Global Competitive Strategy and Organization Design

Introduction

International business strategy concerns more than deciding where to sell products. It requires a firm to determine how it will create, capture, and renew value across countries with different customers, institutions, resource conditions, competitors, and risks. The central managerial challenge is a tension between global integration and local responsiveness. Global integration seeks economies of scale, consistent standards, shared knowledge, and coordinated investment. Local responsiveness seeks adaptation to national preferences, regulation, culture, infrastructure, and competitive conditions.

This tension affects strategic positioning, value-chain configuration, headquarters–subsidiary relationships, organizational structure, knowledge transfer, and performance control. A firm may possess an excellent product and still underperform internationally if its manufacturing footprint is poorly configured, its subsidiaries lack appropriate authority, or its performance system rewards local optimization at the expense of global value creation.

At master’s level, global strategy should therefore be treated as an integrated design problem. Strategy and organization must fit one another. A transnational strategy cannot be implemented effectively through a rigid headquarters hierarchy; likewise, a multidomestic strategy cannot succeed if all important decisions are centralized in the home country.

Learning Objectives

By the end of this chapter, the reader should be able to:

1. Distinguish global, multidomestic, international, and transnational strategies.
2. Analyze the pressures for global integration and local responsiveness.
3. Configure international value chains and evaluate location and governance choices.
4. Design headquarters–subsidiary relationships and appropriate organizational structures.
5. Explain mechanisms for transferring knowledge across borders.
6. Develop performance-control systems that balance global and local objectives.
7. Evaluate ethical, technological, geopolitical, and governance issues in global organization design.
8. Apply these ideas to a complex international management case.

1. The Strategic Problem: Integration, Responsiveness, and Learning

A multinational enterprise (MNE) operates through activities distributed across countries. These activities may include research and development, sourcing, manufacturing, logistics, marketing, sales, after-sales service, finance, and data management. International expansion creates opportunities, but dispersion also creates coordination costs, information asymmetry, cultural friction, and political exposure.

Three strategic requirements frequently pull management in different directions:

• Efficiency: reduce unit costs through scale, specialization, standardization, and scope economies.
• Adaptation: adjust products, processes, and relationships to local market and institutional conditions.
• Innovation and learning: generate knowledge in multiple locations and transfer or recombine it across the enterprise.

A useful conceptual model is the integration–responsiveness framework. Integration pressures increase when customers demand consistent global brands, when fixed costs are high, when technology is standardized, or when competitors operate globally. Responsiveness pressures increase when consumer preferences differ, regulations are country-specific, distribution systems vary, or local legitimacy is essential.

Neither pressure is inherently superior. A pharmaceutical company may require strong global control over safety and clinical standards while adapting market access and stakeholder engagement locally. A restaurant chain may standardize procurement and brand identity but adapt menus and service practices. A business-to-business software firm may standardize its platform while tailoring compliance, language, implementation, and support.

Sources of Integration Pressure

Important sources include:

• economies of scale in production, purchasing, advertising, and research;
• global customer accounts requiring consistent service;
• rapid diffusion of technology and digital platforms;
• global competitors and price transparency;
• common quality, cybersecurity, or safety requirements;
• opportunities to centralize scarce expertise.

Sources of Local Responsiveness Pressure

Important sources include:

• different income levels and consumption patterns;
• national regulations and public-policy priorities;
• cultural and linguistic differences;
• distinct channels, infrastructure, and labor markets;
• local competitors and business relationships;
• political expectations concerning employment, data, taxation, or local sourcing.

The strategic task is not to eliminate the tension but to decide where standardization creates value and where adaptation protects or creates value.

2. Four International Strategies

The classic typology identifies four broad strategies. They are ideal types rather than mutually exclusive categories. Real firms often combine them across products, regions, and value-chain activities.

2.1 International Strategy

An international strategy transfers products, technologies, brands, or managerial practices developed in the home country to foreign markets. Headquarters generally retains substantial control over core knowledge and strategic decisions, while foreign units focus on sales, distribution, and market execution.

