International Business: Environments and Operations, 16e (Daniels et al.

)
Chapter 16 The Organization of International Business

1) Historically, managers built organizations by focusing on the boxes and lines of a(n)
________ structure.
A) formal
B) innovative
C) collaborative
D) flexible
Answer: A
Diff: 2
Learning Outcome: Discuss factors affecting the organizational structures of international
businesses
Skill: Concept
Objective: 16-1 Profile the evolving idea of organization in the MNE
AACSB: Application of knowledge

2) The concept of organization includes how a company does all of the following EXCEPT
________.
A) specifies the framework for work
B) develops systems that coordinate and control tasks
C) cultivates a common workplace culture among employees
D) plans leadership and training programs to develop the managerial staff
Answer: D
Diff: 2
Learning Outcome: Discuss factors affecting the organizational structures of international
businesses
Skill: Concept
Objective: 16-1 Profile the evolving idea of organization in the MNE
AACSB: Analytical thinking

3) Organization ________ refers to the formal arrangement of roles, responsibilities, and

relationships within an organization.
A) structure
B) systems
C) culture
D) strategy
Answer: A
Diff: 1
Learning Outcome: Discuss factors affecting the organizational structures of international
businesses
Skill: Concept
Objective: 16-1 Profile the evolving idea of organization in the MNE
AACSB: Analytical thinking

1
Copyright © 2018 Pearson Education, Inc.
4) The balance between centralization and decentralization of authority in a company is known
as ________.
A) systemic differentiation
B) horizontal differentiation
C) schematic differentiation
D) vertical differentiation
Answer: D
Diff: 1
Learning Outcome: Discuss factors affecting the organizational structures of international
businesses
Skill: Concept
Objective: 16-1 Profile the evolving idea of organization in the MNE
AACSB: Application of knowledge

5) 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.
Answer: FALSE
Diff: 2
Learning Outcome: Discuss factors affecting the organizational structures of international
businesses
Skill: Concept
Objective: 16-1 Profile the evolving idea of organization in the MNE
AACSB: Analytical thinking

6) Johnson & Johnson distributes decision-making power among departments and divisions. This
policy provides managers with a sense of ownership and control at the company. Johnson &
Johnson is best described as a ________ organization.
A) vertical
B) centralized
C) horizontal
D) decentralized
Answer: D
Diff: 2
Learning Outcome: Discuss factors affecting the organizational structures of international
businesses
Skill: Application
Objective: 16-2 Interpret classical organization structures
AACSB: Application of knowledge

2
Copyright © 2018 Pearson Education, Inc.
7) Which of the following is the LEAST likely reason that global firms are shifting away from
formal organizational structures?
A) advancements in communication systems
B) changes in managerial standards
C) opportunities in new markets
D) demands of stockholders
Answer: D
Diff: 2
Learning Outcome: Discuss factors affecting the organizational structures of international
businesses
Skill: Concept
Objective: 16-2 Interpret classical organization structures
AACSB: Analytical thinking

8) 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
D) higher; unstructured
Answer: C
Diff: 2
Learning Outcome: Discuss factors affecting the organizational structures of international
businesses
Skill: Concept
Objective: 16-2 Interpret classical organization structures
AACSB: Analytical thinking

9) Tyrone is a production manager at Penderhall Electronics, an MNE with operations in Asia,

Europe, and the United States. Tyrone has very little decision-making authority at Penderhall,
since most decisions are made at headquarters and distributed downward. Which structure is
most likely used by Penderhall?
A) centralized
B) systematic
C) decentralized
D) multidomestic
Answer: A
Diff: 2
Learning Outcome: Discuss factors affecting the organizational structures of international
businesses
Skill: Application
Objective: 16-2 Interpret classical organization structures
AACSB: Application of knowledge

3
Copyright © 2018 Pearson Education, Inc.
10) ________ 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
Answer: D
Diff: 2
Learning Outcome: Discuss factors affecting the organizational structures of international
businesses
Skill: Concept
Objective: 16-2 Interpret classical organization structures
AACSB: Analytical thinking

11) Which of the following statements is most likely true regarding vertical differentiation?
A) MNEs with decentralized structures are more appealing to foreign workers.
B) Most MNEs balance authority between headquarters and subsidiaries because of globality.
C) MNEs with many organizational levels are less likely to perform well in emerging markets.
D) Most MNEs implement centralized authority structures due to the complexity of
globalization.
Answer: B
Diff: 3
Learning Outcome: Discuss factors affecting the organizational structures of international
businesses
Skill: Concept
Objective: 16-2 Interpret classical organization structures
AACSB: Reflective thinking

12) In general terms, we see the principles of horizontal differentiation in the design logic of
________.
A) vertical differentiation
B) decentralization
C) the value chain
D) the unity-of-command principle
Answer: C
Diff: 2
Learning Outcome: Discuss factors affecting the organizational structures of international
businesses
Skill: Concept
Objective: 16-2 Interpret classical organization structures
AACSB: Analytical thinking

