Chapter 14- Organization of IB

Question 1

vertical differentiation

Answer 1

there is a hierarchy and upper management makes all the decisions; easier to run and make decisions; one location normally

Question 2

name the five organizational structures

Answer 2

vertical differentiation, horizontal differentiation, worldwide area structure, worldwide product division structure, global matrix

Question 3

reasons to use vertical differentiation

Answer 3

if product is the same worldwide; local or domestic strategy; to make sure decisions are consistent with strategy; no replicate jobs; know who to report to; chain of command is very centralized; can coordinate between top and bottom

Question 4

cons for vertical differentiation

Answer 4

hard to move ideas up the vertical ladder sometimes; if people below have power to make more decisions they have more autonomy and more drive to increase profits and do better

Question 5

horizontal differentiation

Answer 5

lots of subsidiaries that have plenty of autonomy to make their own decisions without having to go up the ladder

Question 6

why use horizontal differentiation

Answer 6

if you have lots of consumer products that differ and each product needs their own structure; local responsiveness is important; when you have very little homogeneity; complicated products that have a lot of parts

Question 7

pros for horizontal differentiation

Answer 7

more autonomy=more worker satisfaction; marketing strategies for each country can be localized; multipoint competition

Question 8

what kind of work do you want to be horizontally structured

Answer 8

R and D because it gives you access to more creative people in lots of places and an almost 24 hour time cycle of work

Question 9

worldwide area structure

Answer 9

when you structure your company based on geographic areas or countries

Question 10

why would you want to use a worldwide area structure

Answer 10

can be more responsive to local differences in culture; used when products have to be changed a little to fit the market

Question 11

worldwide product structure

Answer 11

divide their company into different products; the product won’t change no matter where we sell it

Question 12

global matrix structure

Answer 12

combining area, product , vertical, and horizontal; used kind of like when you manufacturing is in a worldwide product structure but the marketing and distribution is the the worldwide area structure to be locally responsive

Question 13

what is really important when creating an international company

Answer 13

how do you structure incentives worldwide so that it is fair? some markets are tougher to work in than others

Question 14

consists of the people, culture, processes, and controls inherent within any company

Answer 14

the organizational architecture

Question 15

the superior profitability of a company is associate with an organizational architecture that matches and is consistent with the firm’s

Answer 15

strategy

Question 16

_______ are established as a way to measure performance

Answer 16

control systems

Question 17

what are the three dimensions of organizational structure

Answer 17

vertical differentiation, horizontal differentiation, and integrating mechanisms

Question 18

_____ of decision making will be used in a global standardization strategy because the dispersed global activities of the firm that create value need to be tightly controlled

Answer 18

centralization

Question 19

the network for transmitting information within an organization that is based on informal contacts is called the

Answer 19

knowledge network

Question 20

what strategy reflects both centralized and decentralized operating decisions

Answer 20

transnational

Question 21

divides the world into geographic areas

Answer 21

worldwide area structure

Question 22

rank from highest to lowest the need for coordination among the four different types of companies

Answer 22

transnational (highest), global, international, local

Question 23

the control system where employees tend to control their own behavior and need little direct supervision because they have elected to follow the norms and values of the firm

Answer 23

cultural controls

Question 24

the four control systems used in international firms

Answer 24

personal, bureaucratic, output, and cultural

Question 25

cons for horizontal differentiation

Answer 25

makes it harder to take things upward; don’t know who is reporting to whom; Sony center of operations for each division was spread around the world which made communication hard

Question 26

localization strategy

Answer 26

focus on local responsiveness; tend to operate with worldwide area structures and operating decisions are decentralized; the need for coordination between subunits is low so low need for formal or informal integrating mechanisms

Question 27

international strategy

Answer 27

attempt to create value by transferring core competencies from home to foreign subsidiaries; if diverse they operate with a product division structure; headquarters maintains centralized control over the core competency such as RandD and marketing; all other operating decisions are decentralized

Question 28

global standardization strategy

Answer 28

focus on the realization of location and experience curve economies; if diversified use a worldwide product division; too coordinate web of value creation activities, headquarters maintains ultimate control over operating decisions; more centralized and need for coordination is high

Question 29

transnational strategy

Answer 29

focus on simultaneous attainment of location and experience curve economies, local responsiveness, and global learning; operate with matrix style; need to coordinate globally dispersed value chain and to transfer core competencies creates pressures for centralizing some operating decisions (production and R and D); need to be locally responsive pressures decentralization; need for coordination is high

Question 30

some sources of organizational inertia

Answer 30

change often involves the redistribution of power which many people in power will resist; the existing culture (value systems reflect deeply held beliefs so they can be very hard to change