This strategy is appropriate when the firm has distinctive home-based capabilities and local adaptation requirements are limited. It may be an efficient first stage of internationalization. However, it can become inadequate when foreign markets generate valuable innovation or when local competitors learn to imitate the firm.

2.2 Multidomestic Strategy

A multidomestic strategy grants national or regional businesses considerable autonomy. Products, marketing, pricing, partnerships, and sometimes operations are adapted to local requirements. The strategy is particularly relevant in food, media, financial services, consumer products, and other sectors where preferences and regulations vary substantially.

Its principal advantage is responsiveness. Its principal disadvantage is duplication: each country may maintain separate procurement, product development, information systems, and managerial expertise. Local success can therefore coexist with weak enterprise-wide profitability.

2.3 Global Strategy

A global strategy emphasizes worldwide standardization and central coordination. The firm may locate each activity where it can be performed most effectively and serve multiple markets from that location. Headquarters typically establishes common processes, product specifications, technology platforms, and brand standards.

Global strategy is powerful when customer needs are converging and scale economies are substantial. It is less suitable when adaptation is essential or when political and institutional differences make a single operating model impractical.

2.4 Transnational Strategy

A transnational strategy seeks to achieve efficiency, local responsiveness, and organizational learning simultaneously. It treats the MNE as a differentiated network rather than a simple hierarchy. Headquarters may retain responsibility for enterprise architecture and capital allocation, while subsidiaries develop specialized capabilities and contribute knowledge to other units.

A transnational firm might assign advanced battery research to one country, mass production to another, software development to a third, and customer adaptation to regional units. The challenge is not merely to distribute activities but to connect them through common platforms, shared standards, lateral relationships, and trust.

3. Global Value-Chain Configuration

Value-chain configuration asks where activities should be located and how they should be connected. It should be distinguished from coordination, which asks how activities are integrated after they are distributed.

3.1 Location Decisions

A location decision should consider more than labor cost. Relevant criteria include:

• total landed cost, including transport, inventory, tariffs, taxes, and quality failure;
• access to skills, suppliers, technology, and universities;
• market proximity and response time;
• infrastructure reliability and energy availability;
• political stability, property-rights protection, and regulatory quality;
• exchange-rate exposure and fiscal conditions;
• environmental impacts and social standards;
• resilience to disasters, conflict, sanctions, and supply disruption.

A low-wage location may be uneconomic if it produces high defect rates, requires long lead times, or exposes the firm to severe geopolitical risk. Conversely, a higher-cost location may create superior value through engineering expertise, ecosystem quality, or proximity to sophisticated customers.

3.2 Concentration and Dispersion

Concentrating an activity in a small number of locations can produce scale economies and simplify control. Dispersion can reduce transport distance, improve market responsiveness, and provide redundancy. Managers should assess the trade-off between efficiency and resilience.

A basic expected-cost representation can support comparison:

Here, E(C) is expected total cost per period; C₀ is normal operating cost; p is the probability of a disruptive event during the period; and L is the financial loss if disruption occurs. The expression is a simplified risk model. It assumes a single disruption category, an adequately estimated probability, and a measurable loss. It does not capture correlated disruptions, recovery dynamics, strategic reputation effects, or risk aversion.

For example, Location A has normal annual cost of $10 million and an estimated disruption probability of 4%, with a disruption loss of $8 million. Its expected cost is $10 million + (0.04 × $8 million) = $10.32 million. Location B has normal cost of $10.5 million, disruption probability of 1%, and loss of $3 million. Its expected cost is $10.53 million. Location A has the lower expected cost under this simple model, but management may still prefer B if continuity, customer penalties, or risk aversion are strategically important.

3.3 Make, Buy, Alliance, or Acquisition

Configuration also involves governance. A firm may perform an activity internally, contract with an independent supplier, form an alliance, license technology, or acquire a foreign company. The choice depends on transaction-specific investments, uncertainty, knowledge importance, supplier capability, and the need for control.

Internalization is attractive when knowledge is difficult to codify, opportunism would be costly, or quality and timing are strategically critical. Outsourcing is attractive when suppliers possess scale, specialization, or innovation advantages. Alliances can provide access and flexibility but require careful arrangements concerning intellectual property, decision rights, and conflict resolution.