4
Copyright © 2018 Pearson Education, Inc.
13) The idea of ________ involves how a 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
C) vertical differentiation
D) schematic differentiation
Answer: B
Diff: 1
Learning Outcome: Discuss factors affecting the organizational structures of international
businesses
Skill: Concept
Objective: 16-2 Interpret classical organization structures
AACSB: Analytical thinking

14) A ________ structure is the ideal way to organize work when global integration is more
important than local responsiveness and the industry structure encourages cost leadership.
A) decentralized
B) matrix
C) divisional
D) functional
Answer: D
Diff: 1
Learning Outcome: Discuss factors affecting the organizational structures of international
businesses
Skill: Concept
Objective: 16-2 Interpret classical organization structures
AACSB: Analytical thinking

15) At Tyson Manufacturing, departments and units are organized around discrete business
activities, such as finance, production, marketing, and human resources. Tyson most likely has a
________ structure.
A) network
B) matrix
C) functional
D) divisional
Answer: C
Diff: 2
Learning Outcome: Discuss factors affecting the organizational structures of international
businesses
Skill: Application
Objective: 16-2 Interpret classical organization structures
AACSB: Application of knowledge

5
Copyright © 2018 Pearson Education, Inc.
16) Decision making in a functional structure tends to be ________.
A) decentralized
B) centralized
C) horizontal
D) collaborative
Answer: B
Diff: 2
Learning Outcome: Discuss factors affecting the organizational structures of international
businesses
Skill: Concept
Objective: 16-2 Interpret classical organization structures
AACSB: Analytical thinking

17) Functional structures for international operations are most likely found among those
companies that ________.
A) have a narrow range of products that rely on economies of scale
B) have multiple products that share few common technologies
C) rely on differentiated marketing methods
D) compete in unstable industries
Answer: A
Diff: 2
Learning Outcome: Discuss factors affecting the organizational structures of international
businesses
Skill: Concept
Objective: 16-2 Interpret classical organization structures
AACSB: Application of knowledge

18) 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
B) buyers; suppliers
C) markets; countries
D) politics; economics
Answer: A
Diff: 2
Learning Outcome: Discuss factors affecting the organizational structures of international
businesses
Skill: Concept
Objective: 16-2 Interpret classical organization structures
AACSB: Analytical thinking

6
Copyright © 2018 Pearson Education, Inc.
19) A major benefit of the international division structure is ________.
A) outsourcing distribution and shipping tasks
B) responding quickly to foreign events
C) diversifying most product groups
D) hiring low-cost, local workers
Answer: B
Diff: 2
Learning Outcome: Discuss factors affecting the organizational structures of international
businesses
Skill: Concept
Objective: 16-2 Interpret classical organization structures
AACSB: Analytical thinking

20) In which of the following situations would a company most likely benefit from using the
international division structure?
A) when the company's different foreign markets pose significantly different opportunities and
threats
B) when the company relies on local managers in foreign operations to make strategic decisions
C) when the company's domestic market activity is much more important than its international
business activity
D) when the company's domestic business activity has reached its full market potential
Answer: C
Diff: 3
Learning Outcome: Discuss factors affecting the organizational structures of international
businesses
Skill: Application
Objective: 16-2 Interpret classical organization structures
AACSB: Analytical thinking

21) A major benefit of the international division structure is ________.

A) the elimination of conflicts of interest among domestic and foreign operations
B) the integration of domestic and foreign operations
C) de-emphasis of economies of scale
D) cost effectiveness
Answer: D
Diff: 2
Learning Outcome: Discuss factors affecting the organizational structures of international
businesses
Skill: Concept
Objective: 16-2 Interpret classical organization structures
AACSB: Analytical thinking

7
Copyright © 2018 Pearson Education, Inc.
22) Chapman Enterprises is an MNE that markets a diverse portfolio of products including
jewelry, luggage, and furniture. Which structure would most likely be used by Chapman?
A) international division
B) functional division
C) geographic division
D) product division
Answer: D
Diff: 2
Learning Outcome: Discuss factors affecting the organizational structures of international
businesses
Skill: Application
Objective: 16-2 Interpret classical organization structures
AACSB: Application of knowledge

23) Avery Designs is an MNE with a diverse portfolio of products including cookware and
clothing. Both the foreign and domestic operations for the firm's cookware products report to the
same manager. Which structure is most likely used by Avery?
A) matrix division
B) product division
C) international division
D) geographic division
Answer: B
Diff: 2
Learning Outcome: Discuss factors affecting the organizational structures of international
businesses
Skill: Application
Objective: 16-2 Interpret classical organization structures
AACSB: Application of knowledge

24) The primary limitation with the product division structure is the ________.
A) cost of duplicated functions and international activities
B) poor response to local market demands for a product
C) inability to transfer core competencies within units
D) difficulty of selling product lines
Answer: A
Diff: 2
Learning Outcome: Discuss factors affecting the organizational structures of international
businesses
Skill: Concept
Objective: 16-2 Interpret classical organization structures
AACSB: Analytical thinking

