Chapter 09 - Entry Strategies and Organizational Structures

Chapter 09 - Entry Strategies and Organizational Structures
Chapter 09
Entry Strategies and Organizational Structures
True / False Questions
1. An overseas operation that is totally owned and controlled by an MNC is a wholly owned
subsidiary.
True False
2. The primary reason for the use of licensing agreements is a desire by the MNC for total
control over its products in overseas markets.
True False
3. A joint venture is an agreement in which two or more partners own and control an overseas
business.
True False
4. A license is a structural arrangement in which domestic divisions are given worldwide

responsibility for product groups.
True False
5. A franchise is an agreement that allows one party to use an industrial property right in
exchange for payment to the other party.
True False
6. Franchising provides the franchisor with a new stream of income and the franchisee with a
time-proven concept and products that can be quickly brought to market.
True False
9-1
7. Companies in the mature stage of international business involvement are the most likely to
adopt an international division structure.
True False
8. A disadvantage of the international division structure is that it separates a firm's domestic

and international managers, which can result in two different camps with divergent
objectives.
True False
9. A structural arrangement in which domestic divisions are given worldwide responsibility

for product groups is referred to as a global area division structure.
True False
10. Firms that pursue a global product division structure typically have products that are in the
maturity stage of the product life cycle.
True False
11. One disadvantage of the global product division structure is the necessity of duplicating
facilities and staff personnel within each division.
True False
12. A structure under which global operations are organized on a geographic rather than a
product orientation is referred to as a global area structure.
True False
13. Companies that are in growing businesses and have broad product lines most often use a
global area division structure.
True False
9-2
14. An advantage of the global area division structure is that it allows the division manager to
cater to the tastes of the local market and make rapid decisions to accommodate
environmental changes.
True False
15. An advantage of the global functional division structure is that only the CEO can be held
accountable for the profits.
True False
16. One of the main objectives in developing the structure for joint ventures is to help the
partners address and effectively meld their different values and organizational preferences.
True False
17. In most companies, mutual adjustment is achieved by assigning people to a specific

project and having them meet face-to-face and work out a plan of action of designing the new
product.
True False
18. Formalization is an organizational characteristic that assigns individuals to specific, well-

defined tasks.
True False
19. Specialization is the use of defined structures and systems in decision-making,

communicating and controlling.
True False
20. Centralization is a management system in which important decisions are made at the top.
True False
9-3
Multiple Choice Questions
21. The primary reason for the use of _____ is a desire by the MNC for total control and the
belief that managerial efficiency will be better without outside partners.
A. Licensing agreements
B. Franchising
C. Wholly owned subsidiaries
D. Joint ventures
22. This is an agreement in which two or more partners own and control an overseas
business.
A. Franchise
B. Wholly owned subsidiary
C. Licensing agreement
D. Joint venture
23. The equity joint venture:

A. Is characterized by one group merely providing a service for another
B. Involves a financial investment by the MNC in a business enterprise with a local partner
C. Organizes worldwide operations based primarily on function and secondarily on product
D. Provides the most benefits when the need for product specification or differentiation is
high
24. The nonequity venture:

B. Provides the most benefits when the need for product specification or differentiation is
high
C. Involves a financial investment by the MNC in a business enterprise with a local partner
D. Organizes worldwide operations based primarily on function and secondarily on product
9-4
25. The two types of joint ventures are:

