ch.9 international

True or false: Exporting and importing are sustainable long-term business strategies that guarantee a firm permanent access to overseas markets with minimal direct investment and limited risks.

false

In the context of the entry strategies used by multinational corporations (MNCs), which of the following are true of the option of having a wholly owned subsidiary?

Initial investments made in the form of a wholly owned subsidiary in a foreign country are also known as "greenfield" or de novo (new) investments.

This option is often used by small firms, especially if international or transaction costs are high.

Identify the main reasons why multinational corporations (MNCs) use wholly owned subsidiaries.

MNCs' preference for total control

The belief that managerial efficiency will be better without outside partners

When do firms choose the entry and ownership strategy of mergers/acquisitions?

When the firms want to construct high-profit products in a new market

When the firms want quick expansion of resources

In the context of mergers/acquisitions, a major challenge in the post-merger environment involves _____.

high transition costs

Which of the following statements are true of the choices of exporting and importing in international business?

They are often the only ones available for small and new firms that look to expand their business internationally.

They offer an avenue for large firms that want to begin their international expansion with minimum investment and risk.

A(n) _____ _______ (JV) is a specific type of alliance agreement under which two or more partners own or control a business.

joint venture

A(n) ____________ ____________ ___________ is an overseas operation that is totally owned and controlled by a multinational corporation (MNC).

wholly owned subsidiary

Match the types of alliances and joint ventures (in the left column) with their descriptions

Nonequity ventures-

They involve one group merely providing a service for another.

Equity joint ventures-

They involve financial investment by all the firms involved in alliances and joint ventures.

Identify the disadvantages of using wholly owned subsidiaries as an entry strategy by multinational corporations (MNCs)

Home-country unions are likely to oppose the creation of foreign subsidiaries.

Wholly owned subsidiaries are not very efficient with entering several countries or markets.

Wholly owned subsidiaries cause low international integration or multinational involvement.

Wholly owned subsidiaries encounter a high risk with a large investment in one area

One of the most commonly cited advantages of multinational corporations (MNCs) forming a joint venture or an alliance is that it _____.

helps overcome restrictions on foreign competition by becoming part of an insider group

BrandUwell, an American advertising agency, looks to expand its services to the international market. As part of this move, the firm buys the majority shares of an advertising and public relations company, QriUs Communications, that operates in a foreign market. Identify the type of entry and ownership strategy adopted by BrandUwell in the given scenario.

Mergers/acquisitions

Which of the following are true of licensing?

The licensor usually restricts licensee sales to a specific geographic locale.

The licensor often limits the time frame covered by the arrangement.

What are the most pervasive barriers when multinational corporations expand through mergers/acquisitions?

Time constraints

Differences in culture

Identify the true statements about the typical conditions under which licensing is used as an entry strategy in international business.

It is often used by firms that spend a relatively large part of their revenues on research and development (R&D).

It is often used when a firm's product is in the mature stage of the product life cycle and the firm faces strong competition and falling profits.

A(n) Blank 1 of 1 is any type of cooperative relationship among two or more different firms.

alliance

Which of the following are true of franchising?

It gives the franchisor a new stream of income and the franchisee an established concept and products that can be quickly marketed.

It involves an up-front payment of a fee and then a percentage of the revenues by the franchisee to the franchisor.

Match the types of alliances and joint ventures

Nonequity venture-Dream Home International, a multinational construction company, is hired by the Department of Social Welfare in Iridia to build eco-sustainable houses for the homeless and other disadvantaged groups.

Equity joint venture-Stellar Vision, an entertainment company, and Trident Group, an information technology company, form a limited liability company to develop and market virtual reality games together for mobile devices.

In the context of the use of export arrangement as the initial division structure of a firm, match the types of companies (in the left column) with the descriptions of their reporting structures (in the right column).

A company that has a narrow product line-

The export manager typically reports directly to the head of marketing, and international operations are coordinated by the marketing department.

A company that has a broad product line and intends to export different products into the international market-

The export manager typically heads a separate department and reports directly to the president of the company.

Identify the common advantages of multinational corporations (MNCs) forming an alliance or a joint venture.

It helps surmount the effects of local collusion.

