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112 Copyright © (2009) Pearson Education, Inc. Publishing as (Prentice Hall)

CHAPTER 7: ORGANIZATIONAL STRUCTURE AND DESIGN Multiple Choice Questions 1. Organizational _____ illustrate relationships among an organization’s units and lines

of authority. a. charts b. channels c. structures d. paradigms

Answer: a (p. 170, easy, recall) 2. _____ is the sum of the ways an organization divides its labor into distinct tasks and

then coordinates them. a. Differentiation b. Organizational design c. Operations management d. Organizational structure

Answer: d (p. 170, easy, recall) 3. _____ is the extent to which tasks are divided into subtasks and performed by

specialists. a. Integration b. Differentiation c. Formalization d. Interdependence

Answer: b (p. 170, easy, recall) 4. _____ occurs when several groups, that are largely independent in their functions,

collectively contribute to a common output. a. Pooled interdependence b. Cognitive interdependence c. Sequential interdependence d. Reciprocal interdependence

Answer: a (p. 171, moderate, recall) 5. _____ is the extent to which various parts of organizations cooperate and interact.

a. Integration b. Differentiation c. Formalization d. Interdependence

Answer: a (p. 171, easy, recall)


6. _____ exists when two or more groups depend on one another for inputs.

a. Task interdependence b. Pooled interdependence c. Reciprocal interdependence d. Sequential interdependence

Answer: c (p. 171, moderate, integration) 7. _____ is the degree to which one unit, or one person, must use the work or resources

of another unit or person to accomplish tasks. a. Differentiation b. Formalization c. Integration d. Interdependence

Answer: d (p. 171, easy, recall) 8. Company ABC produces widgets. Timely delivery to Company XYZ is critical since

the widgets are essential to the production of Company XYZ’s gadgets. This is an example of _____. a. pooled interdependence b. reciprocal interdependence c. sequential interdependence d. cross-functional interdependence

Answer: c (p. 171, moderate, application) 9. Which of the following is the best example of cognitive differentiation?

a. At a civil engineering firm, some engineers specialize in construction engineering, while others specialize in environmental engineering.

b. An auto manufacturer produces a luxury automobile in order to enhance the image of its other vehicles.

c. At a shoe company, the product development department relies on marketing data to generate ideas for promising new products.

d. Accountants may view an organization’s overall performance in terms of financial results, whereas marketers may view that same performance in terms of customer satisfaction.

Answer: d (p. 171, difficult, integration)


10. One of the driving forces behind the integration of tasks is _____. a. globalization b. interdependence c. localization d. unity of command

Answer: b (p. 171, moderate, recall) 11. A construction company orders windows from one division of a manufacturing

company and roofing from another division of the same company. To meet this customer’s overall needs, the manufacturing company should exercise _____

interdependence. a. intermittent b. pooled c. reciprocal d. sequential

Answer: b (p. 171, moderate, application) 12. Generally, the more _____ that exists within the organization, the more useful ____

are as an integration mechanism. a. task independence; rules b. task interdependence; rules c. task independence; values d. task independence; goals

Answer: a (p. 172, difficult, integration) 13. As task uncertainty and interdependence increase, _____ are a more effective

coordination mechanism than _____. a. goals; rules b. rules; goals c. rules; values d. goals; values

Answer: a (p. 172, difficult, integration) 14. Why are “values” an important coordinating mechanism in conditions of high task

uncertainty and interdependence? a. They represent measurable outcomes and specify how to obtain them. b. Those holding the same values will maintain standard operating procedures. c. They establish guidelines for behavior and consequences in specific conditions. d. Those holding the same values will all work toward the same outcomes while

maintaining flexibility in how they are accomplished. Answer: d (p. 172, moderate, application)


15. What sort of interdependence exists when two or more groups within a company

depend upon one another for inputs? a. pooled b. intermittent c. reciprocal d. sequential

Answer: c (p. 172, easy, recall) 16. Subordinates and managers with very high capabilities are required for _____

organizations with _____ spans of control to be successful. a. flat; wide b. tall; wide c. flat; narrow d. tall; narrow

Answer: a (pp. 173 – 174, difficult, integration) 17. What is meant by the term “unity of command”?

a. the idea that the line of authority should be clear and direct b. the idea that interdependence within a firm should be kept to a minimum c. the idea that managers should have a limited span of control d. the idea that every employee should have one, and only one, boss

