Please answer the QUESTIONS AND make your RESPONSES insightful respectful of the opinion of others.

Questions 9

One of the most common entry strategies for MNC’s is the joint venture. Why are so many companies opting for this strategy? Would a fully owned subsidiary be a better choice?

In what way do the concepts of formalization, specialization, and centralization have an impact on MNC organizational structures?

CH 10

1. What types of political risk would a company entering Russa face? Identify and describe three. What types of political risk would a company entering France face? Identify and describe three. How are they similar? How are they different?

What are some of the challenges associated with managing alliances? How do host governments affect these? 

Responses

Veronica McCulloch

Chapter 9 

3. If the company in question 2 finds a major market for its products in Europe and decides to expand into Asia, would you recommend any change in its organizational structure? If yes, what would you suggest? If no, why not? 

If the firm finds a major market for its products in Europe and expands into Asia, I would recommend continuing with the same organizational structure (international divisional structure). The reasoning is, this type of organizational structure is designed to handle the overseas operations of the product. Therefore utilizing the international divisional structure will most likely help with the success of the product. 

5. In what way do these concepts of formalization, specialization, and centralization have an impact on MNC organizational structures? In your answer use a well known firm such as IBM or Ford to illustrate the practical expressions of these three characteristics.

Formalization ensures that a proper set of rules and regulations is prevalent when employing decision-making, communication, and controlling, which affects the firm’s day-to-day operations. On the other hand, specialization is a concept that promotes skillful people at work; as per this concept, only those people should be deployed at a Job who have the desired skill and are masters of that job. Finally, centralization means that the decision-making power lies with the higher management, and the organization is controlled centrally by the designated group.

An example would be IBM; its organizational structure consists of a board of directors responsible for its overall operation. The board committees have specific areas of responsibility. Executive officers handle various aspects of the international business, including sales and distribution, strategic partnerships, global technology services, human resources, marketing, and communications, research, software and systems, and other specific aspects of organization and function. The concepts of formalization, specialization, and centralization impact the IBM organization structures such as assigning, disciplining, hiring, controlling, and promotion of subordinates. In addition to deciding the budget for a specific area, coordination with other IBM units, influencing policy related to individual work and superiors of IBM.

Chapter 10

2. Most firms attempt to quantify their political risk, although they do not assign specific weights to the respective criteria. Why is this approach so popular? Would the companies be better off assigning weights to each of the risks being assumed? Defend your answer.

Though it is important to quantify risks for MNCs it is equally important to assign weights to the associated risk factors. Each factor is given a score, and then the scores are recorded to provide an overall evaluation of risk. It helps consider all the important risk factors and identify the most important ones based on their rating. Quantifying and giving weights to every criterion helps isolate the important ones and prioritize the riskiest factors first. By assigning weights to the risks assumed, it helps the employees and management clear about their strategy. They can prioritize focus/test the risker factors first and then move on to other factors that do not affect the MNC as much. Therefore the MNC’s will be better off by assigning weights to each assumed risk. Moreover, it helps the firms comprehend the impact each factor has on the organization and its profitability.

5. What are some of the challenges associated with managing alliances? How do host governments affect these?

Managing alliances can bring the biggest challenges, such as managing the operations of partners of different cultures. Cultural differences may create misunderstandings, differences of opinions, and uncertainties in the relationship. Host governments have a substantial role in the terms under which alliances are initially formed, managing investors and operations behavior to how they are governed and dissolved. Thus MNC should develop its strategies to manage the host government’s involvement in its alliances.

Kylie McDonald

Chapter 9
1. One of the most common entry strategies for MNCs is the joint venture. Why are so many companies opting for this strategy? Would a fully owned subsidiary be a better choice?
I believe that so many companies opt for joint ventures because they allow for shared risks, more resources, and new markets. A fully owned subsidiary is often more time-consuming and costly in comparison to other options. 
2. A small manufacturing firm believes there is a market for handheld tools that are carefully crafted for local markets. After spending two months in Europe, the president of this firm believes that his company can create a popular line of these tools. What type of organizational structure would be of most value to this firm in its initial efforts to go international?
Out of the three types of organizational structures, I feel as if a functional organizational structure would be ideal for this firm. This would be best because it allows for several departments to rely solely on their knowledge and talent to support themselves. 

Chapter 10
3. How has terrorism impacted foreign interest in Iran and Saudi Arabia, considering the vast oil reserves that are there? How have terrorist attacks affected political relationships between countries such as the United States and Russia?
Terrorism has had a vast impact on MNC’s in Iran and Saudi Arabia. The main cause of these attacks is due to the oil reserves in these countries. Terror attacks have also affected the political relationships between countries like the United States and Russia because various alliances or interests may be affected. 
5. What are some of the challenges associated with managing alliances? How do host governments affect these?
One of the major challenges with managing alliances would be cultural differences. We have seen time and time again several issues caused by cultural differences. Some of these issues are miscommunication, confusion, and uncertainty. Host governments have a great effect on alliances especially foreign alliances. With that being said, governments control imports and exports and tariffs that go along with those that could be detrimental to certain alliances.