It gives access to knowledge and skills of both parties involved in the alliance or joint venture.

It helps mitigate political risk factors.

It improves the efficiency of both parties involved in the alliance or joint venture.

In the context of the basic organization structure of multinational corporations (MNCs), identify the true statements about an international division structure

It is likely to be used by firms that have small international sales, limited geographic diversity, or few executives with international expertise.

It is often adopted by firms that are in the developmental stages of international business involvement.

It takes most of the burden off the CEO for monitoring the operations of a series of overseas subsidiaries as well as domestic operations.

A(n) ________ is an agreement that allows one party to use an industrial property right in exchange for payment to the owning party.

license

Which of the following are the typical conditions under which a firm uses licensing as an entry strategy in international business?

When a host country requires the newly entering firm to make a substantial direct investment in the country

When the firm is small and lacks financial and managerial resources to enter foreign markets

Identify the advantages of an international division structure adopted by a firm.

The clustering of international actions under one senior executive makes sure that the international focus gains the top management's attention.

It allows the firm to develop an overall, integrated approach to international operations, as well as a team of internationally experienced managers.

A(n) ___________ is a business arrangement under which one party allows another to operate an enterprise using its trademark, logo, product line, and methods of operation in return

francise

A(n) _________ ___________ __________ is a structural arrangement in which domestic divisions are given worldwide responsibility for product groups.

global product division

In the context of the initial division structure of a firm, a(n) _____ lets the firm reduce the risk and size of investment in instituting significant international operations while testing the size of international markets.

export arrangement

A(n) ________ _______ _______ is a structural arrangement that handles all international operations of a business out of a division created for this purpose.

international division structure

A benefit of a firm's global product structure is that _____.

the creation of specialized product sets results in effective alterations

Identify the disadvantages of an international division structure adopted by a firm.

This structure separates the domestic and international managers, which can lead to two different camps with different objectives.

Ideas for new processes in the international market are given low priority as most research and development (R&D) efforts are domestically oriented.

Identify the disadvantages of a firm using a product division structure.

This structure necessitates the duplication of facilities and staff personnel within each division.

This structure tends to encourage managers to pursue currently attractive geographic prospects for products and neglect areas with better long-term potential.

Which of the following is true of global product divisions?

They typically operate as profit centers.

In the context of the basic organization structures, identify the features of a global area division.

This arrangement allows division managers to fulfill the demands of the local market and make quick decisions to accommodate environmental changes.

This arrangement is typically used by firms that are in mature businesses and have geographically differentiated narrow product lines.

True or false: A subsidiary is a typical organizational arrangement for handling finance-related businesses or other operations that need an on-site presence from inception.

true

Identify the types of multinational corporations (MNCs) that typically use a global functional division structure.

MNCs that require tight, centralized coordination and control of integrated production processes

MNCs that transport products and raw materials from one geographic area to another

Identify the benefits of a firm's global product structure.

This structure maintains product emphasis and promotes product planning on a global basis.

This structure allows line and staff managers within a division to achieve expertise in the technical and marketing aspects of products assigned to them.

This structure offers a direct line of communication from the customer to those in the firm who have product knowledge and expertise.

Which of the following are the drawbacks of a multinational corporation (MNC) adopting a global functional division structure?

Coordination of manufacturing and marketing tends to be challenging in this arrangement.

The chief executive officer is solely held accountable for the profits.

Management of multiple product lines can be difficult because of the separation of production and marketing into different departments.

True or false: A drawback of a firm using a product division structure is that it leads division managers to focus their time and efforts on tapping the international market, and thus the domestic market is often neglected.

false

A(n) ________ ________ _______ is a structure under which global operations are organized on a geographic rather than a product basis.

global area division

A(n)______ ______ ______ of 3 is an organization structure that organizes worldwide operations primarily based on function and secondarily on product.

global functional division

In the context of the basic organizational structures of multinational corporations (MNCs), identify the advantages of a global functional division.

Tight centralized control

Emphasis on functional expertise

Relatively lean managerial staff

Which of the following are true of a mixed organization structure?

A firm that employs this arrangement manages geographic and product lines through the use of a matrix design.

A firm that uses this arrangement combines elements of function, product, and geographic designs.

