International Business Past Paper PDF

International Business: The New Realities, 4e, GE (Cavusgil) Chapter 11 Strategy and Organization in the International Firm 1) Strategy is ________. A) a quality of executive management that provides inspirational guidance and motivation to personnel, leading the firm to a better future B) the patt...

International Business: The New Realities, 4e, GE (Cavusgil) Chapter 11 Strategy and Organization in the International Firm 1) Strategy is ________. A) a quality of executive management that provides inspirational guidance and motivation to personnel, leading the firm to a better future B) the pattern of shared values, behavioral norms, systems, policies, and procedures that employees learn and adopt C) a planned set of actions that managers employ to make the best use of the firm's resources and core competencies to gain competitive advantage D) the procurement of selected value-chain activities, including production of intermediate goods or finished products, from independent suppliers Answer: C 2) When developing strategies, managers start by ________. A) configuring and coordinating the firm's activities around the world B) deciding which customers to target C) analyzing the particular opportunities and challenges that confront the firm D) examining the firm's specific strengths and weaknesses Answer: D 3) Which of the following activities would be considered last by a manager while developing strategies? A) analyzing the particular challenges that confront the firm B) deciding how best to contend with competitors C) examining the firm's specific strengths and weaknesses D) analyzing the particular opportunities for the firm Answer: B 1 Copyright © 2017 Pearson Education, Ltd. 4) ________ refers to lowering the cost of the firm's operations and activities on a global scale. A) Efficiency B) Protectionism C) Flexibility D) Currency control Answer: A 5) Firms that want to become globally competitive must seek simultaneously three strategic objectives-efficiency, flexibility, and learning. Answer: TRUE 6) Efficiency refers to emphasizing consensus-based decision making and problem solving, in which managers readily share their knowledge. Answer: FALSE 7) During the recent global recession, efficiency and flexibility became particularly important to the success of multinational firms. Answer: TRUE 2 Copyright © 2017 Pearson Education, Ltd. 8) Describe the three strategic objectives for creating a competitive advantage in international business as proposed by Bartlett and Ghoshal. Provide an example to illustrate each objective. Answer: a. Efficiency-The firm must build efficient international supply chains. Efficiency refers to lowering the costs of the firm's operations and activities on a global scale. MNEs with multiple value chains around the world must pay special attention to how they organize their R&D, manufacturing, supply chain, product, marketing, and customer service activities. For example, automotive companies such as Toyota strive to achieve scale economies by concentrating manufacturing and sourcing activities in a limited number of locations around the world. b. Flexibility-The firm must develop worldwide flexibility to manage diverse country-specific risks and opportunities. The diversity and volatility of the international environment is a special challenge for managers. Therefore, the firm's ability to tap local resources and exploit local opportunities is critical. For example, managers may opt for contractual relationships with independent suppliers and distributors in one country while engaging in direct investment in another. c. Learning-The firm must create the ability to learn from international exposure and exploit learning on a worldwide basis. The diversity of the environment presents the internationalizing firm with unique learning opportunities. Even though the firm goes abroad to exploit its unique advantages, such as technology, brand-name, or management capabilities, managers can add to the stock of capabilities by internalizing new knowledge gained from international exposure. Thus, the organization can gain new technical and managerial know-how, new product ideas, R&D capabilities, partnering skills, and survival capabilities in unfamiliar environments. As an example, it was Procter & Gamble's research center in Belgium that developed a special capability in water-softening technology, primarily because the water in Europe contains more mineral than in the United States. 