8
Copyright © 2018 Pearson Education, Inc.
25) Historically, the geographic division structure is associated with companies pursuing
________ strategies.
A) multidomestic
B) transnational
C) global
D) international
Answer: A
Diff: 2
Learning Outcome: Discuss factors affecting the organizational structures of international
businesses
Skill: Concept
Objective: 16-2 Interpret classical organization structures
AACSB: Analytical thinking

26) Which of the following factors increasingly encourages MNEs to install a geographic
division structure?
A) growth of emerging markets
B) diversification of products
C) rise of social networking
D) global recession
Answer: A
Diff: 2
Learning Outcome: Discuss factors affecting the organizational structures of international
businesses
Skill: Concept
Objective: 16-2 Interpret classical organization structures
AACSB: Analytical thinking

27) Gary is a manufacturing manager at Forman Enterprises. Gary works at the MNE's
headquarters in the United States. Before Gary can implement any major changes or decisions,
he must communicate and coordinate his plans with Raj, a sales manager at Forman's facility in
India. Which structure is most likely used by Forman Enterprises?
A) global
B) matrix
C) product division
D) geographic division
Answer: B
Diff: 2
Learning Outcome: Discuss factors affecting the organizational structures of international
businesses
Skill: Application
Objective: 16-2 Interpret classical organization structures
AACSB: Application of knowledge

9
Copyright © 2018 Pearson Education, Inc.
28) The fundamental limitation of a matrix structure is that it ________.
A) creates a poor organizational culture
B) isolates upper management from operational levels
C) institutes a dual hierarchy that violates the unity-of-command principle
D) introduces more errors in the decision-making process due to the speed of the process
Answer: C
Diff: 2
Learning Outcome: Discuss factors affecting the organizational structures of international
businesses
Skill: Concept
Objective: 16-2 Interpret classical organization structures
AACSB: Analytical thinking

29) In reality, the organizational charts of ________ MNEs neatly depict a functional, divisional,
or matrix structure.
A) no
B) few
C) most
D) all
Answer: B
Diff: 1
Learning Outcome: Discuss factors affecting the organizational structures of international
businesses
Skill: Concept
Objective: 16-2 Interpret classical organization structures
AACSB: Analytical thinking

30) A firm's vertical differentiation determines where in its organization structure managers have
decided to concentrate decision-making authority.
Answer: TRUE
Diff: 1
Learning Outcome: Discuss factors affecting the organizational structures of international
businesses
Skill: Concept
Objective: 16-2 Interpret classical organization structures
AACSB: Analytical thinking

31) Decentralization has the key advantage of letting decisions be made by those who directly
deal with customers, competitors, and markets.
Answer: TRUE
Diff: 2
Learning Outcome: Discuss factors affecting the organizational structures of international
businesses
Skill: Concept
Objective: 16-2 Interpret classical organization structures
AACSB: Analytical thinking

10
Copyright © 2018 Pearson Education, Inc.
32) One advantage of centralized corporate practices is a reduced risk that lower-level employees
make costly, wrong decisions.
Answer: TRUE
Diff: 2
Learning Outcome: Discuss factors affecting the organizational structures of international
businesses
Skill: Concept
Objective: 16-2 Interpret classical organization structures
AACSB: Analytical thinking

33) Horizontal differentiation is concerned with how the managers of a firm decide to divide the
company into discrete subunits.
Answer: TRUE
Diff: 1
Learning Outcome: Discuss factors affecting the organizational structures of international
businesses
Skill: Concept
Objective: 16-2 Interpret classical organization structures
AACSB: Analytical thinking

34) Technology such as e-mail, VoIP, teleconferencing, and social networks helps MNEs
respond to increasing globality.
Answer: TRUE
Diff: 1
Learning Outcome: Discuss factors affecting the organizational structures of international
businesses
Skill: Concept
Objective: 16-2 Interpret classical organization structures
AACSB: Information technology

35) The functional structure is inappropriate for firms with products and manufacturing methods
that are largely undifferentiated among countries.
Answer: FALSE
Diff: 2
Learning Outcome: Discuss factors affecting the organizational structures of international
businesses
Skill: Concept
Objective: 16-2 Interpret classical organization structures
AACSB: Analytical thinking

11
Copyright © 2018 Pearson Education, Inc.
36) The functional structure is ideal when the company faces complex and changing
environments.
Answer: FALSE
Diff: 2
Learning Outcome: Discuss factors affecting the organizational structures of international
businesses
Skill: Concept
Objective: 16-2 Interpret classical organization structures
AACSB: Analytical thinking

37) A divisional structure tends to be adopted by firms that are diversified by products or
markets.
Answer: TRUE
Diff: 2
Learning Outcome: Discuss factors affecting the organizational structures of international
businesses
Skill: Concept
Objective: 16-2 Interpret classical organization structures
AACSB: Analytical thinking

38) Companies tend to use geographic divisions when they have large foreign operations that are
not dominated by a single country or market.
Answer: TRUE
Diff: 2
Learning Outcome: Discuss factors affecting the organizational structures of international
businesses
Skill: Concept
Objective: 16-2 Interpret classical organization structures
AACSB: Analytical thinking