A. Equity and non-equity ventures
B. Proprietary and public ventures
C. Statutory and unofficial ventures
D. External and internal ventures
26. This is an agreement that allows one party to use an industrial property right in exchange
for payment to the other party.
A. Franchise
B. Joint venture
C. License
D. Certificate of proprietary usage
27. A _____ 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 for a fee.
A. License
B. Franchise
C. Certificate of proprietary usage
D. Joint venture
28. These agreements typically require payment of a fee upfront and then a percentage of the
revenues.
A. Franchise
C. Export
D. Joint venture
29. Aircraft manufacturing fits which of the following globalization versus local
responsiveness combination?
A. High pressure for globalization, high pressure for local responsiveness
B. High pressure for globalization, low pressure for local responsiveness
C. Low pressure for globalization, low pressure for local responsiveness
D. Low pressure for globalization, high pressure for local responsiveness
9-5
30. Clothing manufacturing fits which of the following globalization versus local
A. Low pressure for globalization, low pressure for local responsiveness
B. Low pressure for globalization, high pressure for local responsiveness
C. High pressure for globalization, low pressure for local responsiveness
D. High pressure for globalization, high pressure for local responsiveness
31. A common first choice among manufacturing firms, especially those with technologically
advanced products, would be to develop a(n):
A. Domestic policy
B. Export arrangement
C. Cartel arrangement
D. Import quota
32. In a company that has a narrow product line, the export manager usually reports directly
to the head of:
A. Purchasing
B. Personnel
C. Production
D. Marketing
33. The structural arrangement that allows a company to develop an overall, unified approach
to international operations and helps the firm develop a cadre of internationally experienced
managers is an advantage of a(n):
A. Mixed organization structure
B. Global area division structure
C. Global product division structure
D. International division structure
9-6
34. Pressure by local foreign government for continued growth of international sales
encourage on-site:
A. Maintenance
B. Supply and distribution operations
C. Manufacturing operations
D. Safety operations
35. A structural arrangement that handles all international operations out of a division created
for this purpose is referred to as a(n):
A. Worldwide organizational structure
B. Global matrix structure
C. International division structure
D. Overseas network structure
36. Companies still in the development stages of international business involvement are most
likely to adopt the:
A. International division structure
B. Global product division structure
C. Global area division structure
D. Global functional division structure
37. According to the text, all of the following types of companies are likely to adopt the
international division structure except:
A. Companies with limited geographic diversity
B. Companies with a large number of executives with international expertise
C. Companies still in the developmental stage of international business
D. Companies with small international sales
9-7
38. A structural arrangement in which domestic divisions are given worldwide responsibility
for product groups is referred to as a(n):
39. The products sold by firms that adopt a global product division structure are generally in
the _____ stage of the product life cycle.
A. Introduction
B. Growth
C. Maturity
D. Decline
40. Which of the following provides the most benefits when the need for product specification
or differentiation is high?
A. International division
B. Global product division
C. Global area division
D. Global functional division
41. A structure under which global operations are organized on a geographic rather than a
product basis is referred to as a(n):
A. Global area division structure
9-8
42. That division managers may pursue currently attractive geographic prospects for their
products and neglect other areas with better long-term potential is a major drawback of the:
43. Which of the following is an advantage of a global area division structure?

A. The structural arrangement helps a firm manage a diverse product line
B. The structural arrangement helps a firm cater to local needs in foreign markets
C. The marketing, production and finance divisions of the firm can be coordinated on a
product-by-product global basis
D. The structural arrangement helps a firm develop an overall, unified approach to
international markets
44. A global area division structure most often is used by companies that are in _____
businesses and have _____ product lines.
A. Growing; broad
B. Mature; narrow
C. Growing; narrow
D. Mature; broad
45. The difficulty encountered in reconciling a product emphasis with a geographic

orientation is the primary disadvantage of a(n):
9-9
46. Which of the following organizes worldwide operations based primarily on function and
secondarily on product?
47. A global functional division structure is used primarily by:

A. Service companies
B. Extractive companies
C. Light manufacturing companies
D. Heavy manufacturing companies
48. All of the following are advantages of the global functional division structure except:
A. An emphasis on functional expertise
B. A tight centralized control
C. A relatively lean managerial staff
D. The chief executive officer is held accountable for the profits
49. A structure that is a combination of a global product, an area or a functional arrangement

is referred to as a(n) _____ organizational structure.
A. Assimilated
B. Transnational
C. Mixed
D. Team-based
50. A multinational structural arrangement that combines elements of function, product and
geographic designs, while relying on a network arrangement to link worldwide subsidiaries is
referred to as a:
A. Transnational network structure
B. Cross-cultural matrix structure
C. Transnational divisional structure
D. Cross-cultural network structure
9-10
51. A _____ is designed to help MNCs take advantage of global economies of scale while also
being responsive to local customer demands.
A. Global matrix structure
B. Transnational network structure
C. Worldwide divisional structure
D. Cross-cultural matrix structure
52. At the center of the _____ are nodes, which are units charged with coordinating product,
functional and geographic information.
A. Cross-cultural matrix structure
B. Worldwide divisional structure
C. Transnational network structure
D. Global product division structure
53. Subsidiaries that are located anywhere in the world where they can benefit the
organization are called:
A. Chaebols
B. Keiretsus
C. Specialized subunits
D. Dispersed subunits
54. Specialized operations are:

A. Designed to tap specialized expertise or other resources in the company's worldwide
subsidiaries
B. Subsidiaries that are located anywhere in the world where they can benefit the organization
C. Designed to take advantage of low factor costs, while others are responsible for providing
information on new technologies or consumer trends
D. Used to share information and resources throughout dispersed and specialized subunits
9-11
55. Interdependent relationships are:

subsidiaries
C. Used to share information and resources throughout the dispersed and specialized subunits
D. Designed to take advantage of low factor costs, while others are responsible for providing
56. In terms of cultural control in a global area division:

A. It is treated like all other MNC structural divisions
B. Local subsidiary culture is often the most important
C. It is possible for some companies, but not always necessary
D. Culture must support the shared decision making
57. In which of the following MNC structures are tight process bureaucratic controls used to
maintain product quality and consistency?
B. Global area division
C. Matrix structure
D. Global product division
58. The decision-making control in which local units are given autonomy is characteristic of
a(n):
B. International division structure
D. Transnational network structure
9-12
59. The output control in which profit responsibility is shared with product and geographic
units is characteristic of a(n):
C. Matrix structure
60. Bureaucratic control is not very important in which type of multinational structure?
A. Global product division structure
C. Matrix structure
61. Which basic value is not common in Asian firms?

A. Group
B. Trust
C. Confrontation
D. Fluid
62. Individuals who work for a company, usually via the Internet and move on to other
employment when their assignment is done are known as:
A. Purchasing agents
B. Marketing managers
C. International outsourcers
D. Electronic freelancers
63. _____ is the use of defined structures and systems in decision-making, communicating
and controlling.
A. Formalization
B. Specialization
C. Concentration
D. Interpretation
9-13
64. In a study of U.S. and Japanese firms in Taiwan, objective formalization was measured
by:
A. Use of informal controls
B. The extent to which goals were vague and unspecified
C. The number of different documents given to employees
D. Use of culturally induced values in getting things done
65. As an organizational characteristic, _____ is the assigning of individuals to specific, well-

defined tasks.
A. Interpretation
B. Concentration
C. Formalization
D. Specialization
66. Specialization in an international context can be classified into:

A. Diagonal and vertical specialization
B. Vertical and parallel specialization
C. Horizontal and vertical specialization
D. Diagonal and parallel specialization
67. The assignment of jobs so that individuals are given a particular function to perform and
tend to stay within the confines of this area is referred to as:
A. Diagonal specialization
B. Parallel specialization
C. Vertical specialization
D. Horizontal specialization
68. The assignment of work to groups of departments where individuals are collectively
responsible for performance is referred to as:
A. Horizontal specialization
B. Vertical specialization
C. Lateral specialization
D. Parallel specialization
9-14
69. _____ is a management system in which important decisions are made at the top.
A. Centralization
B. Decentralization
C. Horizontal specialization
D. Vertical specialization
70. Pushing decision making down the line and getting the lower-level personnel involved is
referred to as:
A. Centralization
B. Decentralization
Essay Questions
71. Explain alliances and joint ventures.
72. "Companies still in the developmental stages of international business involvement are
most likely to adopt the international division structure". Why?
9-15
73. What is a mixed organization structure? Are mixed organization structures gaining in
popularity? If so, why?
74. Explain the transnational network structure. What are its three subcomponents?
75. Discuss the organizational characteristics of formalization, specialization and