3 Copyright © 2017 Pearson Education, Ltd. 9) How can a firm's strategy make the best use of the firm's resources? How does a firm's decision to have a centralized versus a decentralized organizational structure affect its strategy? Answer: Strategy is a planned set of actions that managers employ to make best use of the firm's resources and core competencies to gain competitive advantage. When developing strategies, managers start by examining the firm's specific strengths and weaknesses. They then analyze the particular opportunities and challenges that confront the firm. Once they understand the firm's strengths, weaknesses, opportunities, and challenges, they decide which customers to target, what product lines to offer, how best to contend with competitors, and how generally to configure and coordinate the firm's activities around the world. International strategy is strategy carried out in two or more countries. Managers in experienced MNEs develop international strategies to help the firm allocate scarce resources and configure value-adding activities on a worldwide scale, participate in major markets, implement valuable partnerships abroad, and engage in competitive moves in response to foreign rivals. A fundamental issue in organizational structure is how much decision-making responsibility the firm should retain at headquarters and how much it should delegate to foreign subsidiaries and affiliates. This is the choice between centralization and decentralization. A centralized approach gives headquarters considerable authority and control over the firm's activities worldwide. A decentralized approach means substantial autonomy and decision- making authority are delegated to the firm's subsidiaries around the world. In every company, management tends to devise a structure consistent with its vision and strategies. Thus, MNEs that emphasize global integration tend to have a centralized structure. Those that emphasize local responsiveness generally are decentralized. Planning shared by managers at headquarters and at subsidiaries, with negotiation and give-and- take on both sides, is vital to the design of effective strategies. Diff: 3: Hard 10) Managers who exemplify an open-minded attitude and who appreciate cultural diversity are described as applying a global ________. A) sensitivity B) standard C) posture D) mindset Answer: D 4 Copyright © 2017 Pearson Education, Ltd. 11) GramTech Solutions is a software development firm based in the United States. The firm's CEO, David Ghaster, wants to open an outlet in India. Being a visionary leader, he would ________. A) require employees to discover a strategic vision for the firm B) require managers to acquire an openness to, and awareness of, culture in India C) commit minimum resources for international ventures because of the currency risk involved D) cut down on employees' cross-cultural training to save capital to open a firm in India Answer: B 12) Which of the following is the most critical asset of any organization? A) goodwill B) computer programs C) human capital D) bonds Answer: C 13) Organizational culture is ________. A) the pattern of shared values, behavioral norms, systems, policies, and procedures that employees learn and adopt B) an approach in which a firm views international business as separate from, and secondary to, its domestic business C) a reporting structure inside the firm that specifies the links between people, functions, and processes D) an organizational design in which all international activities are centralized within one division in the firm, separate from domestic units Answer: A 5 Copyright © 2017 Pearson Education, Ltd. 14) Companies that proactively build a global organizational culture will ________. A) promote independent headquarters and subsidiaries to avoid miscommunication B) subscribe to ethical standards developed in the home market to avert misunderstanding C) maintain a global perspective in all major initiatives D) adopt multiple corporate languages for business communications Answer: C 15) The managerial routines, behaviors, and mechanisms that allow a firm to function as intended are known as ________. A) organizational designs B) organizational culture C) organizational processes D) organizational structure Answer: C 16) Which of the following is a characteristic of a global team? A) culturally diverse B) similarly trained C) domestically based D) constant face-to-face interaction Answer: A 6 Copyright © 2017 Pearson Education, Ltd. 17) Which of the following is true about global teams? A) It is a locally distributed group of employees charged with specific problem solving that affects company operations at the domestic scale. B) To develop global strategies, the team should include culturally diverse managers whose business activities span the globe. C) Strategic global teams focus on the efficient and effective operation of the business across the whole network. D) Operational global teams identify or implement initiatives that enhance the long-term direction of the firm in its global industry. Answer: B 18) A culturally diverse team would ________. A) use diverse languages for business communications across various teams across the globe B) follow country-specific ethical standards across the globe C) use local employees, for accountability, for all major company decisions D) create a global view inside the firm while remaining in touch with local realities Answer: D 19) Which of the following is characteristic of a global industry? A) A small number of major players compete head-on in multiple markets. B) Competition is designed on a country-by-country basis. C) Numerous firms compete within the