DRS, IBEO 12

Chapter 15
The Organization of International Business

Chapter 15
The Organization of International Business
Multiple Choice Questions

STUDY QUESTION 1: What is the challenge of organization in international

business? Why do managers increasingly worry about it? What trends drive current
change?

1. Once managers have specified the company's strategy, their jobs turn to converting strategic
plan into actions. This task begins by _____.
a. devising an organization that can create value while mediating the pressures for
worldwide integration versus local differentiation (interpretation, page 520)
b. configuring the subsidiary network to create the optimal value chain
c. adjusting the strategy to avoid conflicts with company traditions
d. precisely mapping the responsibilities for each subsidiary and every manager

2. The task of organization in the international company to execute its strategy is becoming
more challenging because of the growing importance of _____.
a. formally outlining the structure of the organization
b. overcoming resistance to product change
c. building knowledge-generating and decision-making relationships (interpretation,
page 521)
d. reengineering inefficient units of the company

3. _____ and _____ trends pose new challenges to building an organization that helps managers
implement their chosen strategy
a. Demographic; technological
b. Institutional; cognitive
c. Social; political.
d. Environmental; workplace (definition, page 521)

4. The three components of building a capable organization include all of the following except
_____.
a. formal structure that specifies the framework for work
b. systems that coordinate and control what gets done
c. developing a set of shared values among employees around the world
d. leadership and training programs to develop the staff of the company (definition,
page 523)

5. Changes in social contract between employees and organizations are characterized by

_____________ and ______________.
a. Increased job security, pay, and benefits; increased professional mobility
b. Decreased job security, pay, and benefits; decreased professional mobility.
c. Decreased job security, pay, and benefits; increased professional mobility

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d. Increased job security, pay, and benefits; decreased professional mobility.

STUDY QUESTION 2: What is meant by vertical differentiation?

6. The degree of _____ in a company determines where it has opted to assign decision-making
authority within the context of its organization structure.
a. systemic differentiation
b. horizontal differentiation
c. schematic differentiation
d. vertical differentiation (definition, page 524)

7. The_____ the level of the company at which managers make decisions, the more that
organization is _____.
a. higher; decentralized
b. lower; centralized
c. higher; centralized (interpretation, page 524)
d. higher; unimportant

8. Concerns about cost, expediency, and uncertainty encourage a MNE to _____.

a. decentralize decision-making
b. centralize decision-making (interpretation, page 524)
c. expand the number of levels of the organization involved in decision-making
d. consult more subsidiary personnel

9. Decentralized decision-making is most appropriate when _____.

a. success in international operations depends on the quality of local adaptation
(interpretation, page 524)
b. decisions involve moving goods or resources internationally
c. global standardization is required to contain costs
d. decisions must be made that will impact the entire company

10. A decision made at the Citigroup Panama level, a foreign subsidiary of Citigroup, would be a
___ decision.
a. Centralized
b. Collectivist
c. Decentralized
d. Individualist

STUDY QUESTION 3: What is meant by horizontal differentiation? How can one define
the properties and purposes of structure?

11. The term _____ refers to the formal arrangement of roles, responsibilities, and relationships
within an organization.
a. structure (definition, page 524)
b. systems

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c. culture
d. strategy

12. The idea of _____ describes how the company specifies organizational tasks, divides those
tasks into jobs, departments, subsidiaries, and divisions, and then assigns authority and
authority relationships.
a. systemic differentiation
b. horizontal differentiation (definition, page 526)
c. vertical differentiation
d. schematic differentiation

13. An organization chart—the system of lines and boxes that represents its formal structure—
depicts all of the following except _____.
a. division of labor within an organization
b. linkages among the various units of an organization
c. when subsidiaries report to headquarters (definition, page 524)
d. the arrangement of management positions

14. _____ is the matter of how the company balances centralization versus decentralization of
decision-making whereas _____ is the matter of how the company opts to divide itself into
specific units to do specific jobs.
a. Horizontal differentiation; vertical differentiation
b. Vertical differentiation; systemic differentiation
c. Schematic differentiation; schematic differentiation
d. Vertical differentiation; horizontal differentiation (interpretation, page 524)

15. Which of the following statements is not an advantage of decentralization?

a. Entourages lower-level managers to exercise initiative
b. Enable more flexible response to rapid environmental changes
c. Gives senior executives the authority to direct major change pg. 527*
d. Decisions made by those who directly deal with customers, competitors, and
markets

STUDY QUESTION 4: What are the features, properties, and practices of the functional
structure?

