International Business The New Realities 4th Edition By Cavusgil – Test Bank

Chapter 11   Strategy and Organization in the International Firm

1) Strategy is ________.

1. A) a quality of executive management that provides inspirational guidance and motivation to personnel, leading the firm to a better future
2. B) the pattern of shared values, behavioral norms, systems, policies, and procedures that employees learn and adopt
3. C) a planned set of actions that managers employ to make the best use of the firm’s resources and core competencies to gain competitive advantage
4. D) the procurement of selected value-chain activities, including production of intermediate goods or finished products, from independent suppliers

Answer:  C

Diff:  1: Easy

Skill:  Concept

Objective:  11-1: Describe strategy in international business

AACSB:  Analytical Thinking

2) When developing strategies, managers start by ________.

1. A) configuring and coordinating the firm’s activities around the world
2. B) deciding which customers to target
3. C) analyzing the particular opportunities and challenges that confront the firm
4. D) examining the firm’s specific strengths and weaknesses

Answer:  D

Diff:  1: Easy

Skill:  Concept

Objective:  11-1: Describe strategy in international business

AACSB:  Analytical Thinking

3) Which of the following activities would be considered last by a manager while developing strategies?

1. A) analyzing the particular challenges that confront the firm
2. B) deciding how best to contend with competitors
3. C) examining the firm’s specific strengths and weaknesses
4. D) analyzing the particular opportunities for the firm

Answer:  B

Diff:  1: Easy

Skill:  Concept

Objective:  11-1: Describe strategy in international business

AACSB:  Analytical Thinking

4) ________ refers to lowering the cost of the firm’s operations and activities on a global scale.

1. A) Efficiency
2. B) Protectionism
3. C) Flexibility
4. D) Currency control

Answer:  A

Diff:  1: Easy

Skill:  Concept

Objective:  11-1: Describe strategy in international business

AACSB:  Analytical Thinking

5) Firms that want to become globally competitive must seek simultaneously three strategic objectives-efficiency, flexibility, and learning.

Answer:  TRUE

Diff:  1: Easy

Skill:  Concept

Objective:  11-1: Describe strategy in international business

AACSB:  Analytical Thinking

6) Efficiency refers to emphasizing consensus-based decision making and problem solving, in which managers readily share their knowledge.

Answer:  FALSE

Diff:  1: Easy

Skill:  Concept

Objective:  11-1: Describe strategy in international business

AACSB:  Analytical Thinking

7) During the recent global recession, efficiency and flexibility became particularly important to the success of multinational firms.

Answer:  TRUE

Diff:  1: Easy

Skill:  Concept

Objective:  11-1: Describe strategy in international business

AACSB:  Analytical Thinking

8) Describe the three strategic objectives for creating a competitive advantage in international business as proposed by Bartlett and Ghoshal. Provide an example to illustrate each objective.

Answer:  a. Efficiency-The firm must build efficient international supply chains. Efficiency refers to lowering the costs of the firm’s operations and activities on a global scale. MNEs with multiple value chains around the world must pay special attention to how they organize their R&D, manufacturing, supply chain, product, marketing, and customer service activities. For example, automotive companies such as Toyota strive to achieve scale economies by concentrating manufacturing and sourcing activities in a limited number of locations around the world.

1. Flexibility-The firm must develop worldwide flexibility to manage diverse country-specific risks and opportunities. The diversity and volatility of the international environment is a special challenge for managers. Therefore, the firm’s ability to tap local resources and exploit local opportunities is critical. For example, managers may opt for contractual relationships with independent suppliers and distributors in one country while engaging in direct investment in another.
2. Learning-The firm must create the ability to learn from international exposure and exploit learning on a worldwide basis. The diversity of the environment presents the internationalizing firm with unique learning opportunities. Even though the firm goes abroad to exploit its unique advantages, such as technology, brand-name, or management capabilities, managers can add to the stock of capabilities by internalizing new knowledge gained from international exposure. Thus, the organization can gain new technical and managerial know-how, new product ideas, R&D capabilities, partnering skills, and survival capabilities in unfamiliar environments. As an example, it was Procter & Gamble’s research center in Belgium that developed a special capability in water-softening technology, primarily because the water in Europe contains more mineral than in the United States.

Diff:  3: Hard

Skill:  Application

Objective:  11-1: Describe strategy in international business

AACSB:  Analytical Thinking

9) How can a firm’s strategy make the best use of the firm’s resources? How does a firm’s decision to have a centralized versus a decentralized organizational structure affect its strategy?

Answer:  Strategy is a planned set of actions that managers employ to make best use of the firm’s resources and core competencies to gain competitive advantage. When developing strategies, managers start by examining the firm’s specific strengths and weaknesses. They then analyze the particular opportunities and challenges that confront the firm. Once they understand the firm’s strengths, weaknesses, opportunities, and challenges, they decide which customers to target, what product lines to offer, how best to contend with competitors, and how generally to configure and coordinate the firm’s activities around the world.

International strategy is strategy carried out in two or more countries. Managers in experienced MNEs develop international strategies to help the firm allocate scarce resources and configure value-adding activities on a worldwide scale, participate in major markets, implement valuable partnerships abroad, and engage in competitive moves in response to foreign rivals.

A fundamental issue in organizational structure is how much decision-making responsibility the firm should retain at headquarters and how much it should delegate to foreign subsidiaries and affiliates. This is the choice between centralization and decentralization.

A centralized approach gives headquarters considerable authority and control over the firm’s activities worldwide. A decentralized approach means substantial autonomy and decision-making authority are delegated to the firm’s subsidiaries around the world. In every company, management tends to devise a structure consistent with its vision and strategies. Thus, MNEs that emphasize global integration tend to have a centralized structure. Those that emphasize local responsiveness generally are decentralized.

Planning shared by managers at headquarters and at subsidiaries, with negotiation and give-and-take on both sides, is vital to the design of effective strategies.

Diff:  3: Hard

Skill:  Synthesis

Objective:  11-1, 11-5: Describe strategy in international business, Understand organizational structure in international business

AACSB:  Analytical Thinking; Environments and Reflective Thinking

10) Managers who exemplify an open-minded attitude and who appreciate cultural diversity are described as applying a global ________.

1. A) sensitivity
2. B) standard
3. C) posture
4. D) mindset

Answer:  D

Diff:  1: Easy

Skill:  Concept

Objective:  11-2: Understand building the global firm

AACSB:  Analytical Thinking