Mgt 430 Review Questions for Midterm Exam Spring 2016

1. Describe the global integration and coordination forces encountered by MNEs.

The global integration and coordination forces encountered by MNEs include:
a. Economies of scale. In many industries, such as automotive
manufacturing, production at scale-economy volumes often exceeded the
domestic sales levels that individual companies could achieve which
motivated these manufacturers to penetrate foreign markets which lead
to the global integration and coordination of these markets.
b. Economies of scope. More efficient worldwide communication and
transportation networks provided opportunities for economies of scope
which precipitated increased global integration and coordination.
c. Factor costs. The need for access to new resources at the best possible
prices results in factor cost differentials becoming a powerful driver of
global integration and coordination.
d. Increasingly trade liberalized environments.
e. The expanding spiral of globalization. - Globalization is a spiral process
that requires MNEs to adapt continuously
2. Describe the worldwide innovation and learning force that Microsoft
encounters.
The main worldwide innovation and learning force encountered by
MNEs such as Microsoft is the increased need for rapid and coordinated
worldwide innovation. This need is driven by shortened product life cycles,
increased costs of R&D and the emergence of global technology standards.
For instance, the increased costs of R&D coupled with the shortened lifecycles of new technologies have combined to reinforce the need for
companies to seek global volume to amortize their substantial investments
as quickly as possible. Moreover, the emergence of global technology
standards have encouraged MNEs such as Microsoft to aggressively diffuse
their software with the goal of making the software the global standard which
will impart a significant global competitive advantage on the company.
3. Describe the local differentiation and responsiveness forces encountered by
Samsung, a multinational electronics and home appliances manufacturer and
retailer.
The local differentiation and responsiveness forces encountered by MNEs
such as Samsung include:
a. Cultural differences. Cultural differences include variances in consumer
tastes and preferences, as well as differences in business customs. As
such, Samsung will need to respond to the variance in customer
preferences between countries and learn to conduct business in
accordance with local expectations.
a. National infrastructure. This includes differences in technical standards
(e.g., voltage, TV broadcast, etc.) and distribution channels (e.g.,
supermarkets, malls or home appliance stores).
b. Government demands. These include national laws and regulations, as
well as host country pressures and demands. As such, Samsung will need
to abide by the unique set of national laws and regulations in each of its
markets and to satisfy the demands of each host countrys government.

c. Local competitors. Host country competitors may appeal to consumers

sense of patriotism when competing against foreign products. As such,
Samsung will encounter this competitive pressure when competing
against U.S. home appliance manufacturers in the U.S. or against
Japanese home appliance manufacturers in Japan.
4. The CEO of paragon Ltd. wants to take his company international. What are
the three main questions that he must answer before expanding abroad?
CH1 23E
a. What market opportunities, sourcing advantages or strategic imperatives
will motivate the companys international expansion?
b. How will the company expand its foreign presence- through exports,
licensing, joint ventures, whole owned subsidiaries or some other means?
c. How will the mentalities-attitudes, assumptions and beliefs- of paragons
management and employees impact the probability of the company
succeeding in its efforts to internationalize?
5. Roy is the CEO of a multinational apparel company. How would he
conceptualize the strategic role of his firms foreign operations if he
embraced a global mentality? If he embraced a multinational mentality.
CH1 27E
If Roy embraced a global mentality, he would view the world as a
single unit of analysis and he would centralize the management of the firms
foreign operations. Thus, he would drive the firm to create products for a
world market and manufacturer then on a global scale in a few highly
efficient plants, often located at the corporate center. However, if Roy
embraced a multinational mentality, he would regard foreign markets as a
portfolio of local opportunities and mange his company as a decentralized
federation. Thus, he would recognize and emphasize the differenced between
national markets and operating environments and modify his products,
strategies and managements practices on a country-by-country basis.
6. What is an MNE? Give examples to explain the differences between
companies that are considered MNEs and those that are not. CH1 28E
an enterprise (a) which comprises entities in two or more countries,
regardless of the legal form and fields of activity of those entities; (b) which
operates under a system of decision making that permits coherent policies
and a common strategy through one or more decision making centers; and
(c) in which the entities are so linked, by ownership or otherwise, that one or
more of them may be able to exercise a significant influence over the
activities of the others, in particular to share knowledge, resources, and
responsibilities. What really differentiates the MNE is that it creates an
internal organization to carry out key cross-border tasks and transactions
internally, rather than depending on trade through the external markets.
A MNE is a company that engages in the active management of
substantial direct investment in one or more foreign countries and that
considers those investments/operations as integral parts of the company,
both strategically and organizationally. Thus, companies that solely rely
on import-export business are nor considered MNEs. They may be
considered international companies but not multi-national

