are the features, properties, and practices of the matrix and mixed structures? 31. Applying strategies that try to simultaneously deal with competing pressures for global integration and local responsiveness spur some MNEs to adopt a _____ structure. a. matrix (definition, page 529) b. functional c. geographic division d. functional division 32. Which of the following statements is false about a matrix structure? a. it specifies extensive communication channels b. it is more easily managed than a divisional structure (interpretation, page 529) c. it creates dual career ladders d. it slows decision-making 33. The fundamental limitation of a matrix structure is that it _____. a. creates the sense that someone else is handling responsibilities for strategic decisions b. can isolate upper management from operational levels c. institutes a dual hierarchy that violates the unity-of-command principle (definition, page 529) d. encourages power contests among executives 34. In reality, the organizational charts of _____ MNEs neatly depict a functional, divisional, or matrix structure. a. no b. few (definition, page 529) c. many d. all 35. A matrix organization includes all of the following except: a. Includes a senority-based promotional approach b. Institutes overlaps among functional and divisional forms c. Gives functional, product, and geographic groups a common focus d. Has dual reporting relationships rater than a single line of command STUDY QUESTION 8: What is meant by contemporary structures? What are its primary characteristics? 36. Contemporary structures essentially aim to arrange roles and responsibilities in the organization so that more employees, particularly those in the front-lines who deal more directly with resources and markets, have _____ decision-making authority. a. no

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b. less c. more (interpretation, page 530) d. absolute 37. Contemporary structures aim to support organizations _____. a. in which the location of control between the constituent units of a network alliance is evident b. that centralize decision-making authority to those who can make informed decisions c. that dismantle horizontal, vertical, or external boundaries that block ideas and relationships (interpretation, page 530) d. that create predictable workplaces with slight collaboration among subsidiaries 38. Which of the following is an unlikely characteristic of contemporary structures? a. few barriers between people b. extensive collaborative efforts among people in different specialties and different geographic locations c. higher capacity for change and learning d. centralized decision-making (definition, page 530) 39. Contemporary structures aim to have few boundaries between all of the following except _____. a. different vertical ranks and functions b. different units in different geographic locations c. the firm and its suppliers, distributors, allies, and customers d. the firm and its competitors (interpretation, page 531) 40. Contemporary organizational structures are beginning to look more like__________, while making the shift to more ____________ decision making : a. The Internet; Centralized b. Hierarchies; Decentralized c. The Internet; Decentralized d. Hierarchies; Centralized

STUDY QUESTION 9: What are the functions and forms of contemporary structures? 41. The benefits of network structures include _____. a. higher competition among members for resources and rewards b. difficulty in switching suppliers, no matter where in the world they are located c. developing core competencies in a broad range of value activities d. maintaining a strong sense of organization in the face of dynamic partnerships (interpretation, page 531)

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42. A hyperarchy is _____. a. a form of structure that precise superiors and subordinates relationships b. a form of structure that relies on extensive centralization c. a large-scale, self-organizing community (definition, page 534) d. analogous to a hierarchy 43. A virtual organization is _____ of a traditional vertical hierarchy. a. an elaboration b. the antithesis (interpretation, page 533) c. the latest interpretation d. a selective application 44. Some MNEs that have tried "spaghetti organizations" have run into problems, most notably _____. a. frequent managerial intervention in decision-making (interpretation, page 533) b. relentless centralization of decision-making c. overly motivated employees d. extreme competition among members for resources 45. _____ STUDY QUESTION 10: Identify the major types of coordination systems. What does each sort aim to accomplish and how? 46. Coordination refers to the _____. a. linking of various value activities within an organization (definition, page 535) b. span of control within an organization c. portioning the performance of specific tasks d. means to ensure managers act in ways that are anchored in their immediate responsibility. 47. Prevalent approaches to coordination include all of the following except _____. a. standardization b. mutual adjustment c. adaptive (definition, page 535) d. planning 48. The approach to coordination that involves ongoing discussions among different units of the MNE to figure out how to resolve challenges jointly is known as _____. a. management by objectives b. organization structure c. coordination by plan d. coordination by mutual adjustment (definition, page 537)

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49. Companies often use a range or executive development and education programs to get to improve the performance of _____. a. coordination by standardization b. coordination by consensus c. coordination by plan (definition, page 536) d. coordination by conflict 50. Establishing common rules and procedures that apply uniformly to everyone worldwide is the effort to coordinate by _____. a. standardization (definition, page 535) b. consensus c. plan d. mutual adjustment 51. _____ STUDY QUESTION 11: Identify the major types of control systems. What does each sort aim to accomplish and how? 52. Three types of control systems are used in MNEs. These are _____. a. market control, bureaucratic control, and lan control (definition, page 538) b. standardization control, adjustment control, and clan control c. market control, adjustment control, and clan control d. planning control, market control, and clan control 53. The MNE that uses external market mechanisms, like price competition and relative market share, to establish internal performance benchmarks and standards is applying a system of _____. a. bureaucratic control b. market control (definition, page 538) c. standardization control d. clan control 54. The MNE that uses centralized authority to install an extensive set of rules and procedures to govern a broad range of activities is applying a system of _____. a. market control b. adjustment control c. bureaucratic control (definition, page 538) d. clan control 55. The MNE that relies on shared values among all employees to idealize the preferred behaviors and identify performance measures within the company is applying a system of _____. a. market control b. bureaucratic control