industry worldwide. D) Different marketing activities are designed to meet local needs across the globe. Answer: A 20) Strategic global teams identify or implement initiatives that enhance the long-term direction of the firm in its global industry. Answer: TRUE 7 Copyright © 2017 Pearson Education, Ltd. 21) Global IT infrastructure and tools such as intranets, the Internet, and electronic data interchange ensure that distant parts of the global network share knowledge and learn from each other. Answer: TRUE 22) A multidomestic industry is one in which competition takes place on a regional or worldwide basis. Answer: FALSE 23) Contrast the strategies of multidomestic industries and global industries. Why is there a difference in strategies between the two industries? Provide an example for illustration. Answer: Industries in which competition takes place on a country-by-country basis are known as multidomestic industries. In such industries, each country tends to have a unique set of competitors. Companies in the food and beverage, consumer products, and fashion industries often may cater to the specific needs and tastes of each of the countries where they do business. Multidomestic firms adapt their offerings to suit the culture, laws, income level, and other specific characteristics of each country. For example, Coca-Cola varies the formula of its beverages to suit differing conditions abroad. By contrast, industries such as aerospace, automobiles, telecommunications, metals, computers, chemicals, and industrial equipment are examples of global industries, in which competition is on a regional or worldwide scale. Formulating and implementing strategy is critical. Most global industries are characterized by the existence of a handful of major players that compete head-on in multiple markets. For example, Kodak must contend with the same rivals, Japan's Fuji and the European multinational Agfa-Gevaert, wherever it does business around the world. 8 Copyright © 2017 Pearson Education, Ltd. 24) Describe four traits that characterize visionary leaders, and explain why these traits are especially necessary for a firm that operates within a global matrix structure. Answer: Visionary leaders are characterized by four major traits: International mind-set and cosmopolitan values. Visionary leadership requires managers to acquire an international mind-set-an openness to, and awareness of, diversity across cultures. Dogmatic, close-minded managers who lack vision and have difficulty adapting to other cultures are likely to fail. Those who are open minded, committed to internationalization, and ready to adapt to other cultures are likely to succeed. Willingness to commit resources. The complexities of foreign markets imply that international ventures take more time than domestic ones to become profitable. Visionary leaders commit to them and unswervingly believe the firm will eventually succeed. Commitment drives them to develop the financial, human, and other resources their firms need to achieve their international goals. Highly committed firms engage in systematic international market expansion, allocate necessary resources, and empower structures and processes that ensure ultimate success. Strategic vision. Visionary leaders articulate a strategic vision-what the firm wants to be in the future and how it will get there. As they develop strategic vision, senior managers focus on the ideal picture of what the firm should become. The picture is a central rallying point for all plans, employees, and employee actions. Willingness to invest in human assets. Visionary leaders must nurture the most critical asset of any organization-human capital. In global firms, senior leaders adopt such human resource practices as hiring foreign nationals, promoting multicountry careers, and providing cross- cultural and language training to develop international supermanagers. These leadership traits are especially necessary for a firm operating in a global matrix structure. The global matrix structure is an arrangement that seeks to leverage the benefits of global strategy and responsiveness to local needs. Specifically, the global matrix structure is a combination of the geographic area, product, and functional structures. It aims to reap the advantages of each while minimizing their disadvantages. To make it work, headquarters management should simultaneously: (1) coordinate and control international operations; (2) respond to needs in individual countries; and (3) maximize interorganizational learning and knowledge sharing among the firm's units worldwide. These tasks can be more easily carried out if managers exhibit the traits of visionary leaders. 