39) Andrews Enterprises, which uses an international division structure, should be able to
respond quickly to foreign activities but will most likely experience costly country-to-country
duplication.
Answer: FALSE
Diff: 2
Learning Outcome: Discuss factors affecting the organizational structures of international
businesses
Skill: Application
Objective: 16-2 Interpret classical organization structures
AACSB: Application of knowledge

12
Copyright © 2018 Pearson Education, Inc.
40) In a matrix structure, product, functional, or geographic groups compete for resources.
Answer: TRUE
Diff: 2
Learning Outcome: Discuss factors affecting the organizational structures of international
businesses
Skill: Concept
Objective: 16-2 Interpret classical organization structures
AACSB: Analytical thinking

41) A matrix organization is a hybrid of the functional and geographic organizations.

Answer: FALSE
Diff: 2
Learning Outcome: Discuss factors affecting the organizational structures of international
businesses
Skill: Concept
Objective: 16-2 Interpret classical organization structures
AACSB: Analytical thinking

42) How might centralization of decision making adversely affect local managers in an MNE?
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.
Diff: 3
Learning Outcome: Discuss factors affecting the organizational structures of international
businesses
Skill: Critical Thinking
Objective: 16-2 Interpret classical organization structures
AACSB: Reflective thinking

13
Copyright © 2018 Pearson Education, Inc.
43) Profile the idea and features of horizontal differentiation, paying particular attention to its
implications to how managers design their company's structure.
Answer: In figuring out who does what work, where, when and for whom, MNEs must
horizontally differentiate their international operations—that is, managers must divide the
company into discrete units that are assigned responsibility for specialized tasks. Failing to tend
to these fundamental questions in an effective manner leaves the company open to the risk of
building an inefficient operation that ultimately will fail. The idea of horizontal differentiation
describes how the company designs its formal structure to perform three functions: specify the
total set of organizational tasks; divide those tasks into jobs, departments, subsidiaries, and
divisions so the work gets done; and assign authority and authority relationships to make sure
work gets done in ways that support the company's strategy. In traditional terms, MNEs resolved
these issues on the basis of function, type of business, geographic area, or some combination of
these three factors. While the specific design standards of each format differ, they all speak to the
matters of horizontal differentiation.
Diff: 3
Learning Outcome: Discuss factors affecting the organizational structures of international
businesses
Skill: Synthesis
Objective: 16-2 Interpret classical organization structures
AACSB: Reflective thinking

14
Copyright © 2018 Pearson Education, Inc.
44) Explain the major types of classical 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 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 group. 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.
Diff: 3
Learning Outcome: Discuss factors affecting the organizational structures of international
businesses
Skill: Critical Thinking
Objective: 16-2 Interpret classical organization structures
AACSB: Analytical thinking

15
Copyright © 2018 Pearson Education, Inc.
45) In a brief essay, discuss how decentralized management and organizational culture affect
Johnson & Johnson.
Answer: Decentralized management is the heart of J&J's organization. It allows managers who
are closest to customers and competitors to make decisions. As the company says, it aims to be
big and small all at once, building a global profile based on the conglomeration of many small
units. By design, each of its 250 units operates with substantial autonomy, commanding the
authority to act as it believes best given local conditions. Each is its own business,
entrepreneurial in character, and aware that success depends on anticipating local customers'
needs and delivering solutions. Encouraging employees to act as local entrepreneurs while
ensuring they act with a global awareness takes us to the role of culture in J&J. Fundamentally,
from the CEO to the director of the smallest unit, management believes that the people and their
values are J&J's greatest assets. Separating J&J from the pack is its organizational culture,
embodied in "Our Credo," crafted in 1943 by Robert Wood Johnson, company chair from 1932
to 1963, this one-page ethical code of conduct states how J&J fulfills its responsibilities.
Collectively, the "Credo underscores J&J's personal responsibility to put the needs of the people
we serve first. It liberates our passion and deepens our commitment to delivering meaningful
health innovations." The company maintains that the Credo is more than just a moral compass; it
is the basis of success.
Diff: 3
Learning Outcome: Discuss factors affecting the organizational structures of international
businesses
Skill: Synthesis
Objective: 16-2 Interpret classical organization structures
AACSB: Reflective thinking

46) Concord Foods, an international firm based in the United States, is in the process of
transitioning from a classical organizational structure to a neoclassical structure. Which of the
following tools would most likely enable Concord to make this change?
A) annual performance appraisals
B) cross-functional task forces
C) flexible benefits plans
D) merit awards
Answer: B
Diff: 2
Learning Outcome: Discuss factors affecting the organizational structures of international
businesses
Skill: Application
Objective: 16-3 Interpret neoclassical organization structures
AACSB: Application of knowledge

16
Copyright © 2018 Pearson Education, Inc.
47) IBM puts investments, people, and work anywhere in the world based on the best mix of
costs, skills, and environment and uses sophisticated strategies and technologies to support and
coordinate activities. IBM most likely uses a ________ structure.
A) classical
B) product
C) neoclassical
D) locational
Answer: C
Diff: 2
Learning Outcome: Discuss factors affecting the organizational structures of international
businesses
Skill: Application
Objective: 16-3 Interpret neoclassical organization structures
AACSB: Application of knowledge

48) Neoclassical structures aim to support organizations ________.