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c. planning control d. clan control (definition, page 538) 56. _____ STUDY QUESTION 12: What are the primary operational methods of control? 57. Written reports compiled and submitted by local subsidiaries to the home office _____. a. are a major means of promoting organization culture b. have recently become less important in MNEs c. are discouraged between headquarters and subsidiaries in the event of a language gap d. resemble the format used domestically (definition, page 538) 58. MNEs use reporting systems for foreign operations that are similar to the ones they use domestically _____. a. primarily in the early stages of operating abroad b. because common systems allow comparative evaluations (definition, page 539) c. until the subsidiary demonstrates mastery of the form d. only in those countries with extremely similar systems of information technology 59. A common problem of corporate visits as a control mechanism is _____. a. the language gap between corporate and subsidiary personnel b. their view by foreign subsidiary managers as being wasteful jaunts by home office executives (interpretation, page 539) c. jet lag that keeps headquarters personnel from being effective d. the ill will created with joint venture partners 60. _____ STUDY QUESTION 13: Define organization culture. Identify its linkages to the MNE's performance and strategy. 61. _____ is the norms and value systems that are shared among the employees of an organization. a. Organizational systems b. Organizational structure c. Organizational culture (definition, page 541) d. Organizational vision 62. Despite wide-range interpretation, many believe that a company's organization culture is best viewed as all of the following except _____. a. values and principles of management b. outlook on power distance (interpretation, page 541) c. nature of the work climate and atmosphere

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d. traditions and ethical standards 63. Studies report a(n) _____link between organization culture and the financial performance of the firm. a. significant (definition, page 541) b. negligible c. spurious d. occasional 64. A strong organization culture provides many benefits to an MNE, including _____. a. inspiring managers worldwide to react to changing customer and market requirements b. solidifying resistance to new versions of traditional policies and procedures c. diluting employee commitment to generating knowledge and building relationships to manage growing interdependence among value activities d. creating the flexibility to adapt its strategy when company or market circumstances change (interpretation, page 541) 65. Key features of a companys organizational culture include all except: a. Values and principles of management b. Work climate and atmosphere c. Patterns of how we do things around here d. Embedded set of disparate ethical standards STUDY QUESTION 14: Cases and Insert Features 66. Johnson & Johnson delegates to its subsidiaries a great deal of authority to respond to local conditions. Many subsidiaries have their own manufacturing, marketing, research, and human resource functions. This particular value chain configuration illustrates the _____________ strategy. multidomestic global transnational international 67. J&J is organized on the principles of a _________ management a. centralized b. decentralized c. horizontal integration d. horizontal differentiation 68. _____ 69. _____

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70. _____ 71. Currently, the role of corporate universities is _____ because _________: A)Declining; MNEs have only built university sites in the United States. B)Rising; it separates company strategy from company culture to facilitate learning. C)Declining; corporate universities do not promote skills relevant to a globalized economy. D)Rising; it is a key enabler for future growth [page 547

True/False Questions
STUDY QUESTION 1: What is the challenge of organization in international business? Why do managers increasingly worry about it? What trends drive current change? 72. Any organization, no matter what form it takes, ultimately must help managers reconcile the pressures for worldwide integration versus local differentiation. True (definition, page 521) 73. Current approaches to designing an organization see the task of building knowledgegenerating and decision-making relationships as less important than specifying the best structural arrangement. False (definition, page 522) STUDY QUESTION 2: What is meant by vertical differentiation? 74. A firm's vertical differentiation determines where in its organization structure managers have decided to concentrate decision-making authority. True (definition, page 524) 75. A firm's horizontal differentiation determines where it has opted to assign decision-making authority within the context of its hierarchy. False (definition, page 524) 76. Decentralization has the key advantage of: letting decisions be made by those who directly deal with customers, competitors, and markets. True STUDY QUESTION 3: What is meant by horizontal differentiation? How can one define the properties and purposes of structure? 77. Horizontal differentiation is concerned with how the managers of a firm decide to divide the company into discrete subunits. True (definition, page 526) 78. Determining how to balance the centralization versus decentralization of decision-making requires managers address the matter of horizontal differentiation. False (definition, page 526) 79. Centralization is more appropriate for an International or Global strategy, as decentralization is more appropriate for a Multidomestic strategy. True 80. An advantage of centralized corporate practices includes reducing the risk that lower-level employees make costly, wrong decisions. True 81. Horizontal differentiation is the degree to which high level managers make important decisions and pass them down to lower levels for implementation False