centralization.
9-16
Chapter 09 Entry Strategies and Organizational Structures Answer Key
True / False Questions
1. (p. 305) An overseas operation that is totally owned and controlled by an MNC is a wholly
owned subsidiary.
TRUE
Difficulty: Easy
2. (p. 305) The primary reason for the use of licensing agreements is a desire by the MNC for
total control over its products in overseas markets.
FALSE
Difficulty: Medium
3. (p. 310) A joint venture is an agreement in which two or more partners own and control an
overseas business.
TRUE
Difficulty: Easy
4. (p. 312) A license is a structural arrangement in which domestic divisions are given worldwide
responsibility for product groups.
FALSE
Difficulty: Medium
9-17
5. (p. 312) A franchise is an agreement that allows one party to use an industrial property right in
FALSE
Difficulty: Easy
6. (p. 315) Franchising provides the franchisor with a new stream of income and the franchisee
with a time-proven concept and products that can be quickly brought to market.
TRUE
Difficulty: Easy
7. (p. 317) Companies in the mature stage of international business involvement are the most
likely to adopt an international division structure.
FALSE
Difficulty: Medium
8. (p. 318) A disadvantage of the international division structure is that it separates a firm's
domestic and international managers, which can result in two different camps with divergent
objectives.
TRUE
Difficulty: Medium
9. (p. 318) A structural arrangement in which domestic divisions are given worldwide
responsibility for product groups is referred to as a global area division structure.
FALSE
Difficulty: Medium
9-18
10. (p. 319) Firms that pursue a global product division structure typically have products that are
in the maturity stage of the product life cycle.
FALSE
Difficulty: Medium
11. (p. 319) One disadvantage of the global product division structure is the necessity of
duplicating facilities and staff personnel within each division.
TRUE
Difficulty: Medium
12. (p. 320) A structure under which global operations are organized on a geographic rather than
a product orientation is referred to as a global area structure.
TRUE
Difficulty: Easy
13. (p. 320) Companies that are in growing businesses and have broad product lines most often
use a global area division structure.
FALSE
Difficulty: Medium
14. (p. 320) An advantage of the global area division structure is that it allows the division
manager to cater to the tastes of the local market and make rapid decisions to accommodate
environmental changes.
TRUE
Difficulty: Medium
9-19
15. (p. 321) An advantage of the global functional division structure is that only the CEO can be
held accountable for the profits.
FALSE
Difficulty: Medium
16. (p. 325) One of the main objectives in developing the structure for joint ventures is to help
the partners address and effectively meld their different values and organizational
preferences.
TRUE
Difficulty: Medium
17. (p. 327) In most companies, mutual adjustment is achieved by assigning people to a specific
project and having them meet face-to-face and work out a plan of action of designing the new
product.
TRUE
Difficulty: Medium
18. (p. 328) Formalization is an organizational characteristic that assigns individuals to specific,
well-defined tasks.
FALSE
Difficulty: Easy
19. (p. 329) Specialization is the use of defined structures and systems in decision-making,
FALSE
Difficulty: Easy
9-20
20. (p. 330) Centralization is a management system in which important decisions are made at the
top.
TRUE
Difficulty: Easy
Multiple Choice Questions
21. (p. 305) The primary reason for the use of _____ is a desire by the MNC for total control and
the belief that managerial efficiency will be better without outside partners.
A. Licensing agreements
B. Franchising
C. Wholly owned subsidiaries
D. Joint ventures
Difficulty: Medium
22. (p. 310) This is an agreement in which two or more partners own and control an overseas
business.
A. Franchise
C. Licensing agreement
D. Joint venture
Difficulty: Easy
23. (p. 310) The equity joint venture:

B. Involves a financial investment by the MNC in a business enterprise with a local partner
C. Organizes worldwide operations based primarily on function and secondarily on product
D. Provides the most benefits when the need for product specification or differentiation is
high
Difficulty: Medium
9-21
24. (p. 310) The nonequity venture:

B. Provides the most benefits when the need for product specification or differentiation is
high
C. Involves a financial investment by the MNC in a business enterprise with a local partner
D. Organizes worldwide operations based primarily on function and secondarily on product
Difficulty: Medium
25. (p. 310) The two types of joint ventures are:

A. Equity and non-equity ventures
B. Proprietary and public ventures
C. Statutory and unofficial ventures
D. External and internal ventures
Difficulty: Medium
26. (p. 312) This is an agreement that allows one party to use an industrial property right in
A. Franchise
B. Joint venture
C. License
D. Certificate of proprietary usage
Difficulty: Easy
27. (p. 313) A _____ 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 for a
fee.
A. License
B. Franchise
C. Certificate of proprietary usage
D. Joint venture
Difficulty: Easy
9-22
28. (p. 313) These agreements typically require payment of a fee upfront and then a percentage
of the revenues.
A. Franchise
C. Export
D. Joint venture
Difficulty: Medium
29. (p. 316) Aircraft manufacturing fits which of the following globalization versus local
A. High pressure for globalization, high pressure for local responsiveness
B. High pressure for globalization, low pressure for local responsiveness
C. Low pressure for globalization, low pressure for local responsiveness
D. Low pressure for globalization, high pressure for local responsiveness
Difficulty: Hard
30. (p. 316) Clothing manufacturing fits which of the following globalization versus local
A. Low pressure for globalization, low pressure for local responsiveness
B. Low pressure for globalization, high pressure for local responsiveness
C. High pressure for globalization, low pressure for local responsiveness
D. High pressure for globalization, high pressure for local responsiveness
Difficulty: Hard
31. (p. 316) A common first choice among manufacturing firms, especially those with
technologically advanced products, would be to develop a(n):
A. Domestic policy
B. Export arrangement
C. Cartel arrangement
D. Import quota
Difficulty: Easy
9-23
32. (p. 317) In a company that has a narrow product line, the export manager usually reports
directly to the head of:
A. Purchasing
B. Personnel
C. Production
D. Marketing
Difficulty: Medium
33. (p. 318) The structural arrangement that allows a company to develop an overall, unified
approach to international operations and helps the firm develop a cadre of internationally
experienced managers is an advantage of a(n):
A. Mixed organization structure
Difficulty: Easy
34. (p. 317) Pressure by local foreign government for continued growth of international sales
encourage on-site:
A. Maintenance
B. Supply and distribution operations
C. Manufacturing operations
D. Safety operations
Difficulty: Medium
35. (p. 317) A structural arrangement that handles all international operations out of a division
created for this purpose is referred to as a(n):
A. Worldwide organizational structure
B. Global matrix structure
D. Overseas network structure
Difficulty: Easy
9-24
36. (p. 317) Companies still in the development stages of international business involvement are
most likely to adopt the:
Difficulty: Easy
37. (p. 317) According to the text, all of the following types of companies are likely to adopt the
international division structure except:
A. Companies with limited geographic diversity
B. Companies with a large number of executives with international expertise
C. Companies still in the developmental stage of international business
D. Companies with small international sales
Difficulty: Medium