16. A _____ is the ideal way to organize work when a company's products share a common
technology and competitive pressures push for a cost-leadership strategy.
a. centralized structure.
b. matrix structure.
c. divisional structure
d. functional structure (definition, page 526)

17. Organizing departments and units around discrete business activities, such as finance,
production, marketing, and human resources, results in a _____.
a. network structure

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b. matrix structure
c. functional structure (definition, page 526)
d. divisional structure

18. Decision-making in a functional structure tends to be _____.

a. decentralized
b. centralized (definition, page 526)
c. vertical
d. lateral

19. Functional structures for international operations are most likely found among those
companies that _____.
a. face competitive pressures for a cost-leadership strategy (interpretation, page 526)
b. offer a broad range of products that share few common technologies
c. rely on differentiated production and marketing methods
d. compete in stable industries

20. _____

STUDY QUESTION 5: What are the features, properties, and practices of the divisional
structure?

21. Whereas executives specify roles and relationships in a functional structure in terms of
_____, they use the divisional structure format to specify them according to _____.
a. inputs; outputs (interpretation, page 527)
b. buyers; supplies
c. markets; countries
d. politics; economics

22. A major benefit of the international division structure is _____.

a. the creation of incentives for domestic divisions to contribute resources for international
operations
b. the formation of a critical mass of international expertise (definition, page 527)
c. that it is well suited to firms with diverse product groups
d. that it is located abroad

23. Historically, when firms have expanded abroad, they have typically grouped all their
international activities in a(n) _____ division.
a. customer
b. functional
c. international (interpretation, page 528)
d. manufacturing

24. A major benefit of the international division structure is _____.

a. that it is well suited to firms with diverse product lines
b. its ability to exploit economies of scale or scope

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c. the creation of incentives for domestic divisions to contribute resources for international
operations
d. the creation of a critical mass of managers that can wield power within the larger
organization (interpretation, page 526)

25. Which type of divisional structure is most common for a company pursuing a Multidomestic
Strategy?
a. International Structure
b. Product Structure
c. Geographic Structure

STUDY QUESTION 6: What are the features, properties, and practices of the product and
area structures?

26. Which of the following organizational structures is particularly popular among companies
that make a variety of diverse products?
a. international division structure
b. functional division structure
c. geographic division structure
d. product division structure (interpretation, page 528)

27. A _____ tends to be adopted by firms that are reasonably diversified and likely use a range of
distribution channels and supply chains.
a. international division structure
b. geographic division structure
c. product division structure (interpretation, page 528)
d. functional division structure

28. The _____, given that both the foreign and domestic operations report to the same manager,
is designed to help overcome the coordination problems that arise with the international
division and worldwide area structures.
a. matrix division structure
b. product division structure (interpretation, page 528)
c. hierarchy division structure
d. functional division structure

29. The primary limitation with the worldwide product division structure is _____.
a. the cost of duplicated functions and international activities among the product
divisions (definition, page 528)
b. that it complicates finding synergies between foreign and domestic value activities
c. that it does not facilitate the transfer of core competencies within a division's worldwide
operations
d. the difficulty it creates in a selling or spinning-off product lines

30. _____

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STUDY QUESTION 7: What are the features, properties, and practices of the matrix and
mixed structures?