Answer: d (p. 173, moderate, recall) 18. A firm with strong formalization would be less likely to emphasize _____.

a. narrow spans of control b. clear lines of authority c. informal meetings d. unity of command

Answer: c (p. 173, moderate, application) 19. A firm’s _____ specifies who reports to whom within an organization.

a. structure b. framework c. line of authority d. span of control

Answer: c (p. 173, easy, recall)


20. A _____ span of control throughout an organization will lead to a _____ organization structure with multiple reporting layers. a. narrow; flat b. narrow; tall c. wide; tall d. wide; flat

Answer: b (p. 173, moderate, integration) 21. All of the following EXCEPT _____ are factors that influence the span of control.

a. technology b. job complexity c. cognitive differentiation d. abilities of employees

Answer: c (p. 174, moderate, application) 22. The _____ is the unofficial but influential means of communication, decision making,

and control that are part of the habitual way things get done in an organization. a. pipeline b. informal organization c. information tunnel d. interpersonal channel

Answer: b (p. 175, easy, recall, AACSB: Communication) 23. In which of the following organizations is decision-making authority pushed down to

its lowest possible level? a. centralized organizations b. decentralized organizations c. flat organizations d. formal organizations

Answer: b (p. 176, easy, recall) 24. Japanese multinational firms tend to operate as _____, announcing decisions from

home offices to subsidiaries. European multinational operations tend to operate as _____, pushing decision-making authority to the lowest possible level. a. centralized organizations; decentralized organizations b. decentralized organizations; centralized organizations c. functional organizations; geographic organizations d. geographic organizations; functional organizations

Answer: a (p. 177, moderate, recall)


25. The term “bamboo ceiling” refers to _____. a. the exclusion of host nationals from strategic decision making in centrally

controlled Japanese subsidiaries b. the reluctance of Japanese managers to allow centralized decision making among

their subordinates c. the lack of information flow from the Japanese-owned subsidiaries in foreign

countries back to headquarters in Japan d. the tendency of Japanese firms to delegate decisions more frequently than

European or American firms Answer: a (p. 177, moderate, recall) 26. Which of the following structural combinations best depicts the U.S. military?

a. formal/decentralized b. informal/decentralized c. formal/centralized d. informal/centralized

Answer: c (p. 177, moderate, recall) 27. Which of the following is NOT a characteristic of a functional structure?

a. The structure creates a clear, broad view of overall organizational goals. b. The structure facilitates specialization of functional knowledge. c. The structure reduces duplication of functional resources. d. The structure is suited for mid-sized firms with limited product diversification.

Answer: a (pp. 179 – 180, difficult, recall) 28. A bank organizes itself around the basic services it provides: retail banking, business

banking, and investment banking. Each service group has its own finance, marketing, operations, and human resource management department. The bank is using a _____. a. functional structure b. product structure c. division structure d. matrix structure

Answer: b (p. 180, moderate, integration) 29. In a product structure, each product is treated as a _____; that is, the expenses related

to a product are subtracted from the revenues generated by selling it. a. profit center b. locus of value c. core competency d. functional division

Answer: a (p. 180, moderate, recall)


30. Which of the following is NOT a characteristic of a product structure?

a. It maximizes economies of scale for functional areas. b. The performance of the firm’s products is typically easier to evaluate. c. There is usually greater product responsiveness to market changes. d. It often reduces the operating decision-making burden of the top executive.

Answer: a (p. 180, difficult, recall) 31. In which of the following ways are product and customer structures similar?

a. They both decrease companies’ ability to leverage global scale economies. b. They both increase the international orientation of all managers. c. They both boost responsiveness to changing market conditions. d. They both create ambiguous lines of authority.

Answer: c (pp. 180 – 182, difficult, integration) 32. H and H Industries is a large industrial firm that manufactures and sells a wide range

of electrical goods; ranging from turbines in power stations to electric engines for trains to household toasters and coffee pots. Based on this, which of the following would be the most appropriate structure for H and H Industries to adopt? a. a regional structure b. a customer structure c. a matrix structure d. a division structure

Answer: d (p. 181, moderate, integration) 33. One of the major weaknesses of the _____ structure is that it can inhibit coordination

and communication among different regions. a. division b. functional c. geographic d. product

Answer: c (p. 183, difficult, recall) 34. There are major disadvantages in all of the following areas of a matrix structure

EXCEPT _____. a. the flow of information b. the level of accountability c. the complexity of performance evaluations d. the ability to respond to changing conditions