3.4 Coordination Across the Chain

Distributed value chains require coordination through:

• common data definitions and digital platforms;
• product and process standards;
• integrated planning and forecasting;
• shared quality and compliance systems;
• cross-border teams and boundary-spanning managers;
• transfer-pricing and service-level agreements;
• escalation procedures for disruption and ethical concerns.

Coordination should not mean uniformity everywhere. Critical standards may be non-negotiable, while operating methods may remain locally flexible.

4. Headquarters–Subsidiary Relationships

The headquarters–subsidiary relationship is a governance relationship involving authority, resources, accountability, and knowledge. It should not be understood simply as “headquarters controls and subsidiaries obey.” Subsidiaries often possess superior knowledge of customers, regulators, suppliers, and local technologies.

4.1 Subsidiary Roles

Common subsidiary roles include:

• Implementer: executes centrally designed products and processes.
• Local adapter: modifies offerings and operations for the national market.
• Specialized contributor: develops expertise used by other units.
• Regional coordinator: manages activities across neighboring countries.
• Global innovator: creates products, technologies, or practices with worldwide relevance.
• Sensing unit: identifies emerging customer, regulatory, or technological developments.

Roles may change over time. A sales subsidiary can become a regional innovation center if it develops distinctive capabilities and earns organizational legitimacy.

4.2 Centralization and Decentralization

Centralization is justified when decisions create large cross-border externalities, require scarce expertise, or must meet uniform safety, brand, cybersecurity, or financial standards. Decentralization is justified when local information is important, decisions are time-sensitive, or experimentation is valuable.

A practical decision-rights design distinguishes among:

1. decisions reserved for headquarters;
2. decisions delegated to subsidiaries;
3. decisions requiring joint approval;
4. decisions governed by mandatory standards but locally executed.

For example, headquarters may control enterprise cybersecurity architecture, while country units control local training and regulatory liaison. Product safety specifications may be global, while packaging language and channel strategy may be local.

4.3 Control, Trust, and Voice

Excessive headquarters intervention can reduce subsidiary initiative and concealment of bad news. Excessive autonomy can create fragmentation and inconsistent risk exposure. Effective governance combines formal controls with trust, transparency, and voice mechanisms.

Subsidiaries should be able to challenge headquarters assumptions and report operational, ethical, or political risks without retaliation. This is especially important where local managers face pressure to meet unrealistic targets or comply with informal demands from powerful stakeholders.

5. Organization Design for International Operations

Organization design should align structure, processes, incentives, people, and technology with strategic requirements. Four common structures are particularly relevant.

5.1 International Division

Foreign activities are grouped into a separate international division. This is relatively simple and suitable for firms beginning international expansion. Its weakness is that domestic and international operations may become disconnected, and international knowledge may remain peripheral.

5.2 Global Product Structure

Worldwide product divisions control activities across countries. This structure supports product expertise, scale, and global standardization. It may, however, underrepresent national market differences and create conflicts with country managers.

5.3 Geographic Structure

Regional or country divisions control operations within territories. This supports local responsiveness and regulatory alignment but can duplicate resources and weaken global product coordination.

5.4 Matrix and Network Structures

A matrix gives managers dual dimensions of accountability, such as product and geography. It can integrate competing priorities but often generates role ambiguity, slow decisions, and conflict. A network structure relies more on lateral coordination, communities of practice, shared platforms, and temporary teams than on formal vertical authority.

The transnational organization is best understood as a differentiated network. Not every unit performs the same role, and coordination occurs through multiple channels: hierarchy, standards, mutual adjustment, professional communities, and digital systems.

6. Knowledge Transfer and Organizational Learning

Knowledge is a major source of international advantage, but it does not automatically travel across borders. Explicit knowledge can be documented in manuals, databases, patents, and specifications. Tacit knowledge is embedded in experience, relationships, routines, and judgment. Tacit knowledge generally requires interaction, observation, and repeated collaboration.

6.1 Direction of Knowledge Flow

Traditional MNEs often assume that knowledge flows from headquarters to subsidiaries. Contemporary firms recognize at least four directions:

• headquarters to subsidiary;
• subsidiary to headquarters;
• subsidiary to subsidiary;
• external partners to multiple parts of the firm.

