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Student name:__________
TRUE/FALSE – Write ‘T’ if the statement is true and ‘F’ if the statement is false.
1) A company’s organizational structure helps to determine where formal power and
authority will be located within the organization.
⊚ true
⊚ false
2) One of the four elements that must be considered when designing the structure of an
international company is customer expertise, which allows a business to gauge the similarity of
client groups and market segments.
⊚ true
⊚ false
3) An evolving structure for an international organization over time is normal, as the
company’s involvement in foreign markets increases over time.
⊚ true
⊚ false
4) Organizational design is another term for a company’s mission statement.
⊚ true
⊚ false
5) The international division is a division in the organization that is responsible for all non-
home-country activities and reports to the domestic division.
⊚ true
⊚ false
6) When companies’ overseas operations increase, most companies establish worldwide
organizations based on product, region, function, or customer classes.
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⊚ true
⊚ false
7) The international product structure is preferred by companies that manufacture products
with a stable technological content that requires strong marketing ability.
⊚ true
⊚ false
8) The international product structure eliminates the duplication of product and area
specialists.
⊚ true
⊚ false
9) Few international companies are organized by function at the top level.
⊚ true
⊚ false
10) Hybrid organizations are often the result of a regionally organized company having
introduced a new and different product from what the regionally organized form is accustomed
to handling.
⊚ true
⊚ false
11) In a typical matrix organization, an organizational structure based on one or possibly two
dimensions is superimposed on an organization based on another dimension.
⊚ true
⊚ false
12) The matrix overlay organizational form attempts to eliminate some of the problems of the
matrix organization.
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⊚ true
⊚ false
13) Strategic business units are an organizational form in which geographic divisions of a
company are defined as distinct, independent businesses.
⊚ true
⊚ false
14) Advantages of the virtual corporation concept include that it allows a company to build
competence from the ground up and to increase management’s control over the corporation’s
activities.
⊚ true
⊚ false
15) The horizontal organization has been characterized as anti-organization because its
designers try to remove the constraints imposed by the conventional organizational structure.
⊚ true
⊚ false
16) In a typical chain of command in a corporate entity, the parent company is controlled by
a subsidiary.
⊚ true
⊚ false
17) In a firm without a global product policy, the preference of the operations management
people in the home office has always been to customize the product.
⊚ true
⊚ false
18) The less familiar the home company is with cultural values in a host country, the more
likely the home company will rely on the subsidiary for management.
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⊚ true
⊚ false
19) With less than 50 percent of the voting stock, or even with no voting stock, an IC can still
have control over a subsidiary’s activities.
⊚ true
⊚ false
20) For controls to be effective, all operating units of an IC must provide headquarters with
timely, accurate, and complete reports, including those dealing with financial, technological,
market opportunity, and political and economic information.
⊚ true
⊚ false
MULTIPLE CHOICE – Choose the one alternative that best completes the statement or
answers the question.
21) After acquiring two new foreign affiliates, Henson Manufacturing created a new
organizational chart to indicate where formal authority would lie within the organization. This
organizational chart is an indication of
A) production development.
B) organizational design.
C) production logistics.
D) organizational structure.
22) Organizational design is best described as
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A) a process that deals with how an international business should be organized to ensure
that its global business activities are integrated efficiently and effectively.
B) management’s concern with the size of an organization or the complexity of its
business operations.
C) something that must remain stable over time to enable the organization to create and
exploit competitive advantage.
D) an aspect of business that becomes less important as an IC encounters increased
environmental and strategic change.
23) What is an accurate description of an IC’s structures and systems?
A) Management must avoid changing them over time, to avoid disrupting operations.
B) They must be designed before a company can develop its strategy.
C) They need to be able to evolve over time.
D) They depend on the country in which the IC is headquartered.
24) While assessing the structure of the proposed international company, the management
team asked for reports on the terrain of the country where they planned to build a new plant. This
report would be used to forecast the costs of building which would vary significantly if the
terrain was mountainous. Which of the four elements of designing the structure of an IC does
this represent?
A) customer expertise
B) geographic expertise
C) functional expertise
D) product and technical expertise
25) The two main issues for management to consider in designing an international company’s
structure include:
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A) departmentalizing to most effectively take advantage of efficiencies gained from
specialization of capital.
B) integrating functions to achieve lowest possible costs.
C) ensuring that policies and procedures can enable continued product innovation.
D) coordinating departments’ activities to meet the firm’s overall objectives.