A) in which the location of control in 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
D) that create predictable workplaces with minimal collaboration among subsidiaries
Answer: C
Diff: 2
Learning Outcome: Discuss factors affecting the organizational structures of international
businesses
Skill: Concept
Objective: 16-3 Interpret neoclassical organization structures
AACSB: Analytical thinking

49) Neoclassical structures attempt to minimize boundaries between all of the following
EXCEPT ________.
A) vertical ranks and functions
B) horizontal units in different areas
C) the firm and its suppliers
D) the firm and its competitors
Answer: D
Diff: 2
Learning Outcome: Discuss factors affecting the organizational structures of international
businesses
Skill: Concept
Objective: 16-3 Interpret neoclassical organization structures
AACSB: Analytical thinking

17
Copyright © 2018 Pearson Education, Inc.
50) Which of the following is promoted by a neoclassical structure?
A) innovation of ideas
B) information control
C) project competition
D) minimal relationships
Answer: A
Diff: 2
Learning Outcome: Discuss factors affecting the organizational structures of international
businesses
Skill: Concept
Objective: 16-3 Interpret neoclassical organization structures
AACSB: Analytical thinking

51) Which of the following is the LEAST likely characteristic of neoclassical structures?
A) few barriers between people
B) extensive collaborative efforts
C) higher capacity for change and learning
D) centralized decision making
Answer: D
Diff: 2
Learning Outcome: Discuss factors affecting the organizational structures of international
businesses
Skill: Concept
Objective: 16-3 Interpret neoclassical organization structures
AACSB: Analytical thinking

52) Which of the following is the most likely benefit of a network structure?
A) encouraging competition among members for resources
B) facilitating supplier changes anywhere in the value chain
C) developing core competencies in a broad range of value activities
D) maintaining a strong sense of organization in the face of dynamic partnerships
Answer: D
Diff: 2
Learning Outcome: Discuss factors affecting the organizational structures of international
businesses
Skill: Concept
Objective: 16-3 Interpret neoclassical organization structures
AACSB: Reflective thinking

18
Copyright © 2018 Pearson Education, Inc.
53) The neoclassical structure implemented by Cisco primarily enables the firm to ________.
A) respond quickly to new opportunities
B) thoroughly assess new competitors
C) assign leaders to new products
D) clarify managers' duties
Answer: A
Diff: 2
Learning Outcome: Discuss factors affecting the organizational structures of international
businesses
Skill: Concept
Objective: 16-3 Interpret neoclassical organization structures
AACSB: Application of knowledge

54) A Japanese keiretsu is best described as a ________.

A) family business
B) product division
C) network structure
D) centralized control system
Answer: C
Diff: 2
Learning Outcome: Discuss factors affecting the organizational structures of international
businesses
Skill: Concept
Objective: 16-3 Interpret neoclassical organization structures
AACSB: Diverse and multicultural work environments

55) Vertical and horizontal constraints that segment employees and their tasks within an
organization are generally referred to as ________.
A) structures
B) networks
C) boundaries
D) classifications
Answer: C
Diff: 1
Learning Outcome: Discuss factors affecting the organizational structures of international
businesses
Skill: Concept
Objective: 16-3 Interpret neoclassical organization structures
AACSB: Application of knowledge

19
Copyright © 2018 Pearson Education, Inc.
56) The temporary arrangement of independent companies, suppliers, and free agents for the
purpose of completing a task or project is best known as a(n) ________ organization.
A) virtual
B) independent
C) decentralized
D) international
Answer: A
Diff: 1
Learning Outcome: Discuss factors affecting the organizational structures of international
businesses
Skill: Concept
Objective: 16-3 Interpret neoclassical organization structures
AACSB: Analytical thinking

57) Some MNEs that have tried contemporary structures have run into problems, most notably
________.
A) frequent managerial intervention in decision making
B) relentless centralization of decision making
C) employees too motivated by bonuses
D) resource competition
Answer: A
Diff: 2
Learning Outcome: Discuss factors affecting the organizational structures of international
businesses
Skill: Concept
Objective: 16-3 Interpret neoclassical organization structures
AACSB: Analytical thinking

58) A hyperarchy is ________.

A) a form of structure with precise superior and subordinate relationships
B) a form of structure that relies on extensive centralization
C) a large-scale, self-organizing community
D) analogous to a hierarchy
Answer: C
Diff: 1
Learning Outcome: Discuss factors affecting the organizational structures of international
businesses
Skill: Concept
Objective: 16-3 Interpret neoclassical organization structures
AACSB: Application of knowledge

20
Copyright © 2018 Pearson Education, Inc.
59) Neoclassical structures aim to centralize decision-making authority by removing boundaries
that impede the decentralization of decision making.
Answer: FALSE
Diff: 1
Learning Outcome: Discuss factors affecting the organizational structures of international
businesses
Skill: Concept
Objective: 16-3 Interpret neoclassical organization structures
AACSB: Analytical thinking

60) A common feature of neoclassical structures is greater cross-functional collaboration.