9 Copyright © 2017 Pearson Education, Ltd. 26) Firms that emphasize global integration make and sell ________. A) unique products that follow a multilocal strategy B) an excessive variety of complex products C) products that require minimal adaptation D) products designed specifically for local markets Answer: C 27) Managing a firm's value-chain activities on a country-by-country basis to address diverse opportunities and risks is known as ________. A) global integration B) global aggregation C) regional coordination D) local responsiveness Answer: D 28) Coordinating the international value-chain activities of a firm across multiple countries to achieve maximum efficiency is known as ________. A) local responsiveness B) global integration C) adaptation D) country-by-country responsiveness Answer: B 29) Which of the following would exert pressure on a firm to become locally responsive? A) the need to monitor and respond to global competitors B) the need to cater to local customer needs C) the desire to capitalize on converging consumer trends D) the desire to provide uniform service to consumers Answer: B 30) Marketing the same product worldwide is most appropriate for the ________ industry. A) furniture B) electronics C) food and beverage D) retailing Answer: B 31) Global integration is a plan of action that accounts for competition on a country-by-country basis. Answer: FALSE 32) Due to the competition involved in global industries, marketing strategies are determined by the unique needs and regulations of each nation. Answer: FALSE 10 Copyright © 2017 Pearson Education, Ltd. 33) Sourcing inputs from large-scale, centralized suppliers allows firms to obtain economies of scale, more consistent quality, lower costs, and generally more efficient operations. Answer: TRUE 34) Firms undertake global integration to seek cost reduction through scale economies. Answer: TRUE Diff: 1: Easy 35) A company can be compelled to be locally responsive in individual countries to provide uniform services to global customers. Answer: FALSE 36) What is the integration-responsiveness framework? Describe the two main components of the framework. Answer: The discussion about the pressures on the firm of achieving global integration and local responsiveness has become known as the integration-responsiveness (IR) framework. The IR framework has become popular for examining a firm's strategic objectives in international business. Since efficiency and learning objectives are related, they are often combined into a single dimension, called global integration. Global integration refers to coordination of the firm's value- chain activities across countries to achieve worldwide efficiency, synergy, and cross-fertilization in order to take maximum advantage of similarities across countries. The flexibility objective is also called local responsiveness. Local responsiveness refers to meeting the specific needs of buyers in individual countries. 37) Describe four factors that might persuade a firm to become locally responsive in a nation where it conducts business. Answer: ∙ Cater to local customer needs. Particularly in multidomestic industries, buyer needs vary from country to country. The internationalizing firm must adapt its products to meet diverse cross- national needs. ∙ Accommodate differences in distribution channels. Channels can vary from market to market and may increase the need for local responsiveness. In Latin America, small stores are the most common type of retailer. Foreign firms that ordinarily distribute their goods via large stores must adapt their approach when doing business there. ∙ Respond to local competition. Foreign firms are disadvantaged in markets that have numerous local competitors. To outdo local rivals, successful MNEs must devise offerings that best meet local demand. ∙ Adjust to cultural differences. Culture's influence on business activities can be substantial, depending on the market and the product. Where cultural differences are important, such as in sales of food and clothing, the firm must adapt its products and marketing activities accordingly. 11 Copyright © 2017 Pearson Education, Ltd. 38) In the ________ strategy, a firm views international business as separate from, and secondary to, its domestic business. A) home replication B) multilocal C) global D) transnational Answer: A 39) Which of the following is true about foreign units of a company using a multidomestic strategy? A) They are centralized to ensure efficiency and learning. B) They are highly controlled by the company's headquarters. C) They are autonomous and operate independently. D) They pursue global integration. Answer: C 40) Which of the following characterizes a multidomestic strategy? A) Subsidiary managers adapt products and services to meet local needs. B) Management practices are universal across local businesses. C) Firm executives control all subsidiaries to maximize efficiency. D) The firm allows subsidiaries to standardize products and services across countries. Answer: A 41) Which of the following is a disadvantage of a multidomestic strategy? A) lack of opportunities to delegate tasks B) high pressure on headquarters staff C) inefficient manufacturing D) standardized products in culturally different markets Answer: C 42) Which of the following is an advantage of a multidomestic strategy? A) standardized organizational culture B) minimal pressure on headquarters staff C) minimum redundancy D) low operating costs Answer: B Diff: 