Chapter 15: Structuring and Organizing MNEs
TRUE/FALSE
1. A framework that addresses the pressures MNEs confront is commonly referred to as the
integration-responsiveness framework.
2. A key challenge faced by firms is the conversion of individual knowledge into organizational
knowledge.
3. The integration-responsiveness framework allows managers to deal with the pressures for both global
integration and local responsiveness.
4. Cost pressures often push MNEs to adapt locally.
5. Global integration means reacting to different consumer preferences and host country demands.
6. Home replication strategy duplicates home country-based competencies in foreign countries.
7. Transnational strategy is usually the easiest strategy for an MNE to implement and the first one
adopted when the firm ventures abroad.
8. A localization strategy is best adopted when an MNE is willing to give full attention to foreign market
adaptation and there are minimal pressures to keep cost low.
9. A disadvantage to the global standardization strategy is that often times one size does not fit all, and
they tend to experience a lack of local responsiveness.
10. The global standardization strategy, despite its complexity, is still the best option at being cost
effective and locally responsive.
11. The corresponding structure of transnational strategy is geographic area structure.
12. The corresponding structure of localization strategy is international division structure.
13. A transnational strategy is the best strategy for a situation of low pressure for local responsiveness and
low pressure for cost reduction.
14. A situation of high pressure for local responsiveness but low pressure for cost reductions calls for a
localization strategy.
15. Localization strategy is an extension of the home replication strategy.
16. International division structure is an organizational structure typically set up when a firm first engages
in a home replication strategy.
17. Global product division structure organizes the MNE according to different geographic areas.
18. One of the disadvantages of the geographic area structure is that country and regional managers are not
given sufficient voice relative to the heads of the domestic divisions.
19. A global matrix structure alleviates the disadvantages associated with both geographic area and global
product division structures.
20. The global product division seeks to balance local responsiveness with efficiency while the global
matrix seeks to provide the world with standardized products, seeking to reach their full market
potential.
21. All firms evolve in the same direction from relatively simple international division, through either
geographic area or global product division structures, and may finally reach the more complex global
matrix stage.
22. Strategy usually drives structure, but structure does not usually drive strategy.
23. Host countries tend to prefer higher end jobs such as advanced manufacturing, R&D, and regional
headquarters, while the MNE may prefer to outsource low-end jobs.
24. The knowledge that underpins the competitive advantages of multinational firms is often
organizational and tacit.
25. The top executives at the highest level of an MNE are usually host country nationals.
26. Highly standardized operations such as mass production assembly lines rely to a large extend on
individual tacit knowledge.
27. Explicit knowledge is codifiable and can be transmitted by information technology. Tacit knowledge is
noncodifiable and requires hands-on communication.
28. From a resource perspective, tacit knowledge is harder to transfer than explicit knowledge.
29. Regarding knowledge flow in MNEs, firms adopting the transnational strategy experience the highest
knowledge interdependence while firms adopting the localization strategy experience the lowest.
30. In home replication strategy, knowledge flow is multidirectional, while in transnational strategy, it is
one-way.
31. In MNEs, each subsidiary is generating knowledge through interactions with its local environment.
32. In MNEs, knowledge normally flows in a hierarchical manner between subsidiaries, regional
headquarters and global headquarters, while lateral flows between subsidiaries are discouraged.
33. Subsidiary initiatives refer to subsidiaries reacting to headquarters’ demands differently.
34. Allowing subsidiaries greater freedom and responsibility usually encourages entrepreneurship and
innovation.
35. The best practice to manage a global matrix is to add additional management positions and spread out
the responsibility internally in order to add customer focused dimensions.
MULTIPLE CHOICE
1. Which are the two primary pressures MNEs confront?
a.
Liability of foreignness and investment risk
b.
Local and foreign government
c.
Global scale advantages and local responsiveness
d.
Ethics and governance
2. The big-4 accountancy firms serve clients worldwide through a ‘multiplex’ organizational structure.
What is not a characteristic of this form?
a.
A culture of reciprocity based on relationships across specializations
b.
Client management systems connecting teams of professionals
c.
Multiple axes of deep specialization
d.
Global standardization of services provided
3. The prediction that people around the world would be drinking Coke, wearing Levi jeans, and
watching MTV on their Sony TVs was based on which idea?
a.