26) Organizational designers in the IC must be aware that the gain achieved from increased
specialization of labor may sometimes be nullified by
A) the increased cost of geographic expansion.
B) the increased cost of coordination.
C) the increased cost of product development.
D) increased costs from unionization.
27) When designing the structure of an IC, the element a company considers while it assesses
population groups is
A) product and technical expertise.
B) functional expertise.
C) customer expertise.
D) geographical expertise.
28) In designing the organizational structure, management knows that two concerns,
__________ and __________, run counter to each other.
A) an effective way to departmentalize; coordinating activities
B) earning profits; paying taxes
C) hiring employees; gauging client groups
D) sales growth; research and design expenditures
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29) What method do companies often use when initially entering a foreign market? This
method would create the least amount of risk.
A) Export product to the foreign market.
B) Acquire an existing business in the foreign market.
C) Create a wholly owned subsidiary.
D) Build a manufacturing facility in foreign market.
30) A division in the organization that is at the same level as the domestic division and is
responsible for all non-home-country activities is a(n)
A) foreign division.
B) global product division.
C) regional division.
D) international division.
31) Keller Corp., based in Virginia, has exported its line of luggage and travel products into
Europe for the past three years and has decided to create a new division based in Paris to handle
all overseas activity. What type of division is the company creating?
A) international
B) domestic
C) global
D) regional
32) Within the international division structure, it is common for
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A) conflicts to be minimized within the firm.
B) fewer power struggles to arise over product designs.
C) the challenges of managing the international division to diminish as larger size and
scale are achieved.
D) disagreements to be had regarding prices charged to the international division by the
domestic unit.
33) Once a company’s overseas operations have achieved satisfactory levels, the company
might decide to eliminate the international division and incorporate a worldwide structure. These
structures are usually based on one of four things, including
A) processing.
B) product.
C) media availability.
D) tariffs.
34) When creating a worldwide organizational structure, one criteria that companies do not
rely on as the basis for organizational subdivisions at the second, third, and still lower levels is
A) size of company
B) national subsidiary
C) region.
D) function
35) One advantage of companies with global structures is that they
A) outperform those with international divisions.
B) are organized on the basis of geography and not on products or processes.
C) are large companies with numerous overseas manufacturing facilities.
D) may obtain lower production costs by promoting worldwide product standardization.
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36) One expectation by companies that adopt the global organizational form is that this
change may
A) permit the company to obtain cheaper labor.
B) help the company be more capable of developing strategies to confront global
competition.
C) enable the company to get lower interest rates to finance expansion.
D) enable the company to avoid regulations and policies set down by foreign
governments.
37) As their overseas operations have increased in importance, larger multinationals have felt
the need to
A) change from a global structure to an international division.
B) establish home country operations that handle all aspects of production and
marketing.
C) eliminate their domestic operations.
D) establish worldwide organizations based on product, customer class, function, or
region at the top level.
38) The international structural stages model suggests that a typical evolutional path for an
international company’s structure would be
A) from international division to worldwide product division to geographical area
division.
B) from geographical area division to worldwide product division to global matrix.
C) from functional division to horizontal company to virtual corporation.
D) from international division to worldwide product division to global matrix.
39) The use of an international product structure typically
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A) represents a sharp move away from pre-export department times.
B) removes domestic product divisions.
C) helps to avoid duplication of product experts.
D) suffers from a duplication of area experts.
40) Malek Inc. has implemented a company structure in which the domestic product division
is responsible for all global line and staff operations. In addition, each product division is
responsible for the worldwide operation efforts of marketing and production. Which structure
does this company use?
A) geographic region
B) international product
C) hybrid
D) global functional
41) The geographic region structure seems to be popular with companies that
A) operate in a purely domestic market offering customized products.
B) favor licensing as a form of market entry.
C) manufacture products with a low technological content.
D) manufacture products incorporating high technology in industrialized regions.
42) What is one disadvantage of the geographic region structure?
A) All managers report to their respective home or host country office.
B) It is not appropriate for companies that produce items with low technological
content.
C) Each region must have its own product and functional specialists.
D) It complicates the task of directing worldwide operations.
43) One characteristic of the geographic regionalized organization is
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A) it has the advantage that it avoids duplication of product and functional specialists.
B) it seems to be popular with companies that have diverse products, each with different
product requirements, competitive environments, and political risks.
C) it avoids problems with global product planning.
D) it has geographic area managers who report directly to domestic operating units.