Answer: TRUE
Diff: 2
Learning Outcome: Discuss factors affecting the organizational structures of international
businesses
Skill: Concept
Objective: 16-3 Interpret neoclassical organization structures
AACSB: Analytical thinking

61) The notion of boundaries, within the context of neoclassical structures, refers to those
limitations that interfere with communication and collaboration between the firm and its
suppliers, distributors, allies, competitive rivals, and customers.
Answer: FALSE
Diff: 2
Learning Outcome: Discuss factors affecting the organizational structures of international
businesses
Skill: Concept
Objective: 16-3 Interpret neoclassical organization structures
AACSB: Reflective thinking

62) The keiretsu structure, long used by Japanese companies, is an example of virtual
organization.
Answer: FALSE
Diff: 2
Learning Outcome: Discuss factors affecting the organizational structures of international
businesses
Skill: Concept
Objective: 16-3 Interpret neoclassical organization structures
AACSB: Application of knowledge

21
Copyright © 2018 Pearson Education, Inc.
63) According to the unity-of-command principle, workers and organizations benefit the most
from dual hierarchies of communication.
Answer: FALSE
Diff: 2
Learning Outcome: Discuss factors affecting the organizational structures of international
businesses
Skill: Concept
Objective: 16-3 Interpret neoclassical organization structures
AACSB: Application of knowledge

64) The open source model is a hyperarchy that involves giving source code to volunteers who
fix software bugs.
Answer: TRUE
Diff: 2
Learning Outcome: Discuss factors affecting the organizational structures of international
businesses
Skill: Concept
Objective: 16-3 Interpret neoclassical organization structures
AACSB: Information technology

65) Profile the causes and likely benefits that prompt companies to consider adopting a
neoclassical structure.
Answer: Some MNEs, notably IBM and GE, find that the traditional structures, such as an area
or product division, provide an inadequate format to respond to the demands of their dynamic
environments and complex strategies. More precisely, managers note a rich set of triggers,
including increasing international activities, expanding internal relationships, rising expectations
of foreign customers, and growing power of knowledge-based strategies.
Capturing these opportunities pushes managers to look beyond the range of traditional structures
and consider contemporary formats that are better equipped to help them achieve outcomes such
as keeping international and domestic personnel in closer proximity to each other in order to
improve idea exchange and knowledge transfer. Successfully done, these sorts of actions help
managers reset the roles and responsibilities dictated by the company's structure to let more
employees, particularly those on the front line who deal more directly with resources and
markets, have greater authority.
Several environmental trends further spur managers to engage contemporary formats.
Specifically, lower trade barriers and cheaper telecommunications and computing capabilities
enable a globally dispersed labor force to collaborate more easily. Both individually and
collectively managers note that these developments encourage them to move from the classic
structure of separate businesses organized in different countries to a worldwide company that can
divide and parcel out work to the most efficient locations.
Diff: 3
Learning Outcome: Discuss factors affecting the organizational structures of international
businesses
Skill: Critical Thinking
Objective: 16-3 Interpret neoclassical organization structures
AACSB: Analytical thinking

22
Copyright © 2018 Pearson Education, Inc.
66) What is the difference between a classical structure and a neoclassical structure? Provide
examples of each type.
Answer: Classical structures, like the functional, divisional, and matrix formats, rely on the
hierarchy to arrange roles, responsibilities, and relationships. Neoclassical structures, like the
network or virtual format, arrange work roles, responsibilities, and relationships in ways that
bypass the horizontal, vertical, or external boundaries that block the development of knowledge-
generating and decision-making relationships.
Diff: 3
Learning Outcome: Discuss factors affecting the organizational structures of international
businesses
Skill: Synthesis
Objective: 16-3 Interpret neoclassical organization structures
AACSB: Analytical thinking

67) Coordination refers to ________.

A) linking various value activities within an organization
B) identifying the span of control within an organization
C) portioning the performance of specific tasks
D) assigning tasks to qualified managers
Answer: A
Diff: 2
Learning Outcome: Discuss factors affecting the organizational structures of international
businesses
Skill: Concept
Objective: 16-4 Differentiate the systems used to coordinate international activities
AACSB: Analytical thinking

68) Which of the following is NOT one of the three prevalent approaches to coordination?
A) standardization
B) mutual adjustment
C) adaptation
D) planning
Answer: C
Diff: 1
Learning Outcome: Discuss factors affecting the organizational structures of international
businesses
Skill: Concept
Objective: 16-4 Differentiate the systems used to coordinate international activities
AACSB: Analytical thinking