Answer: a (p. 184, difficult, integration)


35. Companies that advocate unity of command would be least likely to adopt which organizational structure? a. customer b. division c. functional d. matrix

Answer: d (p. 184, moderate, integration) 36. When a firm decides to outsource its manufacturing operations, a _____ allows it to

maintain close contact with the firms to which it is outsourcing the work. a. division structure b. network structure c. functional structure d. geographic structure

Answer: b (pp. 185 – 187, moderate, integration) 37. Which of the following statements characterizes a firm that operates within a “high-

networked” structure? a. It uses outside organizations for limited activities only. b. It has little contact with firms to which work has been outsourced. c. It owns and executes most of its primary and support value chain activities. d. It has more value chain activities networked to external organizations than it owns

and executes internally. Answer: d (p. 186, moderate, application) 38. One of the greatest potential advantages of using a _____ is that it allows managers to

focus on core competencies. a. product structure b. network structure c. regional structure d. functional structure

Answer: b (p. 187, difficult, recall) 39. A manager prepares a report that details her firm’s diversity of customers and

competitors. This manager is engaged in assessing her firm’s _____. a. global strategy b. marketing strategy c. corporate structure d. environmental complexity

Answer: d (p. 188, easy, application)


40. Which of the following is NOT a core category of environmental complexity? a. quality b. customers c. technology d. competitors

Answer: a (pp. 188 – 189, moderate, recall) 41. “White water” environments are _____.

a. stable b. formal c. dynamic d. stationary

Answer: c (p. 189, easy, recall) 42. Computer software companies compete against a wide array of competitors and must

continually struggle to lead, or even stay abreast of, industry changes. Thus, we may say that software companies exist in _____and _____ external environments. a. complex; static b. complex; dynamic c. simple; static d. simple; dynamic

Answer: b (p. 189, easy, application) 43. Assume that a firm operates in a highly complex and dynamic business environment.

Its organizational structure would most likely be _____. a. centralized b. formalized c. decentralized d. mechanized

Answer: c (pp. 189 – 190, moderate, application) 44. A firm with _____ would most likely use global product divisions to manage foreign

sales. a. high foreign sales and high product diversification b. high foreign sales and low product diversification c. low foreign sales and high product diversification d. low foreign sales and low product diversification

Answer: c (pp. 190 – 191, moderate, integration)


45. A mining company supplies materials such as sand, gravel, and lime for the local building trade. It has few export sales. What is the most likely structure that this firm will use to manage international sales? a. a matrix structure b. global product divisions c. a geographic structure d. an international division

Answer: d (p. 191, moderate, application) 46. Firms with _____ and _____ usually employ a geographic structure to manage

international sales. a. low foreign sales; low product diversification b. high foreign sales; low product diversification c. low foreign sales; high product diversification d. high foreign sales; high product diversification

Answer: b (p. 191, difficult, recall) 47. As firms venture into foreign markets, _____.

a. they usually begin with a limited number of products b. the products to be sold are typically designed and produced domestically c. the primary international task is exporting products to foreign markets d. all of the above

Answer: d (p. 191, difficult, recall) 48. When designing an organizational structure for an international context, management

must choose between a _____, which integrates activities on a coordinated worldwide basis and a _____, which differentiates activities in each country served. a. global approach; local approach b. local approach; global approach c. functional approach; network approach d. centralized approach; decentralized approach

Answer: a (p. 192, difficult, recall) 49. Firms involved in international business can use _____ to help them deal with the

pressures for both integration and differentiation. a. teams b. liaisons c. direct contact d. all of the above

Answer: d (p. 194, moderate, recall)


50. _____ are individuals who are designated to act as a bridge between different areas, such as quality or manufacturing processes. a. Enablers b. Liaisons c. Facilitators d. Fact-finders

Answer: b (p. 194, easy, recall) True/False 51. Organizational structure can be defined as the sum of the ways a firm divides its labor

into distinct tasks and then coordinates them. Answer: True (p. 170, moderate, integration) 52. Organizational design involves dividing labor into groups and coordinating tasks. Answer: False (p. 170, easy, recall) 53. Organizational charts illustrate an organization’s complete structure. Answer: False (p. 170, moderate, recall) 54. Work teams in differentiated organizations are generally highly interdependent. Answer: False (p. 171, moderate, integration) 55. Cognitive differentiation is the degree to which one unit or one person depends on

another to accomplish a task. Answer: False (p. 171, easy, integration) 56. Companies in relatively stable and static environments can use rules effectively to

achieve integration. Answer: True (p. 172, moderate, application) 57. In conditions of high task uncertainty and interdependence, values are a better

integrating mechanism than goals. Answer: True (p. 172, moderate, integration) 58. Formal organizations often limit a supervisor’s span of control. Answer: True (p. 173, moderate, integration)


59. A small company owns a dozen apple orchards and two processing plants. Each year

the same crew of dedicated managers and workers pick, polish, and juice the apples for two markets (whole fruit and apple juice), both of which are taken to market by truckers. It is likely that this company has a tall organizational structure.