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STUDY QUESTION 4: What are the features, properties, and practices of the functional structure? 82. The functional structure is ideal when products and manufacturing methods are largely undifferentiated among countries. False (interpretation, page 526) 83. The functional structure is ideal when the company faces complex and changing environments. False (definition, page 526) 84. Functional structures are popular among companies with narrow product lines (page 528) 85. A geographic division structure is popular when foreign operations are large and are not dominated by a single country or region True STUDY QUESTION 5: What are the features, properties, and practices of the divisional structure? 86. A major benefit of the international division structure is the creation of a critical mass of international expertise. True (definition, page 526) 87. A division structure tends to be adopted by firms that are diversified by products or markets. True (definition, page 526) 88. Divisional structures are popular among companies with narrow product lines (False 89. Companies with a narrow range of products are most likely to use a product division. False (definition, page 528) 90. Firms with a low degree of diversification and a domestic structure based on function tend to favor a worldwide area structure. True (interpretation, page 528) 91. An international division structure Which type of divisional structure is best suited for multidomestic strategies that demand little integration and standardization between domestic and foreign operations? (Page 530) STUDY QUESTION 7: What are the features, properties, and practices of the matrix and mixed structures? 92. Group interdependence, either in terms of products, functions, or geography, and the increased exchange of information are features of a matrix structure. True (definition, page 529) 93. A matrix organization is a hybrid of the functional and area organizations. False (definition, page 529) STUDY QUESTION 8: What is meant by contemporary structures? What are its primary characteristics? 94. Contemporary structures aim to centralize decision-making authority by removing boundaries that impede the decentralization of decision-making. False (interpretation, page 530) 95. A common feature of contemporary structures is greater cross-functional collaboration. True (definition, page 531)

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STUDY QUESTION 9: What are the functions and forms of contemporary structures? 96. The idea of a network organization refers to a collection of independent, mostly singlefunction firms. True (definition, page 531) 97. The notion of boundaries, within the context of contemporary structures, refers to those limitations that interfere with communication and collaboration between the firm and its suppliers, distributors, allies, competitive rivals, and customers. False (interpretation, page 531) In developing the adaptable organization, managers face a range of structural barriers. Overcoming these barriers requires a rethinking of what GE's former CEO Jack Welch has called an organization's social architecture, namely the framework that moderates and brings together individual behavior, strategic competencies, and organizational culture. 5) _______ STUDY QUESTION 10: Identify the major types of coordination systems. What does each sort aim to accomplish and how? 98. Coordination by plan deals with exact rules and procedures that spell out what needs to be done and how. False (definition, page 535) 99. Coordination methods include mutual adjustment, planning, and standardization. True (definition, page 535) STUDY QUESTION 11: Identify the major types of control systems. What does each sort aim to accomplish and how? 100. MNEs typically design their control systems in terms of either market control, bureaucratic control, or adaptation control. False (definition, page 538) 101. Adopting a market control system requires that the MNE uses external market mechanisms to establish internal performance benchmarks and standards. True (definition, page 538) STUDY QUESTION 12: What are the primary operational methods of control? 102. Written reports are a major means of promoting corporate culture. False (definition, page 539) 103. The reporting systems used by MNEs to control worldwide operations typically differ from country to country. False (definition, page 539) STUDY QUESTION 13: Define organization culture. Identify its linkages to the MNE's performance and strategy. 104. The common values shared by a company's employees are known as its corporate culture. True (definition, page 541)

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105. The character of a company's corporate culture is a product of, beside the core values and business principles that management advocates, the behaviors that define "how we do things around here." True (interpretation, page 541) STUDY QUESTION 14: Cases and Insert Features . Johnson and Johnson is organized on the principles of decentralized management in the belief that mangers who are closest to customers and competitors should make decisions. Correct Answer = TRUE (text pg 519) Johnson and Johnson is organized on principles of decentralized management, therefore, most of their international subsidiaries are managed by citizens of the country that they are located in. Answer: True

Andy Grove, the former CEO of Intel, noted that executives face the challenge of understanding how to"must let chaos reign, and then rein in chaos." This declaration has led to a fundamental shift in the understanding of how companies approach the organization of their global operations. While there are many implications, increasingly we see evidence that many companies are meeting chaos with chaos, tightening controls, sometimes radically, while guiding the company in innovative ways. 19) _______