31. Applying strategies that try to simultaneously deal with competing pressures for global
integration and local responsiveness spur some MNEs to adopt a _____ structure.
a. matrix (definition, page 529)
b. functional
c. geographic division
d. functional division

32. Which of the following statements is false about a matrix structure?

a. it specifies extensive communication channels
b. it is more easily managed than a divisional structure (interpretation, page 529)
c. it creates dual career ladders
d. it slows decision-making

33. The fundamental limitation of a matrix structure is that it _____.

a. creates the sense that someone else is handling responsibilities for strategic decisions
b. can isolate upper management from operational levels
c. institutes a dual hierarchy that violates the unity-of-command principle (definition,
page 529)
d. encourages power contests among executives

34. In reality, the organizational charts of _____ MNEs neatly depict a functional, divisional, or
matrix structure.
a. no
b. few (definition, page 529)
c. many
d. all

35. A matrix organization includes all of the following except:

a. Includes a senority-based promotional approach
b. Institutes overlaps among functional and divisional forms
c. Gives functional, product, and geographic groups a common focus
d. Has dual reporting relationships rater than a single line of command

STUDY QUESTION 8: What is meant by contemporary structures? What are its primary
characteristics?

36. Contemporary structures essentially aim to arrange roles and responsibilities in the
organization so that more employees, particularly those in the front-lines who deal more
directly with resources and markets, have _____ decision-making authority.
a. no

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b. less
c. more (interpretation, page 530)
d. absolute

37. Contemporary structures aim to support organizations _____.

a. in which the location of control between the constituent units of a network alliance is
evident
b. that centralize decision-making authority to those who can make informed decisions
c. that dismantle horizontal, vertical, or external boundaries that block ideas and
relationships (interpretation, page 530)
d. that create predictable workplaces with slight collaboration among subsidiaries

38. Which of the following is an unlikely characteristic of contemporary structures?

a. few barriers between people
b. extensive collaborative efforts among people in different specialties and different
geographic locations
c. higher capacity for change and learning
d. centralized decision-making (definition, page 530)

39. Contemporary structures aim to have few boundaries between all of the following except
_____.
a. different vertical ranks and functions
b. different units in different geographic locations
c. the firm and its suppliers, distributors, allies, and customers
d. the firm and its competitors (interpretation, page 531)

40. Contemporary organizational structures are beginning to look more like__________, while
making the shift to more ____________ decision making :
a. The Internet; Centralized
b. Hierarchies; Decentralized
c. The Internet; Decentralized
d. Hierarchies; Centralized

STUDY QUESTION 9: What are the functions and forms of contemporary structures?

41. The benefits of network structures include _____.

a. higher competition among members for resources and rewards
b. difficulty in switching suppliers, no matter where in the world they are located
c. developing core competencies in a broad range of value activities
d. maintaining a strong sense of organization in the face of dynamic partnerships
(interpretation, page 531)

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42. A hyperarchy is _____.

a. a form of structure that precise superiors and subordinates relationships
b. a form of structure that relies on extensive centralization
c. a large-scale, self-organizing community (definition, page 534)
d. analogous to a hierarchy

43. A virtual organization is _____ of a traditional vertical hierarchy.

a. an elaboration
b. the antithesis (interpretation, page 533)
c. the latest interpretation
d. a selective application

44. Some MNEs that have tried "spaghetti organizations" have run into problems, most notably
_____.
a. frequent managerial intervention in decision-making (interpretation, page 533)
b. relentless centralization of decision-making
c. overly motivated employees
d. extreme competition among members for resources

45. _____

STUDY QUESTION 10: Identify the major types of coordination systems. What does each
sort aim to accomplish and how?

46. Coordination refers to the _____.

a. linking of various value activities within an organization (definition, page 535)
b. span of control within an organization
c. portioning the performance of specific tasks
d. means to ensure managers act in ways that are anchored in their immediate
responsibility.