Answer: False (pp. 173 – 174, moderate, application) 60. The appropriateness of a tall or flat organization is affected more by the internal

environment than the external environment. Answer: False (p. 174, difficult, recall) 61. Flattening an organization’s structure decreases the amount of time it takes for

information to travel from the bottom to the top of the organization. Answer: True (p. 174, moderate, integration) 62. Organizational charts usually include informal structures for decision making,

communication, and control. Answer: False (p. 175, difficult, application) 63. Formalization mechanisms (such as span of control, line of authority, and chain of

command) work to both differentiate and integrate people and their activities. Answer: True (p. 175, difficult, recall) 64. Informalization and decentralization are synonymous. Answer: False (p. 177, moderate, integration) 65. Japanese firms tend to exhibit a stronger degree of centralization than either European

or American firms. Answer: True (p. 177, difficult, recall) 66. A very formal organization can be centralized or decentralized. Answer: True (p. 177, moderate, integration) 67. In a functional structure, the firm is organized around specific products (or services)

or related sets of products (or services). Answer: False (p. 179, moderate, recall)


68. Multinational firms rarely employ geographic or regional structures. Answer: False (p. 183, moderate, application) 69. A matrix structure consists of two organization structures superimposed on each

other. Answer: True (p. 184, difficult, integration) 70. Unity of command is one of the strengths of a matrix structure. Answer: False (p. 184, moderate, integration) 71. In a low-networked structure, the quantity and magnitude of externally networked

activities is limited. Answer: True (pp. 185 – 186, easy, application) 72. Companies using network organizational structures, such as Nike, generally operate

in stable environments. Answer: (False (p. 186, easy, integration) 73. Environmental functionality is the breadth and depth of differences and similarities in

an organization’s external environment. Answer: False (p. 188, moderate, recall) 74. A major principle in the relationship between organizational strategy and structure is

that the structure should complement and leverage the strategy. Answer: (True (p. 190, moderate, integration) 75. Firms with high foreign sales and highly diverse product lines frequently use a matrix

structure. Answer: True (p. 191, moderate, recall) 76. If a domestic organization opens an international division, its products typically have

broad appeal, and there are relatively few customer differences across countries. Answer: True (p. 191, moderate, application)


77. Differences among countries and customer preferences motivate businesses to adopt a global approach to organizational structure.

Answer: False (p. 192, moderate, integration) 78. Intensifying globalization has contributed to increased outsourcing; flatter, more

flexible organizational structures; and increased integration. Answer: True (p. 192, moderate, recall) 79. A company is likely to use a “local approach” to doing business abroad if the benefits

from location-specific differentiation and adaptation are significant and economies of scale are small.

Answer: True (p. 192, moderate, integration) 80. Liaison roles are designed to enhance the information flows between two or more

groups within an organization. Answer: True (p. 194, moderate, recall) Short Essay Questions 81. Compare organizational structure and organizational design? (p. 170) Organizational structure is the sum of the ways an organization divides its labor into distinct tasks and then coordinates them; organizational design is the process of assessing the organization’s strategy and environmental demands and then determining the

appropriate organizational structure. 82. What is an organizational chart? (p. 170) An organizational chart uses labeled boxes and connecting lines to illustrate relationships among units and lines of authority among supervisors and subordinates. While it can provide a view of an organization’s structure, an organizational chart does not show the complete organizational structure. 83. Describe the concept of “differentiation” in an organization. (pp. 170 – 171) Differentiation is the extent to which tasks are divided into sub-tasks and performed by individuals with specialized skills. Differentiation’s main benefit is greater specialization of knowledge and skills. Task differentiation relates to what employees do. Cognitive differentiation involves the way employees think. Although differentiation contributes to greater specialization, it can create challenges to the integration of the various specialized capabilities needed to deliver a product or service to the customer.


