Organizational Theory, Design, and Change, 7e (Jones) Chapter 3_ Organizing in a Changing Global Environment 1) The term organizational domain refers to the particular range of goods and services that the organization produces, and the customers and other stakeholders it serves. Answer: TRUE Page Ref: 60 Difficulty: Easy LO: 3-1 2) Shareholders are a part of an organization's specific environment. Answer: FALSE Page Ref: 61 Difficulty: Easy LO; 3-1 3) Suppliers are a part of the specific environment of an organization Answer: TRUE Page Ref: 61 Difficulty: Easy LO: 3-1 4) The specific environment consists of forces from outside stakeholder groups that directly affect an organization's ability to secure resources. Answer: TRUE Page Ref: 61 Difficulty: Easy LO: 31 5) Global supply chain management is the process of coordinating the flow of raw materials, components, semi-finished goods, and finished produets around the world. Answer: TRUE Page Ref: 61 Difficulty: Easy LO: 3-1 6) Economic forces, such as interest rates, are considered to be specific environmental forces. rather than a general environmental forces. Answer: FALSE Page Ref: 63 Difficulty: Easy LO: 3-17) The forces that constitute the specific environment shape the general snvironment and affect the ability ofall organizations in a particular environment to obtain resources. Answer: Page Ref: 63 bifficulty: Moderate LO: 3-1 8) Environmental complexity is a function of the strength, number, and interconnectedness of the specific and general forces that an organization has to manage. Page Ref: 66 Difficulty: Easy LO: 3-2 9) One way to reduce uncertainty is to increase the number of specific and general environmental forces that are interconnected, Because, when forces begin to interact, the environment becomes more predictable, Answer: Page Ref: 66 Difficulty: Hard LO: 3-2 10) Asa company begins to produce a wider variety of produets for different groups of castomers, its environmental complexity goes on decreasing Answer: 11) By decreasing the number of suppliers, an organization can reduce the complexity of its environment. Answer: Page Ref: 66 Difficulty: Easy LO: 3-2 12) An organization can reduce environmental uncertainty by entering into global markets, Answer: Page Ref: 67 Difficulty: Moderate LO: 3-213) The environment of an organization is considered to be unstable and dynamic if the organization cannot predict the way in which the forces will change over time. Answer: TRUE Page Ref: 67 Difficulty: Easy LO: 3-2 14) Environmental dynamism is a function of the amount of resources available to support an organization's domain. Answer: FALSE, Page Ref: 67 Difficulty: Easy LO: 3-2 15) Ina rich, stable, and simple environment, resources are easy to come by and uncertainty is low. Answer: TRUE Page Ref: 67 Difficulty: Basy LO: 3-2 16) Environmental richness is a function of how much and how quickly forces in the specific and general environments change over time and thus increase the uncertainty an organization faces ‘Answer: FALSE Page Ref: 67 iculty: Easy LO: 3.2 17) The richer the environment, the more difficult it is for organizations to obtain resources, Answer: FALSE Page Ref: 67 Difficulty: Easy LO: 3-2 18) An increase in the level of environmental richness leads to an increase in the environmental ‘uncertainty. Answer: FALSE Page Ref: 67 Difficulty: Moderate LO: 3-2 19) An increase in the level of competition leads to a proportionate increase in the level of environmental richness. Answer: FALSE Page Ref: 67 Difficulty: Moderate LO: 3-220) As the level of environmental complexity increases, the level of environmental uncertainty decreases. Answer: FALSE Page Ref: 67 Difficulty: Easy LO: 3-2 21) Symbiotic interdependencies are the interdependencies that exist among organizations that compete for scarce inputs and outputs Answer: FALSE Page Ref: 71 Difficulty: Easy LO: 3-4 22) The interdependencies that exist between an organization and its suppliers and distributors are known as competitive interdependencies. Answer: FALSE Page Ref: 71 Difficulty: Easy LO: 3-4 23) Symbiotic and competitive interdependencies exist in the specific environment. Answer: TRUE Page Ref: 71 Difficulty: Easy LO: 3-4 24) Interdependencies are symbiotic when the outputs of one organization are inputs for another. Answer: TRUE Page Ref: 71 Difficulty: Basy LO: 3-4 25) Cooptation is a strategy that manages symbiotic interdependencies by neutralizing problematic forces in the specific environment. Answer: TRUE Page Ref: 72 Difficulty: Easy LO: 3-4 26) An interlocking directorate is a linkage that results when a director from one company sits on the board of another company. Answer: TRUE Page Ref: 72 Difficulty: Easy LO: 3-427) A collusion is an agreement that commits two or more companies to share their resources to develop joint new business opportur