FINAL – REVIEW ANSWER – IBM – ALL CHAPTERS

1. Which of these terms means the totality of a firm's organization, including formal
organization structure, control systems and incentives, processes, organizational
culture, and people?
A. Organizational ethics
B. Organizational architecture
C. Organizational norms
D. Organizational hierarchy
2. According to the text, superior enterprise profitability requires all of the following
conditions to be fulfilled except:
A. the different elements of a firm's organizational architecture must be internally
consistent.
B. the organizational architecture must match the strategy of the firm.
C. The strategy and architecture of the firm must not only be consistent with each
other, but also consistent with the competitive environment of the firm.
D. The firm's formal organizational structure must revolve around the indigenous
population in each subunit.
3. Organizational structure means all of the following, except:
A. the establishment of integrating mechanisms to coordinate the activities of
subunits.
B. the location of decision-making responsibilities with a structure.
C. the manner in which decisions are made and work is performed by individuals.
D. the formal division of the organization into subunits such as product divisions and
functions.
4. Which term refers to the metrics used to measure the performance of subunits and
make judgments about how well managers are running those subunits?
A. Key processes
B. Control systems
C. Knowledge networks
D. Job assignments
5. When a company measures the performance of its national operating subsidiaries
according to profitability, the company is using:
A. control systems.
B. lean processes.
C. incentives.
D. organizational culture.
6. The manner in which decisions are made and work is performed within the
organization is known as the firm's:
A. organizational culture.
B. incentives.
C. control systems.
D. processes.
7. Incentives are:
A. The metrics used to measure the performance of subunits and make judgments
about how well managers are running those subunits.
B. the devices used to reward appropriate managerial behavior.
C. the manner in which decisions are made and work is performed within the
organization.
D. the norms and value systems that are shared among the employees of an
organization.
8. The norms and values systems that are shared among the employees of a company
are referred to as:
A. processes.
B. control systems.
C. incentives.
D. organizational culture.
9. A firm's determines where in its hierarchy the decision-making power is
concentrated.
A. integrating mechanism
B. vertical differentiation
C. knowledge network
D. horizontal differentiation
10. What is horizontal differentiation?
A. The mechanisms that enable each subunit to operate independently
B. The formal division of the organization into subunits
C. The location of decision-making responsibilities within a structure
D. The mechanisms for coordinating subunits
11. Integration mechanisms are:
A. the formal division of the organization into subunits.
B. the mechanisms that enable each subunit to operate independently.
C. the mechanisms for coordinating subunits.
D. the location of decision making responsibilities within a structure.
12. Which of the following is an argument favoring centralization?
A. It permits greater flexibility.
B. Motivational research favors it.
C. It can avoid the duplication of activities.
D. It gives top management time to focus on critical issues by delegating routine
issues to lower-level managers.
13. Which of the following is an argument favoring decentralization?
A. It can facilitate coordination.
B. It can help ensure that decisions are consistent with organizational objectives.
C. It can give top-level managers the means to bring about needed major
organizational changes.
D. It permits greater flexibility.
14. Centralization:
A. gives top management time to focus on critical issues by delegating more routine
issues to lower-level managers.
B. can give top-level managers the means to bring about needed major
organizational changes by concentrating power and authority in one individual or a
management team.
C. permits greater flexibility because decisions do not have to be "referred up the
hierarchy"
D. unless they are exceptional in nature.
E. can be used to establish relatively autonomous, self-contained subunits within an
organization.
15. A firm that needs greater flexibility should choose for its decision-making.
A. vertical differentiation
B. centralization
C. horizontal differentiation
D. Decentralization
16. Behavioral scientists have long argued that people are willing to give more to their
jobs when they have a greater degree of individual freedom and control over their
work. This suggests that:
A. motivational research favors decentralization.
B. centralization can facilitate coordination.
C. centralization can ensure that decisions are consistent with organizational
objectives.
D. decentralization permits total flexibility with no control.
17. Which of the following decisions is typically centralized at a firm's headquarters?
A. Production decisions
B. Human resource management
C. Marketing decisions
D. Overall firm strategy
18. The emphasis on local responsiveness in firms pursuing a local responsiveness
strategy creates strong pressures for:
A. decentralizing all decisions to foreign subsidiaries.
B. decentralizing operating decisions to foreign subsidiaries.
C. centralizing all operating decisions.
D. centralizing all decisions.
19. Global learning based on the multidirectional transfer of skills between subsidiaries
and the corporate center is a central feature of a firm pursuing a(n) strategy.