84. Describe the types of interdependence among organizational units? (p. 171) Interdependence is the degree to which each person depends on other units or people to accomplish a required task. Pooled interdependence occurs when various groups are largely independent in their functions but collectively contribute to a common output. Sequential interdependence exists when the outputs of one group become the inputs of another group. Reciprocal interdependence exists when two or more groups depend on one another for inputs. 85. Explain unity of command. (p. 173) Formal organizations tend to stress the unity of command; that is, the notion that an employee should have one and only one boss. Thus, people working in a highly formal organization with a strong orientation toward unity of command are likely to have one boss who directs their work and evaluates their performance. 86. Discuss the term “span of control.” (p. 173) Span of control refers to the number of employees reporting to a given supervisor. Consistent span-of-control patterns can affect the overall “shape” of an organization.

Wide spans of control throughout the organization generally lead to a flat organization structure. Narrow spans of control throughout the organization tend to result in a tall organization structure. 87. What can be said about decision making in centralized organizations and

decentralized organizations? (p. 176) Centralized organizations tend to restrict decision making to fewer individuals, usually at the top of the organization. Decentralized organizations tend to push decision-making authority down to the lowest possible level. 88. What role does outsourcing play in a networked organization? (pp. 185 – 186) A major part of creating a networked structure involves reconfiguring the firm’s value

chain in an effort to cut costs, promote specialization, and improve integration and coordination. Outsourcing a value chain activity is one of the most common ways of networking with an external organization; i.e., contracting a significant organizational activity out to an independent party. Increasingly, critical activities that used to be done internally (such as IT, human resources, manufacturing, and customer service) are being outsourced. Much of the outsourcing that occurs today is to companies outside the United States. Technology has made it possible to network these activities while retaining reliability and lowering costs.


89. What factors, or core categories, impact environmental complexity? (p. 188) Environmental complexity involves the breadth and depth of differences and similarities in an organization’s external environment. Complex environments have greater depth and

breadth of differences than do simple environments. The differences and similarities can be assessed along many dimensions, but there are several core categories: products, customers, technology, competitors, suppliers, and geography. 90. Within the context of international business, what is the relationship between the

nature of a company and its structure? (pp. 190 – 191) The first dimension of the relationship between the nature of a company and its structure is the extent of foreign sales. The second dimension is product diversification; that is, the extent to which a firm has many different products across many different segments. Firms with low foreign sales and low product diversification generally form an international division to manage their international sales. Firms with low product diversification and high foreign sales usually employ a geographic structure. Firms with low foreign sales and high product diversification typically use global product divisions. Firms with high foreign sales and high product diversification frequently use a matrix structure. 91. Within the context of the increasingly international environment in which

organizations compete, contrast the global approach and the local approach to business. (p. 192)

A global approach involves the integration of activities on a coordinated, worldwide basis. Firms are likely to use a global approach if the benefits gained from worldwide volumes, efficiencies, or economies of scale are significant. A local approach involves the tendency to differentiate activities country-by-country in order to meet the needs of the local markets. Firms often use a local approach when the benefits from location-specific differentiation and adaptation are significant and economies of scale are small. Note: The remaining questions in this section will be based on the following scenario: Agmoor Products is a manufacturer of racing bikes and after-market bicycle parts. After just two years in operation, owner Ron Moor split Agmoor into two divisions – racing bikes and after-market parts. “It made more sense structurally,” he stated. “We were

growing too fast. With each division operating as its own entity, it became much easier to track production, order processing, and quality.” Then, a representative from Malhotra Bike Company in India contacted Ron Moor. The tremendous demand for after-market parts in India would change Agmoor Products once again. After accepting a contract from Malhotra, Ron Moor split Agmoor’s after-market parts division into a North American division (targeting Agmoor’s current market) and

an overseas division (supporting the Malhotra contract). “I never believed anything like

this would happen at Agmoor!” Moor stated.