Knowledge transfer is more likely when the receiving unit has absorptive capacity: relevant prior knowledge, skilled personnel, learning routines, and motivation to use the knowledge.

6.2 Mechanisms of Transfer

Effective mechanisms include:

• international project teams;
• expatriate and inpatriate assignments;
• communities of practice;
• shared digital repositories;
• rotational leadership programs;
• standard operating procedures;
• joint problem-solving and post-project reviews;
• internal conferences and technical networks.

Codification is valuable, but documentation without social interaction may transfer information without transferring competence. Firms should combine repositories with coaching, demonstrations, and opportunities to apply knowledge.

6.3 Barriers

Barriers include language, status differences, distrust, incompatible systems, weak incentives, knowledge stickiness, national institutional differences, and the “not invented here” attitude. Headquarters may ignore subsidiary innovations because of status bias, while subsidiaries may resist central practices because they perceive them as irrelevant or threatening.

Managers can address these barriers by recognizing contributors, funding cross-unit experimentation, creating common data standards, and evaluating managers partly on enterprise-wide knowledge contribution.

7. Performance Management and Control

International performance control must distinguish between outcomes caused by managerial action and outcomes caused by external conditions. A subsidiary manager should not be penalized for an exchange-rate movement, sudden tariff, or centrally imposed product delay that lies outside the manager’s control.

7.1 Financial and Nonfinancial Measures

A balanced system may include:

• revenue growth and operating margin;
• economic profit or return on invested capital;
• customer retention and service quality;
• innovation milestones and knowledge reuse;
• employee development and retention;
• safety, environmental, and labor indicators;
• compliance and cybersecurity performance;
• resilience, lead time, and supplier concentration.

A useful profitability identity is:

Both numerator and denominator must refer to the same period and accounting scope. Operating margin is a ratio, not a currency amount. It allows comparison across units of different scale but can be distorted by transfer-pricing policies and accounting allocations.

7.2 Relative and Controllable Performance

Performance evaluation should use a combination of absolute targets, relative benchmarks, and controllable measures. For example, a country manager may be evaluated on local contribution margin after adjusting for centrally determined transfer prices, while also being evaluated on customer satisfaction and compliance.

Transfer pricing is especially sensitive. A high internal price may make a subsidiary appear inefficient even if the enterprise benefits overall. Therefore, internal prices should support tax compliance, managerial decision-making, and fair performance assessment without encouraging harmful optimization.

7.3 Incentive Design

Incentives should balance local and global objectives. If bonuses depend solely on country profit, managers may reject beneficial cross-border projects. If bonuses depend solely on global results, local managers may feel powerless and disengage. A mixed scorecard can include both unit-level and enterprise-level outcomes, with explicit recognition for collaboration and knowledge contribution.

8. Strategic Governance, Ethics, and Risk

Global strategy creates governance challenges because firms operate across jurisdictions with differing laws and norms. Ethical obligations should not be reduced to legal compliance. A practice may be legal in one country yet inconsistent with the firm’s stated commitments concerning labor, privacy, safety, corruption, or environmental protection.

Key governance areas include:

• anti-bribery and corruption controls;
• labor rights and responsible sourcing;
• modern slavery and human-rights due diligence;
• data privacy and cross-border data transfer;
• sanctions and export controls;
• tax transparency and transfer-pricing compliance;
• environmental impact and carbon reporting;
• cybersecurity and responsible use of artificial intelligence.

AI can improve demand forecasting, supply-chain sensing, translation, customer service, and knowledge search. However, global deployment may reproduce bias across languages and markets, expose confidential data, or violate local data requirements. Governance should specify data ownership, model accountability, human review, auditability, and procedures for correcting harmful outcomes.

9. Contemporary Developments

Several developments are reshaping global organization design.

Geopolitical fragmentation is increasing the importance of scenario planning, dual sourcing, regional production, and sanctions monitoring. Firms must avoid assuming that global efficiency will always dominate resilience and sovereignty concerns.