A. localization
B. global standardization
C. transnational
D. International
20. Which of the following would be a typical responsibility of a product division in a
product divisional structure?
A. Operating decisions
B. Overall strategic development of the firm
C. Financial control of the various divisions
D. None. All decisions are typically centralized.
21. Regardless of a firm's domestic structure, its international division tends to be
organized on:
A. product.
B. geography.
C. people.
D. economy.
22. In a domestic firm with a product divisional structure, each division is responsible for
a distinct:
A. product line.
B. individual product.
C. product assortment.
D. product design.
23. Which of the following is a problem that arises due to an international division
structure?
A. The need to get an area and a product division to reach a decision can slow
decision making and produce an inflexible organization unable to respond quickly to
innovate.
B. It gives limited voice to area or country managers, since it makes them
subservient to product division managers.
C. The heads of foreign subsidiaries are not given as much voice in the organization
 as the heads of domestic functions or divisions.
D. The dual-hierarchy structure can lead to conflict and perpetual power struggles
between the areas and the product divisions, catching many managers in the middle.
24. The implied lack of coordination between domestic operations and foreign
operations, which are isolated from each other in separate parts of the structural
hierarchy, is a problem encountered with a(n):
A. global matrix structure.
B. international division structure.
C. worldwide product division structure.
D. worldwide area structure.
25. Which of the following is not true regarding a worldwide area structure?
A. It tends to be favored by firms with a low degree of diversification.
B. It facilitates local responsiveness.
C. It tends to be favored by firms with a domestic structure based on function.
D. Decision-making responsibilities are centralized.
26. This structure encourages fragmentation of the organization into highly autonomous
entities.
A. Worldwide area structure
B. Global matrix structure
C. Worldwide product structure
D. Global network structure
27. Which of the following is a potential drawback of the worldwide area structure?
A. It encourages fragmentation of the organization into highly autonomous entities.
B. It is inconsistent with a localization strategy.
C. It discourages local responsiveness.
D. It is not suitable for firms with a low degree of diversification and a domestic
structure based on functions.
28. Firms structured on this basis may encounter significant problems if local
responsiveness is less critical than reducing costs or transferring core competencies
for establishing a competitive advantage.
A. International division structure
B. Worldwide area structure
C. Global matrix structure
D. Worldwide product division structure
29. A(n) tends to be adopted by firms that are reasonably diversified and, accordingly,
originally had domestic structures based on product divisions.
A. worldwide area structure
B. international division structure
C. worldwide product division structure
D. global matrix structure
30. The main problem with this structure is the limited voice it gives to area or country
managers, since it makes them subservient to product division managers.
A. Worldwide product divisional structure
B. Worldwide area structure
C. International structure
D. Global matrix structure
31. The worldwide product division structure:
A. is weak in local responsiveness.
B. inhibits the realization of location economies.
C. inhibits the realization of experience curve economies.
D. limits the transfer of core competencies between areas.
32. In the classic global matrix structure, horizontal differentiation proceeds along two
dimensions. These dimensions are:
A. hierarchy and overall strategy.
B. target returns and sales potential.
C. marketing strategy and sales potential.
D. product division and geographic area.
33. In practice, the global matrix structure:
A. works as well as the theory predicts.
B. is often clumsy and bureaucratic.
C. makes it easy to ascertain accountability.
D. results in quick decision making.
34. In practice, the dual-hierarchy structure:
A. lessens all forms of conflict.
B. makes it easy to ascertain accountability.
C. results in extremely quick decision making.
D. can lead to perpetual power struggles.
35. The need for coordination between subunits is lowest in firms pursuing a(n):
A. localization strategy.
B. international strategy.
C. global strategy.
D. transnational strategy.
36. The need for coordination between subunits is highest in firms pursuing a(n)
A. localization strategy.
B. international strategy.
C. global strategy.
D. transnational strategy.
37. The simplest integrating mechanism in an MNE is:
A. direct contact between managers.
B. the use of teams.
C. the introduction of liaisons.
D. the establishment of the matrix structure.
38. A(n) is valuable because it can be used as a nonbureaucratic conduit for information
flows within a multinational enterprise.
A. liaison network
B. matrix structure
C. organizational structure
D. knowledge network
39. Firms traditionally have tried to achieve coordination by adopting:
A. informal integrating mechanisms.
B. formal integrating mechanisms.
C. vertical differentiation.
D. horizontal differentiation.
40. The main types of control systems used in MNEs include all of the following, except:
A. personal controls.
B. bureaucratic controls.
C. input controls.
D. cultural controls.
41. Which control system is most widely used by small firms?
A. Personal
B. Output
 C. Bureaucratic
D. Cultural
42. Control through a system of rules and procedures that directs the actions of subunits
is:
A. personal control.
B. bureaucratic control.
C. output control.
D. cultural control.
43. Budgets and capital spending are the most important in subunits within multinational
firms.