38. (p. 318) A structural arrangement in which domestic divisions are given worldwide
responsibility for product groups is referred to as a(n):
Difficulty: Easy
39. (p. 319) The products sold by firms that adopt a global product division structure are
generally in the _____ stage of the product life cycle.
A. Introduction
B. Growth
C. Maturity
D. Decline
Difficulty: Medium
9-25
40. (p. 319) Which of the following provides the most benefits when the need for product
specification or differentiation is high?
A. International division
B. Global product division
C. Global area division
D. Global functional division
Difficulty: Easy
41. (p. 320) A structure under which global operations are organized on a geographic rather than
a product basis is referred to as a(n):
Difficulty: Easy
42. (p. 321) That division managers may pursue currently attractive geographic prospects for
their products and neglect other areas with better long-term potential is a major drawback of
the:
Difficulty: Medium
9-26
43. (p. 320) Which of the following is an advantage of a global area division structure?
A. The structural arrangement helps a firm manage a diverse product line
B. The structural arrangement helps a firm cater to local needs in foreign markets
C. The marketing, production and finance divisions of the firm can be coordinated on a
product-by-product global basis
D. The structural arrangement helps a firm develop an overall, unified approach to
international markets
Difficulty: Medium
44. (p. 320) A global area division structure most often is used by companies that are in _____
businesses and have _____ product lines.
A. Growing; broad
B. Mature; narrow
C. Growing; narrow
D. Mature; broad
Difficulty: Medium
45. (p. 321) The difficulty encountered in reconciling a product emphasis with a geographic
orientation is the primary disadvantage of a(n):
Difficulty: Medium
46. (p. 321) Which of the following organizes worldwide operations based primarily on function
and secondarily on product?
Difficulty: Easy
9-27
47. (p. 321) A global functional division structure is used primarily by:
A. Service companies
B. Extractive companies
C. Light manufacturing companies
D. Heavy manufacturing companies
Difficulty: Medium
48. (p. 321) All of the following are advantages of the global functional division structure
except:
A. An emphasis on functional expertise
B. A tight centralized control
C. A relatively lean managerial staff
D. The chief executive officer is held accountable for the profits
Difficulty: Medium
49. (p. 321) A structure that is a combination of a global product, an area or a functional
arrangement is referred to as a(n) _____ organizational structure.
A. Assimilated
B. Transnational
C. Mixed
D. Team-based
Difficulty: Easy
50. (p. 322) A multinational structural arrangement that combines elements of function, product
and geographic designs, while relying on a network arrangement to link worldwide
subsidiaries is referred to as a:
B. Cross-cultural matrix structure
C. Transnational divisional structure
D. Cross-cultural network structure
Difficulty: Easy
9-28
51. (p. 322) A _____ is designed to help MNCs take advantage of global economies of scale
while also being responsive to local customer demands.
A. Global matrix structure
B. Transnational network structure
C. Worldwide divisional structure
D. Cross-cultural matrix structure
Difficulty: Medium
52. (p. 322) At the center of the _____ are nodes, which are units charged with coordinating
product, functional and geographic information.
A. Cross-cultural matrix structure
B. Worldwide divisional structure
C. Transnational network structure
D. Global product division structure
Difficulty: Medium
53. (p. 323) Subsidiaries that are located anywhere in the world where they can benefit the
organization are called:
A. Chaebols
B. Keiretsus
C. Specialized subunits
D. Dispersed subunits
Difficulty: Medium
54. (p. 323) Specialized operations are:

subsidiaries
C. Designed to take advantage of low factor costs, while others are responsible for providing
D. Used to share information and resources throughout dispersed and specialized subunits
Difficulty: Medium
9-29
55. (p. 323) Interdependent relationships are:

subsidiaries
C. Used to share information and resources throughout the dispersed and specialized subunits
D. Designed to take advantage of low factor costs, while others are responsible for providing
Difficulty: Medium
56. (p. 324) In terms of cultural control in a global area division:

A. It is treated like all other MNC structural divisions
B. Local subsidiary culture is often the most important
C. It is possible for some companies, but not always necessary
D. Culture must support the shared decision making
Difficulty: Hard
57. (p. 324) In which of the following MNC structures are tight process bureaucratic controls
used to maintain product quality and consistency?
B. Global area division
C. Matrix structure
D. Global product division
Difficulty: Medium
58. (p. 324) The decision-making control in which local units are given autonomy is
characteristic of a(n):
Difficulty: Medium
9-30
59. (p. 324) The output control in which profit responsibility is shared with product and
geographic units is characteristic of a(n):
C. Matrix structure
Difficulty: Medium
60. (p. 324) Bureaucratic control is not very important in which type of multinational structure?
A. Global product division structure
C. Matrix structure
Difficulty: Easy
61. (p. 326) Which basic value is not common in Asian firms?
A. Group
B. Trust
C. Confrontation
D. Fluid
Difficulty: Medium
62. (p. 326) Individuals who work for a company, usually via the Internet and move on to other
employment when their assignment is done are known as:
A. Purchasing agents
B. Marketing managers
C. International outsourcers
D. Electronic freelancers
Difficulty: Medium
9-31
63. (p. 328) _____ is the use of defined structures and systems in decision-making,
A. Formalization
B. Specialization
C. Concentration
D. Interpretation
Difficulty: Easy
64. (p. 328) In a study of U.S. and Japanese firms in Taiwan, objective formalization was
measured by:
A. Use of informal controls
B. The extent to which goals were vague and unspecified
C. The number of different documents given to employees
D. Use of culturally induced values in getting things done
Difficulty: Medium
65. (p. 329) As an organizational characteristic, _____ is the assigning of individuals to specific,
well-defined tasks.
A. Interpretation
B. Concentration
C. Formalization
D. Specialization
Difficulty: Easy
66. (p. 329) Specialization in an international context can be classified into:

A. Diagonal and vertical specialization
B. Vertical and parallel specialization
C. Horizontal and vertical specialization
D. Diagonal and parallel specialization
Difficulty: Easy
9-32
67. (p. 330) The assignment of jobs so that individuals are given a particular function to perform
and tend to stay within the confines of this area is referred to as:
A. Diagonal specialization
B. Parallel specialization
C. Vertical specialization
D. Horizontal specialization
Difficulty: Medium
68. (p. 330) The assignment of work to groups of departments where individuals are collectively
responsible for performance is referred to as:
A. Horizontal specialization
B. Vertical specialization
C. Lateral specialization
D. Parallel specialization
Difficulty: Medium
69. (p. 330) _____ is a management system in which important decisions are made at the top.
A. Centralization
B. Decentralization
Difficulty: Easy
70. (p. 330) Pushing decision making down the line and getting the lower-level personnel
involved is referred to as:
A. Centralization
B. Decentralization
Difficulty: Easy
9-33
Essay Questions
71. (p. 310) Explain alliances and joint ventures.
An alliance is any type of cooperative relationship among different firms. An international

alliance is comprised of two or more firms from different countries. Some alliances are
temporary; others are more permanent. A joint venture (JV) can be considered a specific type
of alliance agreement under which two or more partners own or control a business. An
international joint venture is a JV comprised of two or more firms from different countries.
Alliances and joint ventures can take a number of different forms, including cross-marketing
arrangements, technology-sharing agreements, production contracting deals and equity
agreements. In some instances, two parties may create a third, independent entity expressly
for the purpose of developing a collaborative relationship outside their core companies.
Alliances and joint ventures, like mergers and acquisitions, can pose substantial managerial
challenges.
Difficulty: Medium
72. (p. 317) "Companies still in the developmental stages of international business involvement
are most likely to adopt the international division structure". Why?
If international operations continue to grow, subsidiaries commonly are grouped into an