Regionalization is emerging in some industries as firms organize supply chains around major markets such as North America, Europe, and Asia. Regionalization does not necessarily mean abandoning global integration; global standards and platforms may coexist with regional manufacturing and regulatory expertise.

Digital coordination enables real-time visibility and virtual collaboration but also creates dependence on common data architecture and cybersecurity. Digital connectivity can reduce coordination costs while increasing the speed and scale of disruption.

Sustainability pressures are shifting location decisions from lowest cost toward total impact, including carbon, water, labor conditions, and community legitimacy. Firms increasingly need traceability beyond first-tier suppliers.

Distributed innovation is becoming more important. Valuable ideas may originate in emerging markets, specialist suppliers, or local subsidiaries. Organization design must therefore make the MNE receptive, not merely directive.

10. Applied Case: Orion Mobility Systems

The following is a fictional illustrative case.

Background

Orion Mobility Systems, headquartered in Germany, manufactures electric delivery vans and fleet-management software. It sells in Europe, India, Brazil, and the United States. Its European engineering center developed a high-performance battery platform, while its Indian subsidiary created low-cost diagnostic software for fleet operators. The Brazilian market requires adaptations for road conditions, financing practices, and local content rules.

Orion initially followed an international strategy. Headquarters designed the vehicle, and country units focused on sales and service. Growth exposed serious problems: European engineers resisted using the Indian software; Brazil experienced long service delays because replacement parts were imported from Europe; and the United States required different cybersecurity documentation. Country managers also complained that headquarters measured them using transfer prices and product delays they could not control.

Problem

Orion must decide whether to centralize its operations, grant subsidiaries more autonomy, or adopt a transnational design. It must improve cost efficiency without sacrificing adaptation, innovation, and regulatory compliance.

Analysis

Integration pressures are high because battery safety, software architecture, procurement, cybersecurity, and brand reputation benefit from common standards. Local responsiveness pressures are also high because regulations, road conditions, customer financing, service networks, and data requirements differ.

A purely global strategy would risk poor local fit. A purely multidomestic strategy would duplicate engineering and weaken platform economies. The strategic diagnosis supports a transnational approach.

The value chain should be differentiated. Battery-cell technology and core vehicle architecture should remain globally coordinated. Regional assembly and service-parts hubs should be developed near major markets. The Indian diagnostic capability should become a global center of excellence rather than remain a country-specific asset. Brazil should receive authority to adapt service processes and selected vehicle components to local conditions, subject to global safety standards.

Approach and Solution

Orion establishes the following design:

1. A global platform council controls battery safety, software interfaces, cybersecurity architecture, and core brand standards.
2. Regional operations manage assembly, logistics, supplier development, and service-parts availability.
3. The Indian subsidiary leads diagnostic-software development and supports other markets through a global product team.
4. Brazil receives delegated authority over local service design, financing partnerships, and approved component adaptation.
5. A cross-border investment committee evaluates projects using enterprise value rather than country profit alone.
6. Performance measures combine regional contribution, customer uptime, safety, software reuse, regulatory compliance, and knowledge transfer.
7. A common digital architecture records technical changes, service incidents, and regulatory requirements, with local access controls.

Outcome

After two years, Orion reduces average service-parts lead time in Latin America, adopts the Indian diagnostic tool across three regions, and improves visibility into cybersecurity compliance. Decision-making initially becomes more complex because managers must negotiate responsibilities across global and regional bodies. Orion addresses this through explicit decision rights, escalation deadlines, and leadership incentives tied to enterprise outcomes.

Learning Points

The case illustrates five principles. First, strategy should reflect both integration and responsiveness pressures. Second, subsidiaries can be sources of global innovation, not merely implementers. Third, value-chain configuration must include resilience and knowledge, not only labor cost. Fourth, performance systems should separate controllable from uncontrollable outcomes. Fifth, transnational organization requires deliberate coordination mechanisms; it does not emerge automatically from geographic expansion.