Answer! FALSE Page Ref: 72 Difficulty: Easy LO: 3-4 28) Cooptation is a strategy used for managing competitive resource interdependencies. Answer: FALSE Page Ref: 72 Difficulty: Easy LO: 3-4 29) A joint venture is the least formal type of strategic alliance. Answer: FALSE, Page Ref: 73 Difficulty: Easy LO: 3-4 30) The alliance resulting fiom a network is less formal than the alliance resulting from a contract. Answer: FALSE Page Ref: 73 Difficulty: Easy LO: 3-4 31) The keiretsu system is a form of minority ownership. Answer: TRUE Page Ref: 74 Difficulty: Easy LO: 3-4 32) Both collusions and cartels are illegal in the United States. Answer; TRUE Page Ref: 77 Difficulty: Easy LO: 3-3 33) Cartels and collusion increase the stability and richness of an organization's environment and reduce the complexity of relations among competitors. Answer: TRUE Page Ref: 77 Difficulty: Easy LO: 3-434) Strategic alliances are a linkage mechanism that can be used to manage both competitive and symbiotic interdependencies. Answer: TRUE Page Ref: 78, Difficulty: Easy LO: 3-3 35) Third-party linkage mechanisms tend to increase the complexity ofthe environment and thus reduce its richness. Answer: FALSE Page Ref: 78. Difficulty: Easy LO: 3-3 36) Formal linkage mechanisms minimize the transaction ci uncertainty, opportunism, and risk. Answer: TRUE Page Ref: 82 Difficulty: Easy LO: 3-4 ts associated with reducing 37) The term refers to the particular range of goods and services that the organization produces, and the customers and other stakeholders it serves. A) organizational design B) organizational domain ) organizational richness D) organizational structure Answer: B Page Ref: 60 Difficulty: Easy LO: 3-1 38) A defense company decided to sell the services of its scientists to commercial clients, This company is changing its A) organizational domain B) symbiotic interdependencies ©) competitive interdependencies D) core competences Answer: A Page Ref: 60 Difficulty: Moderate LO: 3-139) are a part of an organization's specific environment, ‘A) Shop floor workers B) Shareholders ©) Suppliers D) Managers Answer: C Page Ref: 61 Difficulty: Easy LO: 3-1 40) The specific environment consists of forces from A) outside stakeholder groups that directly affect an organization's ability to secure resources B) inside stakeholder groups that directly affect an organization's structure ) general environment that directly affect an organization's human resource practices D) inside stakeholder groups that directly affect an organization's competitive strategies Answer: A Page Ref: 61 Difficulty: Hard LO: 3-1 41) MeDonald's is trying to determine whether it should make its own fast-food containers or bay them from international suppliers. This decision is a part of the management. A) structural environment B) competitive interdependency ©) global supply chain D) symbiotic interdependency Answer: C Page Ref: 61 Difficulty: Easy LO: 3-1 42) Which of the following forces is a general environment factor? A) suppliers B) interest rates ©) distributors D) customers Answer: B Page Ref. 63 Difficulty: Easy LO: 3-143) Which of the following statements is definitely true regarding environmental complexity? A) Environmental richness and environmental dynamism are inversely proportional to each other. B) As a company begins to produce a wider variety of products for different groups of customers, its environmental complexity begins to decrease. C) Environmental complexity is a function of the organizational structure selected by a company. D) The more interconnected the forces in an organization's specific and general environments, the more uncertainty the organization faces. Answer: D. Page Ref: 66 Difficulty: Moderate LO: 3-2 44) Which of the following is most likely to increase the environmental complexity for a company? A) the company changes its organizational structure from divisional to functional B) the company decreases its number of suppliers C) the company diversifies its business in an entirely new industry D) the company changes its organizational structure from centralized to decentralized Answer: C Page Ref: 66 Difficulty: Moderate LO: 3-2 45) Which of the following terms refers to the strength, number, and interconnectedness of the specific and general forees that an organization has to manage? ‘A) environmental complexity B) environmental dynamism ©) environmental richness D) environmental naturalness Answer: A Page Refi 66 Difficulty: Easy LO: 3.2 46) When a company decides to produce different products for different customers, A) the number of stakeholders decreases B) environmental complexity increases C) the organizational domain decreases, D) environmental stability increases Answer: B Page Ref: 66 Difficulty: Moderate LO: 3-247) An organization's environment will be more uncertain when A) specific and general forces in