47. Prevalent approaches to coordination include all of the following except _____.
a. standardization
b. mutual adjustment
c. adaptive (definition, page 535)
d. planning

48. The approach to coordination that involves ongoing discussions among different units of the
MNE to figure out how to resolve challenges jointly is known as _____.
a. management by objectives
b. organization structure
c. coordination by plan
d. coordination by mutual adjustment (definition, page 537)

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49. Companies often use a range or executive development and education programs to get to
improve the performance of _____.
a. coordination by standardization
b. coordination by consensus
c. coordination by plan (definition, page 536)
d. coordination by conflict

50. Establishing common rules and procedures that apply uniformly to everyone worldwide is
the effort to coordinate by _____.
a. standardization (definition, page 535)
b. consensus
c. plan
d. mutual adjustment

51. _____

STUDY QUESTION 11: Identify the major types of control systems. What does each sort
aim to accomplish and how?

52. Three types of control systems are used in MNEs. These are _____.
a. market control, bureaucratic control, and lan control (definition, page 538)
b. standardization control, adjustment control, and clan control
c. market control, adjustment control, and clan control
d. planning control, market control, and clan control

53. The MNE that uses external market mechanisms, like price competition and relative market
share, to establish internal performance benchmarks and standards is applying a system of
_____.
a. bureaucratic control
b. market control (definition, page 538)
c. standardization control
d. clan control

54. The MNE that uses centralized authority to install an extensive set of rules and procedures to
govern a broad range of activities is applying a system of _____.
a. market control
b. adjustment control
c. bureaucratic control (definition, page 538)
d. clan control

55. The MNE that relies on shared values among all employees to idealize the preferred
behaviors and identify performance measures within the company is applying a system of
_____.
a. market control
b. bureaucratic control

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c. planning control
d. clan control (definition, page 538)

56. _____

STUDY QUESTION 12: What are the primary operational methods of control?

57. Written reports compiled and submitted by local subsidiaries to the home office _____.
a. are a major means of promoting organization culture
b. have recently become less important in MNEs
c. are discouraged between headquarters and subsidiaries in the event of a language gap
d. resemble the format used domestically (definition, page 538)

58. MNEs use reporting systems for foreign operations that are similar to the ones they use
domestically _____.
a. primarily in the early stages of operating abroad
b. because common systems allow comparative evaluations (definition, page 539)
c. until the subsidiary demonstrates mastery of the form
d. only in those countries with extremely similar systems of information technology

59. A common problem of corporate visits as a control mechanism is _____.

a. the language gap between corporate and subsidiary personnel
b. their view by foreign subsidiary managers as being wasteful jaunts by home office
executives (interpretation, page 539)
c. jet lag that keeps headquarters personnel from being effective
d. the ill will created with joint venture partners

60. _____

STUDY QUESTION 13: Define organization culture. Identify its linkages to the MNE's
performance and strategy.

61. _____ is the norms and value systems that are shared among the employees of an
organization.
a. Organizational systems
b. Organizational structure
c. Organizational culture (definition, page 541)
d. Organizational vision

62. Despite wide-range interpretation, many believe that a company's organization culture is best
viewed as all of the following except _____.
a. values and principles of management
b. outlook on power distance (interpretation, page 541)
c. nature of the work climate and atmosphere

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d. traditions and ethical standards

63. Studies report a(n) _____link between organization culture and the financial performance of
the firm.
a. significant (definition, page 541)
b. negligible
c. spurious
d. occasional

64. A strong organization culture provides many benefits to an MNE, including _____.
a. inspiring managers worldwide to react to changing customer and market requirements
b. solidifying resistance to new versions of traditional policies and procedures
c. diluting employee commitment to generating knowledge and building relationships to
manage growing interdependence among value activities
d. creating the flexibility to adapt its strategy when company or market circumstances
change (interpretation, page 541)

65. Key features of a company’s organizational culture include all except:

a. Values and principles of management
b. Work climate and atmosphere
c. Patterns of “how we do things around here”
d. Embedded set of disparate ethical standards

STUDY QUESTION 14: Cases and Insert Features

66. Johnson & Johnson delegates to its subsidiaries a great deal of authority to respond to local
conditions. Many subsidiaries have their own manufacturing, marketing, research, and
human resource functions. This particular value chain configuration illustrates the
_____________ strategy.