44) What is a disadvantage of the geographic region organizational structure?
A) It creates increased complexity of directing worldwide operations.
B) It is inappropriate for use in global companies.
C) It creates duplication of area and product specialists.
D) It can make product coordination across regions challenging.
45) The common characteristic of multinationals that are organized by function is a narrow
and
A) highly integrated product mix.
B) highly integrated customer list.
C) vertically integrated marketing mix.
D) highly concentrated regional focus.
46) Nate works for a company that is mostly based on a geographic unit structure but also
combines elements of a functional unit structure and product division structure. This company
provides an example of which type of structure?
A) hybrid
B) matrix
C) matrix overlay
D) virtual
47) A hybrid organization may result from
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A) the firm’s acquiring a company with distinct products and distribution channels.
B) management’s attempt to mesh product and regional expertise.
C) the consistent use of a geographic unit structure.
D) a firm’s use of SBUs.
48) Madison Enterprises is an international corporation that sells sporting equipment and has
had regional units for the past ten years. Recently, the company acquired an international
business that specializes in skincare products for athletes. Madison Enterprises has brought that
company in and retained its product division setup. What type of structure does Madison
Enterprises now use?
A) hybrid
B) matrix overlay
C) virtual
D) matrix
49) The __________ organization has evolved from management’s attempt to mesh product
and regional and functional expertise while maintaining clear lines of authority.
A) hybrid
B) matrix
C) global
D) network
50) Problems with the matrix structure include:
A) two or more managers must agree on decisions.
B) special divisions often must be established to serve heterogeneous customer
segments.
C) global branding and production coordination are hindered.
D) functional concerns are ignored.
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51) An organization in which top-level divisions are required to heed input from a staff
composed of experts from another organizational dimension in an attempt to avoid the double-
reporting difficulty of a matrix organization but still mesh two or more dimensions is known as a
A) hybrid organization.
B) matrix organization.
C) matrix overlay.
D) virtual corporation.
52) __________ are organizational forms in which product divisions are defined as though
they were independent businesses.
A) Free-form management units
B) Strategic business units
C) Matrix overlays
D) Virtual corporations
53) Most strategic business units are organized based on
A) geographic region.
B) functional area.
C) customer class.
D) product line.
54) The organizational form at Luscious Chocolate Company includes separate groups
organized by specialization, including candy bars, baking chocolate, and premium chocolates.
Each of these groups are defined as distinct, independent businesses with clearly defined
markets. What is this an example of?
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A) a matrix overlay
B) strategic business units
C) a hybrid structure
D) a geographic region
55) Carlton Office Systems Inc. needs to improve overall organizational efficiency. To
accomplish this, the company has implemented a complete redesign of all business systems and
reporting hierarchies. During this process, significant cuts were made in middle management
staff. What organizational trend is taking place at this company?
A) virtual corporation
B) reengineering
C) horizontal corporation
D) downsizing
56) Reengineering of organization forms exemplifies
A) a redesign of the company’s products to improve their quality.
B) disempowerment of employees.
C) movement toward lean, fast, and innovative structures and processes.
D) increased use of specialization and increased organizational hierarchy.
57) New York Shoe House Inc. wants to sell its new line of summer sandals in Europe for
just one season. The company does not currently sell in Europe. To accomplish this, the
company plans to build a network of European suppliers and distributors and will break ties with
them after this season. Most communication will take place through computer applications. What
organizational trend does this demonstrate?
A) virtual corporation
B) strategic business units
C) horizontal corporation
D) reengineering
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58) An organization that coordinates economic activity to deliver value to customers using
resources outside the traditional boundaries of the organization is known as a
A) modular network.
B) horizontal corporation.
C) strategic business unit.
D) virtual corporation.
59) Virtual corporations are also called
A) modular networks.
B) corporate networks.
C) modular corporations.
D) anti-organizations.
60) The potential benefits of the virtual corporation concept include
A) greater flexibility than is associated with more typical corporate structures.
B) a greater number of employees working on site.
C) the opportunity to redesign organizational structures and hierarchy.
D) a reduction in management’s control over the corporation’s activities.
61) The potential disadvantages of the virtual corporation concept include:
A) greater flexibility than is associated with more typical corporate structures.
B) improved organizational efficiency.
C) increased job security of long-term employment for employees.
D) a reduction in management’s control over the corporation’s activities.
62) Which type of company is characterized by lateral decision processes, horizontal
networks, and a strong corporate-wide business?