international division structure, which handles all international operations out of a division
that is created for this purpose. This structural arrangement is useful as it takes a great deal of
the burden off the chief executive officer for monitoring the operations of a series of overseas
subsidiaries as well as domestic operations. The head of the international division coordinates
and monitors overseas activities and reports directly to the chief executive on these matters.
The grouping of international activities under one senior executive ensures that the
international focus receives top management attention. The structural arrangement allows the
company to develop an overall, unified approach to international operations and the
arrangement helps the firm develop a cadre of internationally experienced managers. The
structure, however, separates the domestic and international managers, which can result in
two different camps with divergent objectives.
Difficulty: Medium
9-34
73. (p. 215-322) What is a mixed organization structure? Are mixed organization structures
gaining in popularity? If so, why?
Some companies find that neither a global, product, area or functional arrangement is
satisfactory. They opt for a mixed organization structure, which combines all three into an
MNC that supplements its primary structure with a secondary one and, perhaps, a third one. In
recent years, mixed organization structures have become increasingly popular. Many
advantages can be gleaned from a mixed organization structure. In particular, it allows the
organization to create the specific type of design that best meets its needs.
Difficulty: Medium
74. (p. 322-323) Explain the transnational network structure. What are its three subcomponents?
The transnational network structure is a multinational structural arrangement that combines

elements of function, product, and geographic designs, while relying on a network
arrangement to link world wide structures. The framework consists of three components:
dispersed subunits (subsidiaries located anywhere in the world where they can benefit the
organization), specialized operations (activities carried out by subunits that focus on particular
product lines, research areas, and marketing areas, and are designed to tap specialized
expertise or other resources in the company's subsidiaries), and interdependent relationships
(used to share information and resources throughout the dispersed and specialized subunits).
Difficulty: Medium
9-35
75. (p. 328-331) Discuss the organizational characteristics of formalization, specialization and
centralization.
Formalization is the use of defined structures and systems in decision making, communicating
and controlling. As an organizational characteristic, specialization is the assigning of
individuals to specific, well-defined tasks. Specialization in an international context can be
classified into horizontal and vertical specialization. Horizontal specialization assigns jobs so
that individuals are given a particular function to perform and people tend to stay within the
confines of this area. Vertical specialization assigns work to groups or departments where
individuals are collectively responsible for performance. Vertical specialization also is
characterized by distinct differences between levels in the hierarchy. Centralization is a
management system in which important decisions are made at the top. In an international
context, the value of centralization will vary according to the local environment and the goals
of the organization. Many U.S. firms tend toward decentralization, pushing decision making
down the line and getting the lower-level personnel involved.
Difficulty: Medium
9-36

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True / False Questions

4. A license is a structural arrangement in which domestic divisions are given worldwide

8. A disadvantage of the international division structure is that it separates a firm's domestic

9. A structural arrangement in which domestic divisions are given worldwide responsibility

17. In most companies, mutual adjustment is achieved by assigning people to a specific

18. Formalization is an organizational characteristic that assigns individuals to specific, well-

19. Specialization is the use of defined structures and systems in decision-making,

Multiple Choice Questions

23. The equity joint venture:

24. The nonequity venture:

25. The two types of joint ventures are:

43. Which of the following is an advantage of a global area division structure?

45. The difficulty encountered in reconciling a product emphasis with a geographic

47. A global functional division structure is used primarily by:

49. A structure that is a combination of a global product, an area or a functional arrangement

54. Specialized operations are:

55. Interdependent relationships are:

56. In terms of cultural control in a global area division:

61. Which basic value is not common in Asian firms?

65. As an organizational characteristic, _____ is the assigning of individuals to specific, well-

66. Specialization in an international context can be classified into:

71. Explain alliances and joint ventures.

75. Discuss the organizational characteristics of formalization, specialization and

Chapter 09 Entry Strategies and Organizational Structures Answer Key

True / False Questions

Multiple Choice Questions

23. (p. 310) The equity joint venture:

24. (p. 310) The nonequity venture:

25. (p. 310) The two types of joint ventures are:

54. (p. 323) Specialized operations are:

55. (p. 323) Interdependent relationships are:

56. (p. 324) In terms of cultural control in a global area division:

66. (p. 329) Specialization in an international context can be classified into:

71. (p. 310) Explain alliances and joint ventures.

An alliance is any type of cooperative relationship among different firms. An international

If international operations continue to grow, subsidiaries commonly are grouped into an

The transnational network structure is a multinational structural arrangement that combines

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