In the context of the basic organizational structures, which of the following are true of a transnational network?

It mixes elements of classic functional, product, and geographic structures while relying on a network structure to link the worldwide subsidiaries.

It is a web of business tasks and transmissions where local-level groups make decisions, but groups inform headquarters and sometimes each other.

Which of the following is true of the specialized operations component of a firm's transnational network?

It is designed to tap particular expertise or other resources in a firm's worldwide subsidiaries.

Match the multinational organizational structures (in the left column) with the associated descriptions of cultural control

Global area division-

The local subsidiary culture is usually considered the most important.

Global product division-

Cultural control is achievable for some firms though it is not always necessary.

Matrix structure-

The culture is required to support shared decision making.

Transnational network structure-The organization culture has to rise above national cultures and support sharing and learning.

Match the groups of firms (in the left column) with the descriptions of their organization preferences

asian firms-

They tend to be informal, generalist, integrated, and cooperative.

western firms-

They tend to be informal, generalist, integrated, and cooperative.

A(n)_______ ________ _______ is a combination of a global product, area, or functional arrangement.

mixed organizational structures

Which of the following statements are true about the organizational mechanisms used by Toyota in the worldwide integration of product development?

Design engineers remain in their functional area and usually interact through written messages.

The ________ ________ ________ is a multinational structural arrangement that combines elements of function, product, and geographic designs, while relying on a network arrangement to link worldwide subsidiaries.

transnational network structures

Match the parts of a firm's transnational network (in the left column) with their descriptions

dispersed subunits-

They are subsidiaries that are located anywhere in the world where they can add value to the firm.

specialized operations-

They involve activities carried out by worldwide subsidiaries that focus on specific product lines, research areas, and marketing areas.

interdependent relationships-They are used to share resources and information throughout the other components of the network.

Match the multinational organizational structures (in the left column) with the associated descriptions of their decision-making control

international division structure-

Typically, some centralization

Global area division-

Local units given autonomy

Matrix structure-

Balanced between the global area and product units

Transnational network structure-Few decisions centralized at headquarters; most centralized in the key network nodes

Match the categories of formalization identified in a study of U.S. and Japanese firms in Taiwan (in the left column) with the ways in which they were measured (in the right column).

Objective formalization-

It was measured by things such as the number of various documents given to employees, organizational charts, information booklets, operating instructions, written job descriptions, procedure manuals, written policies, and work-flow schedules and programs.

Subjective formalization-It was measured by the extent to which goals were left unspecific and vague, informal controls were used, and culturally induced values facilitated getting things done.

Match the groups of firms (in the left column) with the corresponding basic values (in the right column).

asian firms-

Group, trust, compromising, and fluid

western firms-Individual, legal, confrontational, and analytic

In the context of product integration, which of the following statements are true of cross-functional coordination in a multinational corporation (MNC)? (Check all that apply.)

Personnel spend less time within their functions and thus are less knowledgeable of the developments in their specialized areas.

It leads to product teams becoming independent and thus failing to integrate their overall efforts with the organization at large.

True or false: In order to achieve the layering of competitive advantage, multinational corporations (MNCs) should create extensive internal networks of international subsidiaries in major national or regional markets and build external networks of strategic alliances with firms around the world.

true

_______ involves pushing decision making down the line and getting the low-level personnel of an organization involved.

decentralization

In the context of organizational characteristics, match the types of specialization (in the left column) with their features (in the right column).

Horizontal specialization-

Employees tend to develop functional expertise in a specific area.

Vertical specialization-Employees at higher management positions are given much more status than those in lower levels.

The use of defined structures and systems in decision making, communicating, and controlling is called

formalization

_________ is an organizational management system in which important decisions are made at the top.

centralization

Match the types of networks created by a multinational corporation (MNC) (in the left column) with the corresponding managerial dimensions (in the right column).

internal networks-

Presence of shared vision and clear organizational mandates

external networks-Absence of shared vision and ambiguous organizational mandates

As an organizational characteristic, ________ is the assigning of individuals to specific,well-defined tasks.

specialization

True or false: In an international context, the value of centralization will differ based on the local environment and the goals of an organization.

true

True or false: Decentralization is an organizational management system in which important decisions are made at the top.

false