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A) modular network
B) horizontal corporation
C) modular corporation
D) virtual organization
63) What is a characteristic of a horizontal corporation?
A) It often draws teams from different departments to solve a problem or deliver a
product.
B) It puts greater decision-making responsibility in the hands of managers from outside
the company.
C) It is considered the most conventional organizational structure.
D) It is the same as a “virtual organization.”
64) Within a horizontal corporation, the decision-making process is best described as
A) virtual.
B) hierarchical.
C) vertical.
D) lateral.
65) A company might elect to use the horizontal organizational form if it wanted to give
more decision-making responsibility to
A) the customer.
B) middle management.
C) stockholders.
D) upper management.
66) What is one of the reasons an international company might adopt the horizontal
organization format?
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A) They reduce costs by eliminating middle management.
B) They enhance efficiency by increasing the use of vertical decision processes.
C) They spark innovation and new product development.
D) They enable top management to control processes through centralized approval
systems.
67) Proponents of the horizontal corporation would say that this approach
A) increases lateral relationships that inhibit innovation and new-product development.
B) places more decision-making responsibility in the hands of middle managers and
other skilled professionals.
C) enhances increased control and supervision by upper management.
D) enhances efficiency by increasing the use of vertical decision processes.
68) The text predicts that in the future, managers in many ICs can expect
A) to increase the use of structures based on function in order to gain economies of
scale.
B) to revert to more traditional organizational structures.
C) to see expanded headquarters organizations in order to manage increased
international scope of operations.
D) to make greater use of the dynamic network structure.
69) Companies controlled by other companies (known as parent companies) through
ownership of enough voting stock to elect a majority of the voting members on the company’s
board of directors are known as
A) affiliates.
B) virtual organizations.
C) networked organizations.
D) subsidiaries.
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70) Companies controlled by other companies, in which less-than-majority owners may
exercise control by a variety of means, both those involving stock ownership and those involving
non-ownership mechanisms, are known as
A) international companies.
B) affiliates.
C) networked organizations.
D) subsidiaries.
71) A company in which the parent company has 100 percent ownership is known as a(n)
A) affiliate.
B) greenfield venture.
C) wholly owned subsidiary.
D) acquisition.
72) When comparing controls in international companies to those in domestic operations, it is
correct to say that
A) domestic operations need more controls than ICs.
B) controls are the same for both ICs and domestic operations.
C) ICs need more controls than domestic operations.
D) ICs and domestic operations rely on totally different controls.
73) Sanjay works for Betton Pharmacies, which is controlled by the parent company of
Grayson Labs. In other words, Sanjay works for a(n)
A) subsidiary.
B) affiliate.
C) virtual corporation.
D) horizonal corporation.
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74) The extent to which an IC relies on subsidiary management to make decisions would
most likely depend on
A) the location of competitor ICs.
B) the availability of virtual networks.
C) the size of the IC.
D) the costs of reengineering.
75) Headquarters is more likely to rely on subsidiary management if:
A) subsidiary managers are from another country.
B) conditions in the host country are very similar to those in the home country.
C) the subsidiary is located far away from headquarters.
D) the host country has similar institutions and politics to those in the home country.
76) In larger, older organizations, more decisions are
A) delegated to the subsidiary headquarters.
B) delegated to empowered, decentralized subsidiary managers.
C) made at headquarters of the parent company.
D) made jointly between the subsidiary and parent company.
77) A decision to move production factors from one country to another would be
A) unaffected by currency and political stability.
B) made cooperatively by subsidiary managers.
C) based on tax, labor supply, and market conditions.
D) rejected by managers of the host country receiving the new activity.
78) When the IC headquarters decides which subsidiary would get to fill an order for a
customer abroad, IC management would consider all of the following EXCEPT:
A) production costs.
B) working relationship.
C) tax rates.
D) currency restrictions.
79) It is sensible for an IC to direct or allocate as much profit as reasonably possible to
subsidiaries in countries with
A) problematic labor relations.
B) the most currency controls.
C) higher taxes.
D) the least social unrest.
80) Price and profit allocation decisions are usually best made
A) at the subsidiary headquarters.
B) at the IC headquarters.
C) cooperatively by both subsidiary and IC headquarters.
D) at the subsidiary headquarters in the host country with the lowest prices.
81) Pricing established for transactions between members of the enterprise is called
A) internal pricing.
B) market pricing.
C) transfer pricing.
D) resettlement pricing.
82) In situations where ICs are setting transfer prices