enterprises. Moreover, companies that passively manage an

investment portfolio (as opposed to those that actively manage
foreign assets) are not considered MNEs.
7. Compare and contrast the four mentalities toward internationalization. CH1
29E
a. Companies that have an international mentality produce products for the
domestic market and only subsequently sell these products overseas.
They transfer innovation and knowledge from the parent company to the
foreign operators and and offshore manufacturing represents a means to
protect the companys home market.
b. Companies that have a multinational mentality adopt a more fl exible
approach to their international operations by modifying their products,
strategies, and management practices country-by-country, these
companies view themselves as nationally sensitive and responsive, thus
the term multinational. In companies operating with such a multinational
mentality, managers of foreign operations tend to be highly independent
entrepreneurs, often nationals of the host country. Although the
multinational mentality typically results in very responsive marketing
approaches in the different national markets, it also gives rise to an
inefficient manufacturing infrastructure within the company. Plants are
built more to provide local marketing advantages or improve political
relations than to maximize production efficiency. Similarly, the
proliferation of products designed to meet local needs contributes to a
general loss of efficiency in design, production, logistics, distribution, and
other functional tasks.
a. Companies that have a global mentality create products for a world
market and manufacture them on a global level in a few highly efficient
plants. These companies view the world, not just individual national
market, as their unit of analysis.
b. Companies that have a transnational mentality are responsive to countrylevel operations; however, they coordinate these operations to sustain
competitive effectiveness and economic efficiency. These companies view
themselves as an integrated network.

2.1 International strategy

Companies with this strategy treat overseas units as offshoots of
domestic strategy.
They focus on creating and exploiting innovations on a worldwide basis,
using all the different means to achieve this end.
This approach is popular in the US.
2.2 Multinational strategy
Companies with this strategy treat the world as a portfolio of national
opportunities.
They focus primarily on one means (national differences) to achieve
most of its strategic objectives.
This approach is popular in Europe.
2.3 Global strategy
Companies with this strategy treat the world as a single integrated
strategic unit.

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They use all the different means to achieve the best cost and quality
positions for their products.
This approach is popular in Japan.
2.4 Transnational strategy
The transnational company must develop a very different configuration
of assets and capabilities than is typical of traditional multinational,
international, and global company structures.
They develop global efficiency, multinational flexibility and worldwide
learning capability simultaneously.
International companies are importers and exporters, they have no
investment outside of their home country.
Multinational companies have investment in other countries, but do
not have coordinated product offerings in each country. More focused on
adapting their products and service to each individual local market.
Global companies have invested and are present in many countries.
They market their products through the use of the same coordinated
image/brand in all markets. Generally one corporate office that is responsible
for global strategy. Emphasis on volume, cost management and efficiency.
Transnational companies are much more complex
organizations. They have invested in foreign operations, have a central
corporate facility but give decision-making, R&D and marketing powers to
each individual foreign market.
8. Describe different types of volatility in the global environment that fore the
MNE to adjust its strategies. CH3 25E
Macroeconomic risks such a changes in prices, wages or exchange
rates due to wars, recessions or other reasons that are outside the control of
the MNE constitute one source of volatility in the environment. Another
source of volatility is political risk such as nationally induced changes in the
exchange rate or the adjustment of interest rates. A third source of volatility
is competitive risk, which is associated with the unpredictability of
competitors behavior. Finally, resource risk (i.e., unpredictable surpluses or
deficits in the availability of raw materials, capital or management talent) is
also a source of environmental volatility.
9. Explain why some firms adopt a transnational strategy, while others adopt a
multinational strategy. CH3 26E
A multinational strategy focuses on leveraging national difference to
pursue the companys strategic objectives. As such, scale and scope
economies are not fully exploited. This strategic approach involves
positioning the subsidiary to be autonomous and self0sufficient so that the
subsidiary can respond flexibly to local environments. However, this approach
often leads to inefficiencies and the failure to leverage the knowledge and
competencies of other national units. Conversely, a transnational strategy
involves leveraging national differences, as well as pursuing scale and scope
economies, and leasing, in order to achieve a firms strategic objective.

10.
Cool Cola Ltd. Is a national beverage manufacturer situated in India.
During the past few years, the company has suffered intense competition
from major multinationals such as Coca Cola, Nestle, and Pepsi. What can
Cool Cola do to protect its domestic market? CH3 27E
The firm can pursue three alternative courses of actions. First, CoolColas could defend against the competitors global advantage. Cool-Colas
Ltd. could try to influence the industry structure or market conditions in a
manner that provides Cool-Colas with a competitive advantage. For example,
Cool-Colas could try to enhance consumers preference for beverage products
manufactured in India. Second, Cool-Colas could try to offset the competitors
global advantage, for example, by lobbying for government assistance or
tariff protection. The third alternative is to approximate the multinationals
global advantage by engaging in an alliance or coalition.
11.
The CEO of SemChem Co. was considering how to reorganize the
company following the management teams decision to create four new
product divisions, while maintaining SemChems existing three regional
divisions. A consultant has recommended a solution that centers on driving
the change by restructuring the organization around a matrix. Describe the
matrix structure and discuss some practical difficulties associated with this
organizational structure. CH4 21E
12.
The CEO of AgiTec Co. has decided to transition his firm into a
transnational organization. What advice would you give to the company
about a change process that could avoid the undesirable outcomes that have
often been associated with traditional processes of complex organizational
change?
CH4 23E
13.
What is the key lesson behind the metaphor that develops an
organizational change model based on a framework related to anatomy,
physiology, and psychology?
CH4 24E
14.
Discuss the development and diffusion of knowledge in the
decentralized federation, the coordinated federation and the centralized hub,
respectively.
CH4 26E