multidomestic
global
transnational
international

67. J&J is organized on the principles of a _________ management

a. centralized
b. decentralized
c. horizontal integration
d. horizontal differentiation

68. _____

69. _____

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70. _____

71. Currently, the role of corporate universities is _____ because _________:

A)Declining; MNEs have only built university sites in the United States.
B)Rising; it separates company strategy from company culture to facilitate learning.
C)Declining; corporate universities do not promote skills relevant to a globalized economy.
D)Rising; it is a key enabler for future growth [page 547

True/False Questions

STUDY QUESTION 1: What is the challenge of organization in international

business? Why do managers increasingly worry about it? What trends drive current
change?

72. Any organization, no matter what form it takes, ultimately must help managers reconcile
the pressures for worldwide integration versus local differentiation. True (definition, page
521)
73. Current approaches to designing an organization see the task of building knowledge-
generating and decision-making relationships as less important than specifying the best
structural arrangement. False (definition, page 522)

STUDY QUESTION 2: What is meant by vertical differentiation?

74. A firm's vertical differentiation determines where in its organization structure managers have
decided to concentrate decision-making authority. True (definition, page 524)
75. A firm's horizontal differentiation determines where it has opted to assign decision-making
authority within the context of its hierarchy. False (definition, page 524)
76. Decentralization has the key advantage of: letting decisions be made by those who directly
deal with customers, competitors, and markets. True

STUDY QUESTION 3: What is meant by horizontal differentiation? How can one define
the properties and purposes of structure?

77. Horizontal differentiation is concerned with how the managers of a firm decide to divide the
company into discrete subunits. True (definition, page 526)
78. Determining how to balance the centralization versus decentralization of decision-making
requires managers address the matter of horizontal differentiation. False (definition, page
526)
79. Centralization is more appropriate for an International or Global strategy, as decentralization
is more appropriate for a Multidomestic strategy. True
80. An advantage of centralized corporate practices includes reducing the risk that lower-level
employees make costly, wrong decisions. True
81. Horizontal differentiation is the degree to which high level managers make important
decisions and pass them down to lower levels for implementation False

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STUDY QUESTION 4: What are the features, properties, and practices of the functional
structure?

82. The functional structure is ideal when products and manufacturing methods are largely
undifferentiated among countries. False (interpretation, page 526)
83. The functional structure is ideal when the company faces complex and changing
environments. False (definition, page 526)
84. Functional structures are popular among companies with narrow product lines (page 528)
85. A geographic division structure is popular when foreign operations are large and are not
dominated by a single country or region True

STUDY QUESTION 5: What are the features, properties, and practices of the divisional
structure?

86. A major benefit of the international division structure is the creation of a critical mass of
international expertise. True (definition, page 526)
87. A division structure tends to be adopted by firms that are diversified by products or markets.
True (definition, page 526)
88. Divisional structures are popular among companies with narrow product lines (False

89. Companies with a narrow range of products are most likely to use a product division.
False (definition, page 528)
90. Firms with a low degree of diversification and a domestic structure based on function tend to
favor a worldwide area structure. True (interpretation, page 528)
91. An international division structure Which type of divisional structure is best suited for
multidomestic strategies that demand little integration and standardization between domestic
and foreign operations? (Page 530)

STUDY QUESTION 7: What are the features, properties, and practices of the matrix and
mixed structures?

92. Group interdependence, either in terms of products, functions, or geography, and the
increased exchange of information are features of a matrix structure. True (definition, page
529)
93. A matrix organization is a hybrid of the functional and area organizations. False (definition,
page 529)

STUDY QUESTION 8: What is meant by contemporary structures? What are its primary
characteristics?

94. Contemporary structures aim to centralize decision-making authority by removing

boundaries that impede the decentralization of decision-making. False (interpretation, page
530)
95. A common feature of contemporary structures is greater cross-functional collaboration. True
(definition, page 531)

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STUDY QUESTION 9: What are the functions and forms of contemporary structures?