Best Practices for Managers

Managers designing a global organization should:

1. Diagnose integration and responsiveness pressures by activity, not only by industry.
2. Map the value chain and identify where scale, specialization, proximity, and resilience matter.
3. Assign subsidiary roles explicitly and review them as capabilities evolve.
4. Define decision rights before implementing a matrix or network structure.
5. Build two-way and lateral knowledge flows.
6. Use common standards where risk or interoperability requires them, while preserving local discretion elsewhere.
7. Align incentives with both local performance and enterprise-wide value creation.
8. Adjust performance measures for transfer prices, exchange rates, and centrally imposed decisions.
9. Integrate ethics, human rights, privacy, cybersecurity, and environmental impacts into strategic design.
10. Use scenario planning to test the organization against disruption, regulatory change, and geopolitical fragmentation.

Limitations of the Frameworks

The four-strategy typology is useful for diagnosis but can oversimplify reality. A single firm may pursue a global strategy for its technology platform, a multidomestic strategy for marketing, and a regional strategy for manufacturing. Integration and responsiveness pressures can also change rapidly because of innovation, regulation, crises, or shifts in customer expectations.

Similarly, formal structures do not determine behavior by themselves. Informal networks, leadership credibility, professional identity, and organizational culture influence whether knowledge is shared and decisions are implemented. Finally, financial models such as expected cost simplify uncertainty and may understate catastrophic, correlated, or irreversible risks. Managerial judgment remains essential.

Chapter Summary

Global competitive strategy requires firms to balance efficiency, local responsiveness, and organizational learning. International strategy transfers home-developed capabilities; multidomestic strategy emphasizes national adaptation; global strategy emphasizes worldwide standardization; and transnational strategy seeks simultaneous integration, responsiveness, and learning through a differentiated network.

Value-chain configuration involves location, governance, coordination, and resilience decisions. Headquarters–subsidiary relationships should allocate authority according to information, risk, expertise, and cross-border consequences. Organization structures may be international divisional, product-based, geographic, matrix, or network-oriented, but effective design depends on decision rights and lateral coordination rather than labels alone.

Knowledge flows in multiple directions and require both codification and social interaction. Performance systems should combine financial and nonfinancial measures, distinguish controllable from uncontrollable outcomes, and align local incentives with enterprise-wide goals. Ethical, regulatory, environmental, data, and geopolitical issues are central to contemporary global organization design. The most effective MNEs treat subsidiaries as potential sources of innovation and build governance systems that connect, rather than merely control, their international network.

Key Terms

Global integration: Coordination and standardization of activities across countries to achieve enterprise-wide efficiency or consistency.

Local responsiveness: Adaptation of products, processes, and relationships to national or regional conditions.

Multinational enterprise (MNE): A firm that owns or controls value-creating activities in more than one country.

International strategy: A strategy that transfers home-country capabilities to foreign markets with limited adaptation.

Multidomestic strategy: A strategy emphasizing national autonomy and adaptation.

Global strategy: A strategy emphasizing worldwide standardization and centralized coordination.

Transnational strategy: A strategy seeking integration, responsiveness, and learning simultaneously.

Value-chain configuration: The geographic and governance arrangement of activities through which a firm creates value.

Coordination: The mechanisms used to connect and align dispersed activities.

Headquarters–subsidiary relationship: The distribution of authority, resources, accountability, and knowledge between corporate headquarters and foreign units.

Subsidiary role: The strategic function assigned to a foreign unit, such as implementer, adapter, regional coordinator, or global innovator.

Absorptive capacity: The ability to recognize, assimilate, and apply valuable external knowledge.

Tacit knowledge: Knowledge embedded in experience, relationships, and routines rather than easily documented.

Matrix structure: An organization with dual or multiple lines of authority, commonly product and geographic.

Transfer pricing: Prices assigned to transactions between units of the same enterprise.

Controllability principle: The idea that managers should primarily be evaluated on outcomes they can influence.

Knowledge transfer: The movement and application of information, expertise, practices, or innovation across organizational units.

Resilience: The ability of a firm or value chain to withstand, recover from, and adapt to disruption.

Enterprise-wide value: Value created for the corporation as a whole rather than for one unit alone.