1: Easy 43) A ________ strategy is characterized by substantial control over country operations by headquarters in order to increase efficiency and integration. A) multilocal B) home replication C) multidomestic D) global Answer: D 12 Copyright © 2017 Pearson Education, Ltd. 44) Which of the following is a characteristic of a transnational strategy to internationalization? A) minimal pressure on headquarters staff B) decision making is delegated to local managers C) local responsiveness with central control D) international business is viewed as separate from, and secondary to domestic business Answer: C 45) The home replication strategy is often employed as a means of extending a product's life cycle in a foreign market and to replicate home-market success. Answer: TRUE 46) When using a multidomestic strategy, products and services are carefully adapted to suit the unique needs of each country. Answer: TRUE 47) Global strategy is an approach to internationalization in which headquarters delegates considerable autonomy to each country manager, allowing him or her to operate independently and pursue local responsiveness. Answer: FALSE 48) In a multidomestic strategy, there is maximum pressure on headquarters staff because there is little incentive for decision making by individual managers. Answer: FALSE 49) With a global strategy, headquarters seeks substantial control over its country operations in order to minimize redundancy and achieve maximum efficiency, learning, and integration worldwide. Answer: TRUE 50) By standardizing international operations as much as possible, yet being adaptable to the needs of local markets, a firm is utilizing a transnational strategy of globalization. Answer: TRUE 13 Copyright © 2017 Pearson Education, Ltd. 51) Explain the benefits of a multidomestic strategy to firm internationalization. What are some of the disadvantages to this approach? Answer: The multidomestic approach has several advantages. If the foreign subsidiary includes a factory, locally produced goods and products can be better adapted to local markets. The approach places minimal pressure on headquarters staff because management of country operations is delegated to individual managers in each country. Firms with limited internationalization experience often find multidomestic strategy an easy option as they can delegate many tasks to their country managers (or to foreign distributors, franchisees, or licensees, where they are used). Nevertheless, multidomestic strategy has some disadvantages. The firm's foreign managers tend to develop strategic vision, culture, and processes that differ substantially from those of headquarters. They have little incentive to share knowledge and experience with managers in the firm's other country markets, which leads to duplication of activities and reduced economies of scale. Limited information sharing also reduces the possibility of developing a knowledge-based competitive advantage. Competition may escalate among the subsidiaries for the firm's resources because subsidiary managers do not share a common corporate vision. While a multidomestic strategy results in firms having a highly responsive presence in different national markets, it leads to inefficient manufacturing, redundant operations, a proliferation of products designed to meet local needs, and generally higher costs of international operations than other strategies. Diff: 3: Hard Skill: Concept Objective: 11-4: Learn to identify strategies based on the integration-responsiveness framework AACSB: Analytical Thinking 14 Copyright © 2017 Pearson Education, Ltd. 52) Discuss the advantages and implementation of a transnational strategy, and explain why this strategy is closely associated with a global matrix structure. Answer: A transnational strategy is a coordinated approach to internationalization in which the firm strives to be relatively responsive to local needs while retaining sufficient central control of operations to ensure efficiency and learning. Transnational strategy combines the major advantages of multidomestic and global strategies while minimizing their disadvantages. It is a flexible approach: standardize where feasible; adapt where appropriate. To implement a transnational strategy, the firm should: a. Exploit scale economies by sourcing from a reduced set of global suppliers and concentrate manufacturing in relatively few locations where competitive advantages can be maximized. b. Organize production, marketing, and other value-chain activities on a global scale. c. Optimize local responsiveness and flexibility. d. Facilitate global learning and knowledge transfer. e. Coordinate global competitive moves-that is, rather than following a country-by-country approach, deal with competitors on a global, integrated basis. The global matrix structure is closely associated with transnational strategy. Managerial responsibility for each product is shared by each product unit and the particular geographic areas of the firm. Thus, firms develop a dual reporting system in which, for example, an employee in a foreign subsidiary reports to two managers-the local subsidiary general manager and the corporate product division manager. Often the country manager is superior in authority, with responsibility for appraisal. Global matrix structure recognizes the importance of flexible and responsive country-level operations and shows firms how to link those operations to optimize operational efficiency and competitive effectiveness. The manager working in this structure shares decision making with other managers, wherever they may be, to achieve best practice for the firm's operations worldwide. 