A. cultural controls
B. output controls
C. personal controls
D. bureaucratic controls
44. A company using achieves control by comparing actual performance against targets
and intervening selectively to take corrective action.
A. personal control
B. output control
C. bureaucratic control
D. cultural control
45. There is low interdependence, performance ambiguity, and costs of control in firms
pursuing a(n):
A. localization strategy.
B. international strategy.
C. transnational strategy.
D. global strategy.
46. Due to the high level of interdependence, the costs of controlling firms are higher
than the costs of controlling firms that pursue other strategies.
A. localized
B. transnational
C. international
D. Global
47. In firms pursuing either global or transnational strategies, the usefulness of controls
is limited by substantial performance ambiguities.
A. bureaucratic
B. cultural
C. personal
D. Output
48. These refer to abstract ideas about what a group believes to be good, right, and
desirable.
A. Values
B. Norms
C. Thoughts
D. Ideas
49. Mechanisms to maintain culture include all of the following except:
A. the hiring and promotional practices of the organization.
B. reward strategies.
C. socialization processes.
D. ongoing cultural assessments.
50. Which of the following is not true of a strong corporate culture?
A. Almost all managers share a relatively consistent set of values and norms that
 have a clear impact on the way work is performed.
B. A strong culture leads to a high performance.
C. Outsiders see firms with a strong culture as having a certain way of doing things.
D. A strong culture can be a bad culture.
51. Sources of organizational inertia include all of the following, except:
A. the existing distribution of power within the organization.
B. environmental influences.
C. the existing culture.
D. senior managers' preconceptions about the appropriate business model.
52. Other things being equal, the benefit-cost-risk trade-off is likely to be most favorable
in:
A. politically unstable developing nations that operate with a mixed or command
economy.
B. nations where there is a dramatic upsurge in either inflation rates or private-sector
debt.
C. politically stable developed and developing nations that have free market systems.
D. developing nations where speculative financial bubbles have led to excess
borrowing.
53. Which of the following is not an advantage associated with entering a foreign market
before other international businesses?
A. Ability to preempt rivals and capture demand by establishing a strong brand name.
B. Ability to ride down the experience curve ahead of rivals.
C. Ability to create switching costs.
D. Ability to avoid pioneering costs.
54. Switching costs:
A. drive early entrants out of the market.
B. make it easy for later entrants to win business.
C. make it difficult for later entrants to win business.
D. give later entrants a cost advantage over early entrants.
55. Early entrants to a market that are able to create switching costs that tie the
customer to the product are capitalizing on:
A. economies of scale.
B. pioneering costs.
C. first-mover advantages.
D. late-mover advantages.
56. All of the following are examples of pioneering costs except the costs of:
A. business failure.
B. educating consumers.
C. promoting and establishing a product offering.
D. learning from the mistakes of early entrants.
57. The costs of promoting and establishing a product offering when a firm enters a
foreign market prior to its rivals are known as:
A. switching costs.
B. market development costs.
C. pioneering costs.
D. promotional development costs.
58. A large-scale entrant is more likely than a small-scale entrant to be able to capture
first-mover advantages associated with:
A. demand preemption.
B. diseconomies of scale.
 C. pioneering costs.
D. diseconomies of scope.
59. Which of the following statements about small-scale entry is true?
A. The commitment associated with a small-scale entry makes it possible for the
small-scale entrant to capture first-mover advantages.
B. Small-scale entry is a way to gather information about a foreign market before
deciding whether to enter on a significant scale.
C. By giving a firm time to collect information, small-scale entry increases the risks
associated with a subsequent large-scale entry.
D. Small-scale entry limits a firms ability to learn about a foreign market thereby also
limiting the firm's exposure to that market.
60. Which of the following is not an advantage of a small-scale entry?
A. A small-scale entrant is more likely to be able to capture first-mover advantages
associated with demand preemption, scale economies, and switching costs.
B. Small-scale entry is a way to gather information about a foreign market before
deciding how best to enter.
C. By giving the firm time to collect information, small-scale entry reduces the risks
associated with a subsequent large-scale entry.
D. Small-scale entry allows a firm to learn about a foreign market while limiting the
firm's exposure to that market.