Essay Questions
106. How might centralization of decision-making adversely affect local managers (those managers in foreign branches or subsidiaries)? Answer Although some decisions are better left to corporate management, doing so may cause morale problems among local managers who perceive their responsibility has been taken away. When local managers are prevented from acting in the best interest of their own operation, they tend to think, I could have done better, but corporate management would not let me. If local managers cannot participate in developing global strategies, they may lack the positive attitude to work hard to implement global strategic decisions. These managers also may not gain the experience needed to advance within the company. (interpretation, pages 524525) 40

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107. What are some of the trade-offs that companies need to consider when deciding where to locate decision-making in international business? Answer The higher the managerial level at which managers make decisions, the more they are centralized, the lower the level, the more they are decentralized. The location of decisionmaking may vary within the same company over time as well as by product, function, and country. An ethnocentric attitude would influence a company to develop competencies, such as knowledge and technology, in its home country and control how they are transferred aboard. A polycentric attitude would cause the company to delegate decisions to foreign subsidiaries because headquarters personnel believe only people on the spot know best what to do. A geocentric attitude would permit more openness to capabilities either at home or abroad and be conducive to a transnational strategy. (interpretation, page 525) 108. Explain the major types of traditional organization structures and the advantages and disadvantages of each for international operations. Answer a. Functional division structureDivide personnel functionally so that marketing people report to other marketing people, finance people to other finance people, and so on. Functional divisions are popular among companies with a narrow range of products, particularly if the production and marketing methods are undifferentiated among them. However, as they add new and different products, this structure becomes cumbersome. b. Product division structureProduct divisions are particularly popular among companies that make a variety of diverse products, especially those that have become diverse through acquisitions. Because these divisions may have little in common, they may be highly independent of each other. As is true for the functional structure, the product division structure is well suited for a global strategy because both the foreign and domestic operations for a given product report to the same manager, who can find synergies between the two, such as by sharing information on the successes and failures of each. c. International division structureGrouping international business activities into their own division puts internationally specialized personnel together to handle such diverse matters as export documentation, foreign exchange transactions, and relations with foreign governments. This prevents duplication of these activities in more than one place in the organization. It also creates a large enough critical mass so that personnel within the division can wield power within the organization to push for international expansion. d. Geographic division structureCompanies use geographic divisions if they have large foreign operations that are not dominated by a single country or area. This structure is more common to European MNEs than to U.S MNEs, which tend to be dominated by the strong domestic market. The structure is useful when maximum economies in production can be gained on a regional rather than on a global basis because of market

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size or the production technologies for the industry. A drawback is possibly costly duplication of work among areas. e. Matrix division structureDue to the problems inherent in either integrating or separating foreign operations, many companies are moving toward matrix organizations. In this organizational structure, a subsidiary reports to more than one groupage. This structure is based on the theory that because each group shares responsibility over foreign operations, the groups will become more interdependent, exchange information, and exchange resources with each other. One drawback, however, concerns how groups compete for scarce resources to enact their preferred operating methods. (definition, page 528) 109. Describe some of the general features of contemporary structures.

Answer Because each type of organizational structure has advantages and disadvantages, companies in recent years have developed new forms or organization structure to pull together some of the diverse functional, geographic, and product perspectives. Some of these mechanisms are: a. developing teams with members from different countries for planning to build scenarios on how the future may evolve b. strengthening corporate staffs so that headquarters and subsidiary managers with line responsibilities must listen to different viewpoints c. using more management rotation, such as between domestic and international positions, to break down parochial views d. keeping international and domestic personnel in closer proximity to each other, e. establishing liaisons among subsidiaries within the same country so that different product groups can get combined action on a given issue f. developing teams from different countries to work on special projects of crossnational importance, so that they share viewpoints g. placing foreign personnel on the board of directors and top-level committees to bring foreign viewpoints into top-level decisions h. giving all divisions and subsidiaries credit for business resulting from cooperative efforts so that they are encouraged to view activities broadly i. basing reward systems partially on global results so that managers are committed to global as well as local performance (definition, pages 530531) 110. Describe using reports as a control mechanism.

Answer Headquarters needs timely reports to allocate resources, correct plans, and reward personnel. Their decisions on how to use capital, personnel, and technology are almost continuous, so reports must be frequent, accurate, and up-to-date to assure meeting the MNE's objectives. Headquarters uses reports to evaluate the performance of subsidiary personnel so as to reward and motivate them. Written reports are more important in an international setting than in a domestic one because subsidiaries' managers have much

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less personal contact with managers above them. Corporate managers miss out on much of the informal communication that could tell them about the performance of foreign operations. Most MNEs use reports for foreign operations that resemble those they use domestically. The reasons for this are: a. If the reports have been effective domestically, management often believes they also will be effective internationally. b. There are economies from carrying over the same types of reports. The need to establish new types of reporting mechanisms is eliminated, and corporate management is already familiar with the system. c. Reports with similar formats presumably allow management to better compare one operation with another's. (interpretation, pages 538539)

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