96. The idea of a network organization refers to a collection of independent, mostly single-
function firms. True (definition, page 531)
97. The notion of boundaries, within the context of contemporary structures, refers to those
limitations that interfere with communication and collaboration between the firm and its
suppliers, distributors, allies, competitive rivals, and customers. False (interpretation, page
531)

In developing the adaptable organization, managers face a range of structural barriers.

Overcoming these barriers requires a rethinking of what GE's former CEO Jack Welch has called
an organization's social architecture, namely the framework that moderates and brings together
individual behavior, strategic competencies, and organizational culture. 5) _______

STUDY QUESTION 10: Identify the major types of coordination systems. What does each
sort aim to accomplish and how?

98. Coordination by plan deals with exact rules and procedures that spell out what needs to be
done and how. False (definition, page 535)
99. Coordination methods include mutual adjustment, planning, and standardization. True
(definition, page 535)

STUDY QUESTION 11: Identify the major types of control systems. What does each sort
aim to accomplish and how?

100. MNEs typically design their control systems in terms of either market control,
bureaucratic control, or adaptation control. False (definition, page 538)
101. Adopting a market control system requires that the MNE uses external market
mechanisms to establish internal performance benchmarks and standards. True (definition,
page 538)

STUDY QUESTION 12: What are the primary operational methods of control?

102. Written reports are a major means of promoting corporate culture. False (definition,
page 539)
103. The reporting systems used by MNEs to control worldwide operations typically differ
from country to country. False (definition, page 539)

STUDY QUESTION 13: Define organization culture. Identify its linkages to the MNE's
performance and strategy.

104. The common values shared by a company's employees are known as its corporate culture.
True (definition, page 541)

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105. The character of a company's corporate culture is a product of, beside the core values and
business principles that management advocates, the behaviors that define "how we do things
around here." True (interpretation, page 541)

STUDY QUESTION 14: Cases and Insert Features

. Johnson and Johnson is organized on the principles of decentralized management in the belief
that mangers who are closest to customers and competitors should make decisions.

Correct Answer = TRUE

(text pg 519)

Johnson and Johnson is organized on principles of decentralized management, therefore, most of

their international subsidiaries are managed by citizens of the country that they are located in.

Answer: True

Andy Grove, the former CEO of Intel, noted that executives face the challenge of understanding
how to"must let chaos reign, and then rein in chaos." This declaration has led to a fundamental
shift in the understanding of how companies approach the organization of their global operations.
While there are many implications, increasingly we see evidence that many companies are
meeting chaos with chaos, tightening controls, sometimes radically, while guiding the company
in innovative ways. 19) _______

Essay Questions

106. How might centralization of decision-making adversely affect local managers (those
managers in foreign branches or subsidiaries)?

Answer
Although some decisions are better left to corporate management, doing so may cause
morale problems among local managers who perceive their responsibility has been taken
away. When local managers are prevented from acting in the best interest of their own
operation, they tend to think, I could have done better, but corporate management would
not let me. If local managers cannot participate in developing global strategies, they may lack
the positive attitude to work hard to implement global strategic decisions. These managers
also may not gain the experience needed to advance within the company.
(interpretation, pages 524–525)

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107. What are some of the trade-offs that companies need to consider when deciding where to
locate decision-making in international business?

Answer
The higher the managerial level at which managers make decisions, the more they are
centralized, the lower the level, the more they are decentralized. The location of decision-
making may vary within the same company over time as well as by product, function,
and country. An ethnocentric attitude would influence a company to develop competencies,
such as knowledge and technology, in its home country and control how they are transferred
aboard. A polycentric attitude would cause the company to delegate decisions to foreign
subsidiaries because headquarters personnel believe only people on the spot know best what
to do. A geocentric attitude would permit more openness to capabilities either at home or
abroad and be conducive to a transnational strategy.
(interpretation, page 525)

108. Explain the major types of traditional organization structures and the advantages and
disadvantages of each for international operations.