Worldwide increase in money used for luxuries
b.
Worldwide convergence of consumer tastes
c.
Worldwide increase in GDP
d.
Worldwide connectivity with communication technology
4. Which of the following is NOT one of the four strategic choices for MNEs?
a.
Localization
c.
Asset allocation
b.
Home replication
d.
Global standardization
5. Which is one of the disadvantages of the home replication strategy?
a.
It is organizationally complex and difficult to implement.
b.
It focuses too much on the foreign country.
c.
It has higher costs due to duplication efforts in multiple countries.
d.
It focuses too much on the home country.
6. Which strategy for MNEs is best for environments where there are clear differences between the home
and foreign markets and there is a low pressure for cost reduction?
a.
Global standardization
c.
Home replication strategy
b.
Asset allocation
d.
Localization strategy
7. Which of the following organization structures is the corresponding structure to localization strategy?
a.
Global matrix structure
c.
Global product division
b.
Geographic area structure
d.
International division structure
8. Which of the following strategy is the best response to high pressure for local responsiveness and high
pressure for cost reductions?
a.
Home replication strategy
c.
Localization strategy
b.
Global strategy
d.
Transnational strategy
9. A localization strategy is the best response to ________ pressure for local responsiveness and
________ pressure for cost reductions.
a.
Low…..low
c.
High…..high
b.
High…..low
d.
Low…..high
10. A global standardization strategy is the best response to ________ pressure for local responsiveness
and ________ pressure for cost reductions.
a.
High…..high
c.
Low…..high
b.
High…..low
d.
Low…..low
11. A(n) ________ structure is the best organization structure for MNEs in a situation with low pressure
for local responsiveness and high pressure for cost reduction.
a.
Global matrix structure
c.
Global product division
b.
Geographic area structure
d.
International division structure
12. Which strategy for MNEs entering foreign markets is best described as the development and
distribution of standardized products worldwide to reap maximum benefits from low cost advantages?
a.
Asset allocation
c.
Global standardization
b.
Localization strategy
d.
Home replication strategy
13. A ________ focuses on a number of foreign countries/regions, each of which is regarded as a
stand-alone market worthy of significant attention and adaptation.
a.
Transnational strategy
c.
Global strategy
b.
Localization strategy
d.
Home replication strategy
14. MNEs adopting ________ may designate centers of excellence.
a.
Global strategy
c.
Home replication strategy
b.
Transnational strategy
d.
Localization strategy
15. A ________ is a subsidiary explicitly recognized as a source of important capabilities, with the
intention that these capabilities be leveraged by and/or disseminated to other subsidiaries.
a.
Partner resources division
c.
Center of excellence
b.
Global product division
d.
Small business unit
16. A global mandate is a charter to be responsible for:
a.
One MNE function throughout the world
b.
One MNE function in a foreign subsidiary
c.
All MNE functions throughout the world
d.
All MNE functions in a foreign subsidiary
17. Which strategy is most difficult to implement and is the most organizationally complex?
a.
Localization strategy
c.
Home replication strategy
b.
Transnational strategy
d.
Global standardization
18. Which of the following is a leading problem with the international division organizational structure?
a.
It tends to be phased out first when a firm faces domestic challenges.
b.
It is too locally responsive.
c.
It is not locally responsive.
d.
The management team is duplicated, creating organizational confusion.
19. Which of the following best describes the strength and weakness of the geographic area structure?
a.
Management control
c.
Cost of equity
b.
Level of local responsiveness
d.
Cost of business
20. What is the drawback to the global matrix approach?
a.
While teamwork is realized, it is difficult to know whom to blame or praise when things
go poorly or well.
b.
The management complexity creates slow decision making.
c.
The complex levels of management often have conflicting incentives, which require
valuable time to align.
d.
All of these answers
21. Organizational knowledge is also known as:
a.
Tacit knowledge
c.
Team-embedded knowledge
b.
Personal knowledge
d.
Individual knowledge
22. Which of the following best exemplifies how informal institutions govern MNEs?
a.
MNEs coming into the US have relatively few restrictions, as long as they do not practice
illegal dumping or price setting.
b.
