Answer to Question 1
E
Answer to Question 2
Firms pursuing a global business strategy work in a centralized fashion. As the decisions are made at the headquarters, the organization can be characterized as a centralized hub. The headquarters gives the overall strategic direction. Hence, it has control of the entire company and the knowledge that is generated within the company. However, the need to achieve economies of scale prohibits implementation of local strategies, and thus, a global company cannot quickly react to local challenges and opportunities. Here, data flows extensively from the subsidiaries to the home location, and the home location exerts strong control on the subsidiaries.
The multidomestic business strategy uses a loose federation of associated business units, each of which is rather independent in their strategic decisions. In other words, the degree of integration is very low, and the individual subunits can respond quickly to their respective market demands. Thus, multidomestic companies can be extremely flexible and responsive to the needs and demands of local markets, and any opportunities arising in local markets can be quickly seized. However, by working in a decentralized fashion, much of the knowledge generated is retained at the local subsidiaries. Knowledge transfer between the individual subsidiaries is often limited and leads to inefficiencies and mistakes that can be potentially repeated across subsidiaries. Hence, for companies following a multidomestic business strategy, very little data and control information flow between the home and subsidiary locations.
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