23
Copyright © 2018 Pearson Education, Inc.
69) Patrons of McDonald's can enter the restaurant located in any part of the world and expect to
see employees wearing the same uniforms and menus offering the same products. McDonald's
most likely uses which system of coordination?
A) standardization
B) consensus
C) plan
D) adaptation
Answer: A
Diff: 1
Learning Outcome: Discuss factors affecting the organizational structures of international
businesses
Skill: Application
Objective: 16-4 Differentiate the systems used to coordinate international activities
AACSB: Application of knowledge

70) Which of the following begins with a company defining critical success factors and
specifying objective targets and hard deadlines?
A) coordination by standardization
B) coordination by consensus
C) coordination by plan
D) coordination by intervention
Answer: C
Diff: 2
Learning Outcome: Discuss factors affecting the organizational structures of international
businesses
Skill: Concept
Objective: 16-4 Differentiate the systems used to coordinate international activities
AACSB: Analytical thinking

71) Abel Enterprises has implemented a system based on coordination by mutual adjustment.
Which of the following would most likely be used by Abel Enterprises?
A) strict scheduling
B) social networking
C) synchronized training
D) centralized decision making
Answer: B
Diff: 2
Learning Outcome: Discuss factors affecting the organizational structures of international
businesses
Skill: Application
Objective: 16-4 Differentiate the systems used to coordinate international activities
AACSB: Application of knowledge

24
Copyright © 2018 Pearson Education, Inc.
72) Coordination methods include mutual adjustment, planning, and standardization.
Answer: TRUE
Diff: 2
Learning Outcome: Discuss factors affecting the organizational structures of international
businesses
Skill: Concept
Objective: 16-4 Differentiate the systems used to coordinate international activities
AACSB: Analytical thinking

73) Coordination by plan deals with exact rules and procedures that spell out what needs to be
done and how.
Answer: FALSE
Diff: 1
Learning Outcome: Discuss factors affecting the organizational structures of international
businesses
Skill: Concept
Objective: 16-4 Differentiate the systems used to coordinate international activities
AACSB: Analytical thinking

74) Adopting a market control system requires that the MNE uses external market mechanisms
to establish internal performance benchmarks and standards.
Answer: TRUE
Diff: 2
Learning Outcome: Discuss factors affecting the organizational structures of international
businesses
Skill: Concept
Objective: 16-4 Differentiate the systems used to coordinate international activities
AACSB: Reflective thinking

75) Johnson & Johnson embodies its organizational culture in "The Credo," which is the firm's
________.
A) code of conduct
B) vision statement
C) strategic plan
D) mission statement
Answer: A
Diff: 2
Learning Outcome: Discuss factors affecting the organizational structures of international
businesses
Skill: Concept
Objective: 16-5 Differentiate the systems used to control international activities
AACSB: Application of knowledge

25
Copyright © 2018 Pearson Education, Inc.
76) Three types of control systems are used in MNEs. These are ________.
A) market control, bureaucratic control, and clan control
B) standardization control, adjustment control, and clan control
C) market control, adjustment control, and clan control
D) planning control, market control, and clan control
Answer: A
Diff: 2
Learning Outcome: Discuss factors affecting the organizational structures of international
businesses
Skill: Concept
Objective: 16-5 Differentiate the systems used to control international activities
AACSB: Analytical thinking

77) Falcon Enterprises is an MNE that uses price competition and relative market share to
establish internal performance benchmarks and standards. The firm is most likely applying a
system of ________.
A) bureaucratic control
B) market control
C) standardization control
D) clan control
Answer: B
Diff: 2
Learning Outcome: Discuss factors affecting the organizational structures of international
businesses
Skill: Application
Objective: 16-5 Differentiate the systems used to control international activities
AACSB: Analytical thinking

78) Martin Manufacturing is an MNE that centralizes authority to implement an extensive set of
rules and procedures to govern a broad range of activities. Martin Manufacturing is most likely
applying a system of ________.
A) market control
B) adjustment control
C) bureaucratic control
D) clan control
Answer: C
Diff: 2
Learning Outcome: Discuss factors affecting the organizational structures of international
businesses
Skill: Application
Objective: 16-5 Differentiate the systems used to control international activities
AACSB: Application of knowledge

26
Copyright © 2018 Pearson Education, Inc.
79) Grover Enterprises is an MNE that relies on shared values among all employees to idealize
the preferred behaviors and identify performance measures within the company. Grover is most
likely applying a system of ________.
A) market control
B) bureaucratic control
C) planning control
D) clan control
Answer: D
Diff: 2
Learning Outcome: Discuss factors affecting the organizational structures of international
businesses
Skill: Application
Objective: 16-5 Differentiate the systems used to control international activities
AACSB: Application of knowledge

80) Formal reports, management performance evaluations, and financial metrics are three
examples of ________.
A) coordinating tools
B) coordinating systems
C) control systems
D) control mechanisms
Answer: D
Diff: 1
Learning Outcome: Discuss factors affecting the organizational structures of international
businesses
Skill: Concept
Objective: 16-5 Differentiate the systems used to control international activities
AACSB: Application of knowledge