61. If a firm can realize location economies by moving production elsewhere, it should
avoid:
A. exporting.
B. turnkey contracts.
C. licensing.
D. wholly owned subsidiaries.
62. Which of the following is a distinct advantage of exporting?
A. It avoids the often substantial costs of establishing manufacturing operations in the
host country.
B. Benefits from a local partner's knowledge of the host country's competitive
conditions.
C. Avoids the threat of tariff barriers by the host-country government.
D. Appropriate if lower cost locations for manufacturing the product can be found
abroad.
63. When a firm faces significant transportation costs, _____ can be uneconomical.
A. joint ventures
B. greenfield investments
C. licensing agreements
D. Exporting
64. When an exporting firm finds that its local agent is also carrying competitors'
products, the firm may switch to a _____ to handle local marketing, sales, and
service.
A. wholly owned subsidiary
B. franchising arrangement
C. turnkey operation
D. licensing agreement
65. When local agents carry the products of competing firms and have divided loyalties,
_____ is not appropriate.
A. franchising
B. licensing
 C. exporting
D. greenfield investment
66. The threat of tariff barriers by the host government can make _____ very risky.
A. greenfield investment
B. franchising
C. licensing
D. Exporting
67. Identify the incorrect statement about turnkey projects.
A. The contractor agrees to handle every detail of the project for a foreign client.
B. They are most common in industries which use inexpensive production
technologies.
C. This is a means of exporting process technology to other countries.
D. They create efficient global competitors in the process.
68. In which of the following industries are turnkey projects the most common?
A. Fresh fruit, grain, and meat products.
B. Chemical, pharmaceutical, and metal refining.
C. Consumer durables, computer peripherals, and automotive parts.
D. Apparel, shoes, and leather products.
69. A turnkey strategy:
A. is always riskier than conventional FDI.
B. is never used in a country with unstable political and economic environments.
C. is useful where FDI is limited by host-government regulations.
D. is a strong indicator of a firm's long-term interest in a foreign country.
70. Many Western firms that sold oil-refining technology to firms in Gulf states now find
themselves competing with these firms in the world oil market. This is an example of:
A. the firm entering into a turnkey project with a foreign enterprise, inadvertently
creating a competitor.
B. the firm entering into a turnkey deal having no long-term interest in the foreign
country.
C. the country subsequently proving to be a major market for the output of the
process that has been
exported.
D. selling the firm's process technology through a turnkey project which is also selling
competitive advantage to potential competitors
71. Firms that lack the capital necessary to develop foreign operations may choose
_____ as a means of expanding internationally.
A. turnkey projects
B. licensing
C. greenfield investments
D. acquisitions
72. An arrangement whereby a firm grants the right of intangible property to another
entity for a specified time period in exchange for royalties is a(n) _____ agreement.
A. wholly owned subsidiary
B. turnkey
C. licensing
D. Exporting
73. Patents, inventions, formulas, processes, designs, copyrights, and trademarks are all
forms of
A. licensing agreements.
B. franchising agreements.
 C. intangible property.
D. tangible property.
74. What is the primary advantage of licensing?
A. It helps a firm avoid the development costs associated with opening a foreign
market.
B. It gives a firm the tight control over manufacturing, marketing, and strategy.
C. It helps a firm achieve experience curve and location economies.
D. It increases a firm's ability to utilize a coordinated strategy.
75. Which of the following is a disadvantage of licensing?
A. It does not help firms that lack capital to develop operations overseas.
B. It does not give a firm the tight control over strategy that is required for realizing
experience curve and location economies.
C. It cannot be used when a firm possesses some intangible property that might have
business applications.
D. The firm has to bear the development costs and risks associated with opening a
foreign market.
76. When a company has some intangible property that might have business
applications, but the firm does not want to develop those applications itself, _____
makes sense.
A. exporting
B. a turnkey project
C. licensing
D. a wholly owned subsidiary
77. Cross-licensing agreements are increasingly common in the _____ industry.
A. transportation
B. high-technology
C. construction
D. consumer durables
78. Which mode of entry is pursued primarily by manufacturing firms?
A. Franchising
B. Turnkey
C. Licensing
D. Strategic alliance
79. This mode of entry is primarily used by service firms.
A. Franchising
B. Licensing
C. A strategic alliance
D. A turnkey project
80. If a service firm wants to build a global presence quickly and at a relatively low cost
and risk, _____
makes sense.
