Chapter 5
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Questions and Answers

What is a key consideration when determining the level of centralization in a multinational company?

  • The degree of experience of the subsidiary (correct)
  • The market share of the subsidiary
  • The cultural values of the host country
  • The financial performance of all subsidiaries

What is the main goal of formalization within a multinational company?

  • To enable rapid decision-making at all levels
  • To guide actions and reduce ambiguity (correct)
  • To enhance competition between subsidiaries
  • To encourage innovation and creativity among subsidiaries

Which of the following best describes the focus of local vs. global pressures in the context of multinational companies?

  • Focusing solely on local community engagement
  • Balancing local market demands with global efficiency (correct)
  • Implementing global strategies without adaptation
  • Prioritizing global strategies over local demands

Which strategic framework is primarily concerned with how companies adapt their strategies for international growth?

<p>Alternative strategic frameworks for internationalization (A)</p> Signup and view all the answers

What role does standardization of processes play in a multinational company?

<p>It promotes consistency in operations across subsidiaries. (C)</p> Signup and view all the answers

What characterizes a multidomestic multinational in terms of local market adaptation?

<p>Strategies tailored to each country-market (A)</p> Signup and view all the answers

Which statement best describes the decision-making structure of a multidomestic multinational?

<p>Decision making is decentralized (D)</p> Signup and view all the answers

What is a potential downside of a decentralized structure in a multidomestic multinational?

<p>Increased duplicity of activities between countries (A)</p> Signup and view all the answers

How does a polycentric approach help a multinational company meet local pressures?

<p>By maximizing benefits through extensive customization (C)</p> Signup and view all the answers

Which of the following is NOT a feature of a multidomestic multinational?

<p>Centralized decision-making (C)</p> Signup and view all the answers

What is a key characteristic of a functional structure in a multinational company?

<p>It involves accountability of the export department to the GM. (D)</p> Signup and view all the answers

How does the 'mother-son' structure facilitate multinational operations?

<p>By establishing specific responsibilities for headquarters and subsidiaries. (C)</p> Signup and view all the answers

What is one limitation of the holding or subsidiary structure in decision-making?

<p>It complicates market assessments for the GM. (A)</p> Signup and view all the answers

What is an advantage of using a multidivisional (M-form) structure?

<p>It allows for the separation of operations based on product categories. (D)</p> Signup and view all the answers

In the context of coordination and control mechanisms, which is a primary factor for successful multinational management?

<p>Clear information flows between headquarters and subsidiaries. (C)</p> Signup and view all the answers

What happens as international activities grow within a functional structure?

<p>New subsidiaries become dependent on the export department. (D)</p> Signup and view all the answers

Which of the following best describes the accountability in a functional structure with an export department?

<p>The export department is fully accountable to the GM. (A)</p> Signup and view all the answers

Which organizational structure is characterized by divisions based on geographic markets or product lines?

<p>Multidivisional structure (M-form) (D)</p> Signup and view all the answers

Flashcards

Centralization of Decisions

Centralized decision-making in a company where decisions are made at a high level, often by headquarters, regarding subsidiary strategies.

Subsidiary's Experience

The level of experience and expertise of a company's subsidiary, affecting the need for centralized decision-making

Formalization of Rules

Establishing clear rules and processes to guide actions in a company, often to reduce ambiguity, especially for subsidiaries further from headquarters.

Compliance in MNCs

Implementing internal and external compliance standards throughout an organization, particularly important for subsidiaries.

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Strategic Planning and MNCs

Central strategic planning concerning significant international subsidiary decisions is a form of coordination.

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Polycentric Strategy (Multinational)

An international strategy where a company adapts its products and services to meet the specific needs of each local market. Decision-making is decentralized to local units.

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Sensitivity to local needs

The importance of understanding and responding to the unique requirements and preferences of each market.

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Decentralized Structure

Organizational structure where decision-making authority is distributed to lower levels and local units within a multinational company.

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Duplicity of Activities

Repeating similar activities or processes in different country units. It is common in international strategies that adapt to each local market or region.

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Scarce Communication

Limited communication and coordination between different business units or divisions across countries within a multinational company.

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Functional Structure (U-form)

A multinational company (MNC) organizational structure where functions (like sales, marketing) are grouped together. An export department is in the U-form structure.

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Export Department's Reporting

In a functional structure with an export department, It reports directly to the General Manager (GM).

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Holding/Headquarters-Subsidiary Structure

A multinational organizational structure where headquarters acts as the mother company to its subsidiaries (individual branches in different countries).

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Subsidiary structure and GM Result

With more international markets, MNC adds new subsidiaries. The GM can see results from each market but not which products/business units are most profitable

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Multidivisional (M-form) Structure

An organizational structure for MNCs that divides the company into separate divisions based on product, geography, or brand.

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MNC Organizational Structure

The internal setup of a Multinational Company to manage international operations, decision making, and accountablity.

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Export Department Dependency

In an MNC, the export department's reliance on the General Manager is high, especially initially, as it is a newly introduced business unit.

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Products Profitability in Subsidiary Structure

In the holding-subsidiary structure, the General Manager has difficulty determining which products or business units are most profitable across the international markets.

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Study Notes

Multinational Company (MNC) Strategy and Organization

  • This unit examines the strategies and organizational structures of multinational companies (MNCs).
  • It focuses on the internationalization of businesses, particularly considering management and strategies.

Internationalization of MNCs

  • The content covers different stages of internationalization, including decision-making processes for entering international markets.
  • It explores the influencing factors of cultural distance on country-market decisions.
  • Key aspects such as selecting foreign market entry modes are also highlighted.

Multinational Company (MNC) Pressures and Frameworks

  • MNCs face pressures from local demands versus global pressures.
  • Alternative strategic frameworks for MNCs are explored in detail. This includes how these companies can manage local vs global pressures. Examples include pure global, global ethnocentric, global complexity, transnational, geocentric, multinational, multidomestic and polycentric.
  • These frameworks illustrate different approaches to internationalization and balancing local and global factors.

MNC Organizational Structures

  • The organizational structure of an MNC is crucial for coordinating activities and ensuring efficiency.
  • This section examines various structures like functional (U-form), Holding (Headquarters) - Subsidiary, multidivisional (M-form), and matrix, each with advantages and disadvantages.
  • Different organizational structures are suitable for different types of MNCs; therefore, the optimal structure depends on the specific business strategy.

Coordination and Control Mechanisms in MNCs

  • Coordination and control mechanisms are essential for managing activities across different countries.
  • Formalization through rules and processes, including compliance standards/procedures, is a key aspect of coordination.
  • Organizational socialization emphasizes behaviors within global teams. Suitable measures are crucial to create a consistent and unified global performance.
  • Control mechanisms include performance feedback systems, regular appraisals and management oversight to monitor performance. This is especially critical for geographically remote subsidiaries.

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T5_ Strategy and Organization of the Multinational Company (MNC) PDF

Description

This quiz explores the strategies and organizational structures of multinational companies (MNCs). Focused on internationalization, it covers decision-making processes for entering international markets and the pressures MNCs face. Learn about various strategic frameworks and how cultural factors influence market decisions.

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