MNEs based in the US must advance quickly into foreign markets to beat competitors and
take care of opportunities, but these moves are often slowed by legal regulations and entry
barriers.
c.
The US has few laws limiting US firms from creating subsidiaries overseas, but there is
often a vocal backlash from the public over domestic job loss.
d.
The laws governing MNEs based in the US are always changing.
23. Which of the following best describes the motive for appointing a host country national as head
manager in a MNE subsidiary?
a.
They are familiar with the intricate workings of the MNE.
b.
Host country nationals are never appointed as head manager.
c.
They are independent of the local traditions and MNE so act as a neutral leader.
d.
They are familiar with the local informal institutions and market.
24. What is not one of the typical functions of regional headquarters?
a.
Gathering and aggregating market intelligence across the region
b.
Facilitating communication between corporate headquarters and national subsidiaries
c.
Identifying and realizing economies of scale at a regional level
d.
All of these answers
e.
None of these answers
25. What is not a reason for companies to move their corporate headquarters to another country?
a.
To be closer to their main customer
b.
To escape high rates of corporate taxation
c.
To be closer to financial markets and key shareholders
d.
To leverage the cultural values of the home country
26. Why is the flexible global matrix a popular organizational structure?
a.
Because it allows efficiency and simplicity in management levels
b.
Because it takes everything global and efficiently creates standardized products and
marketing
c.
Because formal structures are easier to observe and imitate than informal structures, and it
is more of a management mentality than an organizational structure
d.
Because it balances local responsiveness and cost efficiency
27. ________ is the structures, processes, and systems that actively develop, advance, and transfer
knowledge.
a.
Tacit knowledge
c.
Explicit knowledge
b.
Knowledge management
d.
Absorptive capacity
28. Teams working together face-to–face over longer periods of time are likely to convert ________ into
________.
a.
Organizational..…personal
c.
Individual…..personal
b.
Explicit…..tacit
d.
Individual…..organizational
29. ________ is the idea that innovation relies more on collaborative research among various internal
units, external firms, and university labs.
a.
Open innovation
c.
Heterogeneity
b.
Closed innovation
d.
Collaborative innovation
30. A group of people working closely together and exchanging knowledge in their shared field of
specialization, yet rarely meeting in person are known as:
a.
Absorptive capacity
c.
Internet club
b.
Social capital
d.
Virtual community of practice
31. Which of the following is an example of explicit organizational knowledge?
a.
Patents
b.
Databases
c.
Job descriptions
d.
All of these answers
e.
None of these answers
32. Organizational routines embody:
a.
Organizational explicit knowledge
c.
Organizational tacit knowledge
b.
Individual explicit knowledge
d.
Individual tacit knowledge
33. Which best describes the tension between central control and subsidiary initiative in a large firm?
a.
The central management may want to give subsidiaries control and encourage
entrepreneurship and innovation, but it is difficult to distinguish between good faith
subsidiary initiative and opportunism.
b.
The central management must realize social capital in order to take advantages of the
complex subsidiary relationships.
c.
The central management’s main motivation is value for the firm, so it will only give
subsidiaries greater responsibility if they create value.
d.
All of these answers
34. A subsidiary with responsibility for one MNE function throughout the world:
a.
Is a worldwide cost centre
c.
Is preferred internal consultant
b.
Has a worldwide mandate
d.
Is an initiative subsidiary
35. The proactive and deliberate pursuit of new opportunities by a subsidiary within the context of the
MNE is known as:
a.
Initiative subsidiary
c.
Worldwide mandate
b.
Subsidiary initiative
d.
Worldwide cost centre
ESSAY
1. Explain the prediction of worldwide convergence of consumer tastes made by Theodore Levitt, and
determine whether or not it was accurate.
2. Identify three strategic choices for MNEs and list their advantages and disadvantages.
3. Describe how two organizational structures align with their strategic counterparts.
4. Explain the reciprocal relationship between multinational strategy and structure.
5. How can MNEs transform individual tacit knowledge into organizational knowledge, and why s the
ability to do so an important capability for MNEs?
6. Define and describe the importance of “open innovation.”
7. Explain the dilemma central management faces regarding subsidiary initiative.
8. Explain what a center of excellence is.