Review Questions

Short Answer Questions

1. What is the difference between global integration and local responsiveness?
2. Identify one strength and one risk of a multidomestic strategy.
3. Why might a subsidiary be assigned the role of global innovator?
4. What is the difference between value-chain configuration and coordination?
5. Why should performance evaluation distinguish controllable from uncontrollable outcomes?

Long Answer Questions

1. Compare international, global, multidomestic, and transnational strategies. Under what conditions is each most appropriate?
2. Explain how a firm should evaluate an international location decision beyond labor cost.
3. Discuss the advantages and disadvantages of geographic, product, matrix, and network structures.
4. Analyze the mechanisms and barriers involved in transferring tacit knowledge across borders.
5. Explain how ethical, regulatory, geopolitical, and sustainability issues influence global organization design.

Analytical / Application Questions

1. A consumer-goods company faces strong global competition but substantial differences in regulations and customer preferences. Design an appropriate strategy and organizational structure, and justify the allocation of decision rights.
2. A subsidiary has developed a process innovation that headquarters initially rejects. Propose a governance and knowledge-transfer process that evaluates the innovation fairly and supports enterprise-wide learning.
3. Using the expected-cost model E(C) = C₀ + pL, compare a low-cost site with annual operating cost of $12 million, disruption probability of 5%, and loss of $6 million with a site costing $12.4 million, disruption probability of 2%, and loss of $4 million. Discuss why the numerical result should not be the sole basis for the decision.

Multiple Choice Questions with Answers

Question 1

Which strategy emphasizes simultaneous global integration, local responsiveness, and organizational learning?

A. International strategy

B. Multidomestic strategy

C. Global strategy

D. Transnational strategy

Correct Answer: D. Transnational strategy

Question 2

Which factor most directly increases pressure for local responsiveness?

A. Common global product standards

B. Different national regulations and customer preferences

C. Economies of scale in procurement

D. A globally consistent brand promise

Correct Answer: B. Different national regulations and customer preferences

Question 3

In value-chain analysis, configuration primarily asks which question?

A. How should employee bonuses be calculated?

B. Where should activities be located and how should they be governed?

C. Which advertising message is most creative?

D. How should financial statements be audited?

Correct Answer: B. Where should activities be located and how should they be governed?

Question 4

A subsidiary that develops expertise used by other units is best described as a:

A. Specialized contributor

B. Passive implementer

C. Domestic division

D. Financial intermediary

Correct Answer: A. Specialized contributor

Question 5

Which type of knowledge usually requires interaction, observation, and repeated collaboration to transfer effectively?

A. Tacit knowledge

B. Published accounting data

C. A patent number

D. A standardized product code

Correct Answer: A. Tacit knowledge

Question 6

What is a major risk of evaluating country managers solely on local profit?

A. It guarantees excessive knowledge sharing

B. It may encourage decisions that harm enterprise-wide value

C. It eliminates transfer-pricing disputes

D. It makes local adaptation impossible in every case

Correct Answer: B. It may encourage decisions that harm enterprise-wide value

Question 7

A firm has normal annual cost of $9 million, disruption probability of 3%, and disruption loss of $5 million. Under E(C) = C₀ + pL, what is its expected cost?

A. $9.03 million

B. $9.15 million

C. $9.50 million

D. $14.00 million

Correct Answer: B. $9.15 million

Question 8

Which structure most directly groups activities according to geographic regions or countries?

A. Geographic structure

B. Global product structure

C. Functional-only structure

D. International alliance structure

Correct Answer: A. Geographic structure

Question 9

Why can a higher-cost location still be strategically attractive?

A. It always has lower taxes

B. It may provide superior skills, infrastructure, resilience, or ecosystem advantages

C. It eliminates all political risk

D. It guarantees higher market share

Correct Answer: B. It may provide superior skills, infrastructure, resilience, or ecosystem advantages

Question 10

Which governance practice is most appropriate for global AI deployment?

A. Remove human review to maximize speed

B. Use identical data rules regardless of jurisdiction

C. Define accountability, auditability, data controls, and procedures for correcting harm

D. Allow each algorithm to operate without documentation

Correct Answer: C. Define accountability, auditability, data controls, and procedures for correcting harm