Answer
a. Functional division structure—Divide personnel functionally so that marketing
people report to other marketing people, finance people to other finance people, and so
on. Functional divisions are popular among companies with a narrow range of products,
particularly if the production and marketing methods are undifferentiated among them.
However, as they add new and different products, this structure becomes cumbersome.
b. Product division structure—Product divisions are particularly popular among
companies that make a variety of diverse products, especially those that have become
diverse through acquisitions. Because these divisions may have little in common, they
may be highly independent of each other. As is true for the functional structure, the
product division structure is well suited for a global strategy because both the foreign and
domestic operations for a given product report to the same manager, who can find
synergies between the two, such as by sharing information on the successes and failures
of each.
c. International division structure—Grouping international business activities into
their
own division puts internationally specialized personnel together to handle such diverse
matters as export documentation, foreign exchange transactions, and relations with
foreign governments. This prevents duplication of these activities in more than one
place in the organization. It also creates a large enough critical mass so that personnel
within the division can wield power within the organization to push for international
expansion.
d. Geographic division structure—Companies use geographic divisions if they have
large foreign operations that are not dominated by a single country or area. This structure
is more common to European MNEs than to U.S MNEs, which tend to be dominated by
the strong domestic market. The structure is useful when maximum economies in
production can be gained on a regional rather than on a global basis because of market

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size or the production technologies for the industry. A drawback is possibly costly
duplication of work among areas.
e. Matrix division structure—Due to the problems inherent in either integrating or
separating foreign operations, many companies are moving toward matrix organizations.
In this organizational structure, a subsidiary reports to more than one groupage. This
structure is based on the theory that because each group shares responsibility over
foreign operations, the groups will become more interdependent, exchange information,
and exchange resources with each other. One drawback, however, concerns how groups
compete for scarce resources to enact their preferred operating methods.
(definition, page 528)

109. Describe some of the general features of contemporary structures.

Answer
Because each type of organizational structure has advantages and disadvantages,
companies in recent years have developed new forms or organization structure to pull
together some of the diverse functional, geographic, and product perspectives. Some of
these mechanisms are:
a. developing teams with members from different countries for planning to build
scenarios on how the future may evolve
b. strengthening corporate staffs so that headquarters and subsidiary managers with
line responsibilities must listen to different viewpoints
c. using more management rotation, such as between domestic and international
positions, to break down parochial views
d. keeping international and domestic personnel in closer proximity to each other,
e. establishing liaisons among subsidiaries within the same country so that different
product groups can get combined action on a given issue
f. developing teams from different countries to work on special projects of cross-
national importance, so that they share viewpoints
g. placing foreign personnel on the board of directors and top-level committees to
bring foreign viewpoints into top-level decisions
h. giving all divisions and subsidiaries credit for business resulting from cooperative
efforts so that they are encouraged to view activities broadly
i. basing reward systems partially on global results so that managers are committed
to global as well as local performance
(definition, pages 530–531)

110. Describe using reports as a control mechanism.

Answer
Headquarters needs timely reports to allocate resources, correct plans, and reward
personnel. Their decisions on how to use capital, personnel, and technology are almost
continuous, so reports must be frequent, accurate, and up-to-date to assure meeting the
MNE's objectives. Headquarters uses reports to evaluate the performance of subsidiary
personnel so as to reward and motivate them. Written reports are more important in an
international setting than in a domestic one because subsidiaries' managers have much

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DRS, IBEO 12
Chapter 15
The Organization of International Business

less personal contact with managers above them. Corporate managers miss out on much
of the informal communication that could tell them about the performance of foreign
operations. Most MNEs use reports for foreign operations that resemble those they use
domestically. The reasons for this are:
a. If the reports have been effective domestically, management often believes they also
will be effective internationally.
b. There are economies from carrying over the same types of reports. The need to
establish new types of reporting mechanisms is eliminated, and corporate management is
already familiar with the system.
c. Reports with similar formats presumably allow management to better compare one
operation with another's.
(interpretation, pages 538–539)

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