53) In establishing a firm's organizational structure, a fundamental issue is ________. A) how to optimize local responsiveness and flexibility B) how much decision-making responsibility the firm should retain at headquarters C) how to leverage natural endowments available to the firm D) how the firm should invest in human assets Answer: B 54) Which of the following gives headquarters considerable authority and control over the firm's activities worldwide? A) nationalization B) home replication strategy C) centralized approach D) decentralized approach Answer: C 15 Copyright © 2017 Pearson Education, Ltd. 55) In which of the following are substantial autonomy and decision making authority delegated to a firm's subsidiaries around the world? A) decentralized approach B) global strategy C) transnational strategy D) nationalization Answer: A Diff: 1: Easy Skill: Concept Objective: 11-5: Understand organizational structure in international business AACSB: Analytical Thinking 56) A firm's headquarters is the primary contributor to ________. A) local market research B) capital planning C) human resource management D) compliance with local laws and regulations Answer: B 57) A firm's subsidiary is the primary contributor to ________. A) transfer pricing B) capital planning C) marketing D) global profitability Answer: C 58) Discuss the factors relevant to a firm's decision to centralize or decentralize foreign operations. Answer: The choice between headquarters and subsidiary involvement in decision making is a function of the nature of the product, the nature of competitors' operations, and the size and strategic importance of foreign operations. Generally, the larger the financial outlay or the riskier the anticipated result, the more involved headquarters will be in decision making. For example, decisions on developing new products or entering new markets tend to be centralized to headquarters. Decisions involving strategies for two or more countries are best left to headquarters managers who have a more regional or global perspective. Decisions to source products from one country for export to another, or decisions on intracorporate transfer pricing are likely to be centralized. Decisions on global products that are marketed in several countries with common trademarks and brand names are usually the responsibility of headquarters. Conversely, decisions on local products that are sold only in single-country markets should be the joint responsibility of corporate and respective country managers, with the latter taking the leadership role. 16 Copyright © 2017 Pearson Education, Ltd. 59) Which of the following organizational arrangements for foreign operations is most closely associated with home replication strategy? A) export department B) international division C) geographic area structure D) product structure Answer: A Diff: 1: Easy 60) International division managers usually oversee ________. A) large-scale investments B) product development C) distributor relationships D) corporate accounting Answer: C 61) Which of the following is an advantage of an international division structure? A) It leverages the benefits of global strategy while responding to local needs. B) It allows better balance between global integration and local adaptation. C) It requires a small resource commitment. D) It allows concentration and development of international expertise. Answer: D 62) Which of the following is a disadvantage of a geographic area structure? A) geographic area managers' lack of global orientation for developing and managing products B) limited communications and coordination among the subsidiaries within each geographic region C) minimal balance between global integration and local adaptation D) decreased responsiveness to customer needs and wants in each regional/local market Answer: A 63) An advantage to firms that use a product structure arrangement is that ________. A) it requires a small resource commitment B) duplication of corporate support functions for each product division is avoided C) there is limited possibility for excessive focus on products D) individual product lines are coordinated and managed globally Answer: D 64) An export department rarely requires much organizational structure until export sales reach a critical point. Answer: TRUE 65) Geographic area structure is an organizational design in which management and control are decentralized to the level of individual geographic regions. Answer: TRUE 17 Copyright © 2017 Pearson Education, Ltd.