Within a few months, Ron Moor saw another opportunity in India. With some slight modifications to Agmoor’s racing bikes, Ron welcomed the challenge of tapping into the Indian bicycle market. “The bicycle is used more as a mode of transportation there,”

Moor said, “and the terrain is different than here at home. But we can give them a superior product.” 92. Is Agmoor’s organizational structure appropriate to its goals? (p. 170) A firm’s organizational structure can be defined as the sum of the ways it divides its labor

into distinct tasks and coordinates them. The structure provides a blueprint for reporting relationships, controls, authority, and decision making within the organization. Ron Moor has changed the organizational structure of Agmoor in order to meet new challenges and opportunities. So far, his restructuring efforts seem appropriate. 93. What level of task differentiation might be observed at Agmoor? (p. 171) Differentiation is the extent to which tasks are divided into subtasks and performed by individuals with specialized knowledge and skills. Agmoor has gone through several changes, all of which can be addressed by task differentiation: the initial separation into two divisions, racing bikes and after-market parts; the subsequent separation into the North American division and the overseas division; and the recent incursion into the Indian bicycle market. Specialization will allow Agmoor’s employees to develop high

levels of expertise in specific tasks and to perform those tasks well. Thus, Agmoor will provide superior customer service. Moreover, the expertise developed from specialization can help Agmoor develop innovative products and services. Therefore, this high level of task differentiation will expedite Agmoor’s achievement of a competitive advantage. 94. Which type of interdependence best defines Agmoor? (pp. 171 – 172) Interdependence is the degree to which each unit or person depends on other people or units to accomplish a required task. Agmoor is characterized by pooled interdependence, since its various groups are largely independent in their functions but collectively contribute to a common output. 95. Explain the span of control at Agmoor. (p. 173) One way to balance both differentiating (separating) and integrating people and activities is through formalization. More formal systems often limit a supervisor’s span of control. When Agmoor started out, the span of control was probably rather wide, with Ron Moor managing the employees and their activities. When Agmoor was separated into two divisions (racing bikes and after-market parts), its organizational structure became more formal. It is likely that a supervisor would have been appointed for each division. Thus, employees in each division would report to their respective supervisors, who would then report to Ron Moor. Therefore, the span of control of managers/supervisors narrowed. With the Malhotra contract, the firm’s structure became even more formalized, as it was


further divided into the North American division and the overseas division. It is likely that more supervisors would have been appointed to oversee the activities of employees in these new divisions; moreover, the employees would report to these supervisors, who would then report to Ron Moor. Once again, the span of control of managers/supervisors had narrowed. It is likely that this pattern would repeat itself, if Agmoor pursued the opportunity to sell bicycles in India. 96. Is the organization structure at Agmoor tall or flat? (p. 173) When Agmoor started out, its organizational structure was flat, with Ron Moor having a wider span of control. As the company restructured, Agmoor became taller, as more layers of management were added and vertical integration was increased. 97. Which organizational structure does Agmoor utilize? (pp. 181 – 182) Agmoor has a division structure. Currently, the divisions consist of multiple products within two areas: racing bikes and after-market parts. If Agmoor pursues the opportunity to sell bicycles in India, it is likely that more divisions would be established. 98. Which core categories of environmental complexity impact Agmoor? (p. 188) Products and technology will impact Agmoor, especially given continuous improvements to racing bicycles and the product modifications that will be required to enter the Indian market. Customers in India and North America will have different preferences and needs. Geography will affect Agmoor’s business, given the distance between its two markets and the differences in the terrains in India and North America. Furthermore, Agmoor has competitors in the markets for racing bicycles and after-market parts, both in North America and overseas. There will also be competitors if Agmoor decides to sell bicycles in India. 99. In explaining the environmental dynamism at Agmoor, would you define it as a

“white water” environment? Why or why not? (pp. 189 – 190) Firms facing dynamic business conditions are operating in “white water” environments, a

metaphor for the challenges of navigating a boat down the rapids of a river. A rapidly changing environment typically requires quick internal organizational changes. Such environments are typical in the fashion industry or computer industry. Agmoor has made changes to adapt to the challenges and opportunities of its new markets. However, rather than being characterized by “white water” dynamism, Agmoor’s marketplace will tend to be more stable over time, with changes and improvements to bicycles and after-market parts being incremental rather than radical.


100. Within the context of international business, to what degree, if any, does Agmoor use a local approach? (p. 192)

Differences among countries and customer preferences can drive companies toward a local approach. A local approach involves differentiating activities in each country served. Agmoor markets racing bicycles in its North American division to meet the needs of cyclists in North America. Ron Moor states there will be differences in the local Indian market for bicycles, such as customer preferences and terrain. However, he is convinced that Agmoor can offer a superior product to the Indian market by making some slight modifications to its racing bicycles. Localization in after-market parts will depend on the bicycles sold to North American customers and Indian customers, as well as the specifications of the Malhotra contract.

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