81) MNEs typically 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
C) until the subsidiary demonstrates mastery of the form
D) only in those countries with extremely similar systems of information technology
Answer: B
Diff: 2
Learning Outcome: Discuss factors affecting the organizational structures of international
businesses
Skill: Concept
Objective: 16-5 Differentiate the systems used to control international activities
AACSB: Analytical thinking

27
Copyright © 2018 Pearson Education, Inc.
82) Which tool is used by most firms to monitor the data linkages among product planning, parts
purchasing, and inventory maintenance activities?
A) reports
B) clan controls
C) financial metrics
D) information systems
Answer: D
Diff: 1
Learning Outcome: Discuss factors affecting the organizational structures of international
businesses
Skill: Concept
Objective: 16-5 Differentiate the systems used to control international activities
AACSB: Information technology

83) MNEs typically design their control systems in terms of either market control, bureaucratic
control, or adaptation control.
Answer: FALSE
Diff: 1
Learning Outcome: Discuss factors affecting the organizational structures of international
businesses
Skill: Concept
Objective: 16-5 Differentiate the systems used to control international activities
AACSB: Analytical thinking

84) MNEs use different report formats and schedules for foreign operations according to local
customs.
Answer: FALSE
Diff: 2
Learning Outcome: Discuss factors affecting the organizational structures of international
businesses
Skill: Concept
Objective: 16-5 Differentiate the systems used to control international activities
AACSB: Application of knowledge

85) The benefits of managerial visits to foreign subsidiaries can easily be replicated with
frequently submitted and reviewed operational reports and schedules.
Answer: FALSE
Diff: 2
Learning Outcome: Discuss factors affecting the organizational structures of international
businesses
Skill: Concept
Objective: 16-5 Differentiate the systems used to control international activities
AACSB: Application of knowledge

28
Copyright © 2018 Pearson Education, Inc.
86) Why do you think corporate universities are becoming more popular among MNEs? How do
both MNEs and employees benefit from corporate universities?
Answer: Originally, corporate universities aimed to teach practical skills and workplace
systems. MNEs are now thinking of training as a strategic imperative. They use their corporate
university to embed new hires with a strategic understanding of operations as well as fortify the
commitment of current workers. The need to generate, transfer, and adopt ideas from wherever
they originate to wherever they add value, particularly compelling for the MNEs building a
globally integrated enterprise, calls for preparing all employees to do so. In addition, MNEs
implementing an international, multidomestic, or global strategy face pressures, given growing
globalization, to help employees understand worldwide operations, opportunities, and
constraints. Another reason for corporate universities is integrating diverse workforces. Hiring
people from around the world expands the mix of nationalities and ethnicities.
Diff: 3
Learning Outcome: Discuss factors affecting the organizational structures of international
businesses
Skill: Critical Thinking
Objective: 16-5 Differentiate the systems used to control international activities
AACSB: Reflective thinking

87) ________ is a system of shared values about what is important and beliefs about how the
world works among the employees of an organization.
A) Organizational system
B) Organizational structure
C) Organizational culture
D) Organizational vision
Answer: C
Diff: 1
Learning Outcome: Discuss factors affecting the organizational structures of international
businesses
Skill: Concept
Objective: 16-6 Explain the purpose and characteristics of organizational culture
AACSB: Interpersonal relations and teamwork

88) Which of the following is most likely a true statement about organization culture?
A) Many organizations use a robust organization culture to create consistently high performance.
B) Fewer and fewer companies allow an organization's culture to emerge naturally.
C) Typically, managers from different countries have values similar to those endorsed by the
company.
D) Divergent values among managers and employees ease the exchange of ideas between people
from different countries.
Answer: B
Diff: 3
Learning Outcome: Discuss factors affecting the organizational structures of international
businesses
Skill: Concept
Objective: 16-6 Explain the purpose and characteristics of organizational culture
AACSB: Reflective thinking

29
Copyright © 2018 Pearson Education, Inc.
89) A company adopting a ________ strategy will likely aim to develop an organization culture
that helps employees around the world unconditionally accept common goals and practices.
A) domestic
B) multidomestic
C) national
D) global
Answer: D
Diff: 1
Learning Outcome: Discuss factors affecting the organizational structures of international
businesses
Skill: Concept
Objective: 16-6 Explain the purpose and characteristics of organizational culture
AACSB: Analytical thinking

90) The common values shared by a company's employees are known as its organization culture.
Answer: TRUE
Diff: 1
Learning Outcome: Discuss factors affecting the organizational structures of international
businesses
Skill: Concept
Objective: 16-6 Explain the purpose and characteristics of organizational culture
AACSB: Analytical thinking

91) The character of a company's corporate culture is a product of the core values and business
principles that management advocates, as well as the behaviors that define "how we do things
around here."
Answer: TRUE
Diff: 2
Learning Outcome: Discuss factors affecting the organizational structures of international
businesses
Skill: Concept
Objective: 16-6 Explain the purpose and characteristics of organizational culture
AACSB: Interpersonal relations and teamwork

30
Copyright © 2018 Pearson Education, Inc.