A. a wholly owned subsidiary
B. exporting
C. a turnkey project
D. Franchising
81. Which of the following statements about franchising is true?
A. It guarantees consistent product quality.
B. It tends to involve more short-term commitments than licensing.
C. It is a specialized form of licensing.
D. It is employed primarily by manufacturing firms.
82. Which of the following is an advantage of franchising?
A. A firm takes profits out of one country to support competitive attacks in another.
B. A firm is relieved of many of the costs and risks of opening a foreign market on its
own.
C. It guarantees consistent product quality.
D. It achieves experience curve and location economies.
83. Firms engaging in _____ with a local company can benefit from a local partner's
knowledge of the host country's competitive conditions, culture, language, political
systems, and business systems.
A. turnkey projects
B. joint ventures
C. greenfield investments
D. licensing arrangements
84. Identify the advantage of establishing wholly owned subsidiaries.
A. It is the least expensive method of serving a foreign market from a capital
investment standpoint.
B. Political considerations make it the most feasible entry mode.
C. It may be required if a firm is trying to realize location and experience curve
economies.
D. It is particularly useful where FDI is limited by host-government regulations.
85. A wholly owned subsidiary is appropriate when:
A. the firm wants to share the cost and risk of developing a foreign market.
B. the firm wants 100 percent of the profits generated in a foreign market.
C. the firm wants a plant that is ready to operate.
D. the firm wants to test a market.
86. A firm that establishes a _____ must bear the full costs and risks of entering a foreign
market.
A. licensing agreement
B. wholly owned subsidiary
C. franchise
D. joint venture
87. A _____ is the most costly method of serving a foreign market from a capital
investment standpoint.
A. wholly owned subsidiary
B. franchising agreement
C. turnkey project
D. joint venture
88. "Protection of technology and The Ability to engage in global strategic coordination"
are advantages of which of the following?
A. Franchising
B. Turnkey contracts
C. Joint ventures
D. Wholly owned subsidiarie
89. If a firm's core competency is based on control over proprietary technological know-
how, it should avoid _____ and _____ arrangements if possible, to minimize the risk
of losing control over that technology.
A. licensing, joint-venture
B. wholly owned subsidiary, exporting
C. turnkey contracts, exporting
D. exporting, joint-venture
90. If a high-tech firm sets up operations in a foreign country to profit from a core
competency in technological know-how, which of the following entry strategy is best?
A. Joint ventures
B. Licensing
C. Wholly owned subsidiaries
D. Turnkey contacts
91. Most service firms have found that _____ with local partners work best for controlling
subsidiaries.
A. joint ventures
B. licensing agreements
C. greenfield investments
D. turnkey project
92. Firms may prefer acquisitions to greenfield investments for all of the following
reasons except:
A. they allow companies to completely sidestep government regulations on
investment.
B. they are quick to execute.
C. they enable the firm to preempt competitors.
D. managers believe acquisitions are less risky.
93. According to the _____, top managers typically overestimate their ability to create
value from an acquisition.
A. misvaluation theory
B. performance extrapolation hypothesis
C. market timing theory
D. hubris hypothesis
94. To increase the potential for a successful acquisition, a firm should:
A. always bid low to allow for partial failure.
B. try to acquire a firm with a very different corporate culture so there is no forced
"overlap".
C. seek companies only from similar national cultures.
D. screen the foreign enterprise to be acquired.
95. Which of the following is not important in the acquisition process?
A. Firms should strive to limit unwanted management attrition after acquisition.
B. An integration plan should quickly be implemented.
C. Proper screening of the company to be acquired should take place.
D. The hubris hypothesis should be maintained.
96. When a firm wants to enter a market where there are already well-established
incumbent companies, and where global competitors are also interested in
establishing a presence, the firm should consider:
A. joint ventures.
B. turnkey projects.
C. acquisitions.
D. greenfield investments.
97. Firms entering markets where there are no incumbent competitors to be acquired
should choose:
A. greenfield investments.
B. joint ventures.
C. acquisitions.
D. takeovers.
98. Which of the following is not an advantage of strategic alliances?
A. It allows firms to share the fixed costs of developing new products or processes.
 B. It is a way to bring together complementary skills and assets that neither company
could easily develop on its own.
C. It will help the firm establish technological standards for the industry that will
benefit the firm.
D. It gives a firm tight control over operations in different countries.
99. _____ is the activity that controls the transportation of physical materials through the
value chain, from procurement through production and into distribution.
A. Outsourcing
B. Production
C. Logistics
D. Distribution
100. _____ is a management philosophy according to which mistakes, defects,
and poor-quality materials are not acceptable and should be eliminated.
A. Scientific management
B. Total quality management
C. ISO 9000
D. Lean manufacturing