the environment become interconnected B) the number of stakeholders in the specific environment decreases ©) the company decreases the number of produets it manufactures D) the company begins to follow the cost leadership strategy Answer: A Page Ref: 66 Difficulty: Moderate LO: 3-2 48) An organization used to obtain supplies from 3,000 suppliers, but now deals with less than 300. By making this change, the organization has reduced its environmental A) dynamism B) complexity ©) richness D) depth ‘Answer: B Page Ref: 66 Difficulty: Easy LO: 3-2 49) Which of the following statements is definitely true regarding envitonmental dynamism? A) As a company decreases the number of suppliers, its environmental dynamism increases. B) A company can reduce its environmental dynamism by selecting a decentralized organizational structure. C) When a company enters into a foreign market, the dynamism of its environment increases. D) Environmental dynamism and environmental richness are directly proportional to each other. Answer: C Page Ref: 67 Difficulty: Hard LO: 3-2 50) Which of the following statements is true regarding environmental richness? A) A rich environment is characterized by plentiful resources, B) In rich environments, uncertainty is high. ©) Environmental richness and environmental complexity are directly proportional to each other. ) Increase in the level of competition leads to a proportionate increase in the level of environmental richness, Answer: A Page Ref: 67 Difficulty: Hard Lo: 3-251) As the of the environment increas A) complexity B) dynamism ©) richness , the resources becorie hard to obtain. Page Ref: 67 Difficulty: Easy LO: 3-2 52) Biotechnology companies in Boston have a large pool of high-quality scientists to choose from because of the presence of so many universities in the area. Base¢ on the information given in this case we can say that the biotechnology companies in Boston have a environment. A) broad B) complex ©) dynamic D) rich Answer: D Page Ref: 67 Difficulty: Easy LO; 3-2 53) Which of the following is most likely to increase the environmental dynamism for a company? A) the company increases the level of employee empowerment B) the company changes its organizational structure from functional structure to matrix structure ©) the company enters into a long-term contract with one of its supplies D) the company enters into a foreign market with new products Answer: D Page Ref: 67 Difficulty: Hard LO: 3-2 $4) Under which of the following situations, a company is most likely to experience high levels of environmental richness? A) the company uses a matrix organizational structure B) the company is not able to obtain sufficient quantity of required raw material due to new government restrictions C) the company is highly centralized D) the company has a monopoly in its industry Answer: D Page Ref: 67 Difficulty: Hard LO: 3-255) As the , the environmental uncertainty decreases. A) environmental complexity decreases B) environmental dynamism increases © environmental richness decreases D) environmental naturalness increases Answer: A Page Ref: 67 Difficulty: Easy LO: 3-2 56) An organization operating in the computer industry has to quickly respond to the changes in the technology. In this case, the environment of the organization is said to be A) complex B) dynamic ©)rich D) broad Answer: B Page Ref: 67 Difficulty: Easy LO: 3-2 57) Which of the following terms refers to the degree to which forces in the specific and general environments change quickly over time and thus contribute to the uncertainty an organization faces? A) environmental dynamism B) environmental richness © environmental complexity D) environmental naturalness Answer: A. Page Ref: 67 Difficulty: Easy LO: 3-2 58) In the context of environmental dynamism, a company is said to be stable if A) the number of outside stakeholders remains constant B) the number of specific and general forces that an organization has ta manage remains stable © forces affect the supply of resources in a predictable way D) the company is structured as per the matrix organizational structure Answer: C Page Ref: 67 Difficulty: Moderate LO: 3-259) Which of the following terms refers to the amount of resources available to support an organization's domain? A) environmental dynamism B) environmental complexity C) environmental richness D) environmental naturalness Answer: C Page Ref: 67 Difficulty: Easy LO: 3-2 60) Which of the following is most likely to be a reason for poor environment? A) resources are plentiful B) environmental uncertainty is low C) competition is high D) the country is wealthy Answer: C Page Ref: 67 Difficulty: Easy LO: 3-2 61) Which of the following is most likely to increase environmental uncertainty? A) increase in the richness of the environment B) decrease in the dynamism of the environment C) decrease in the depth of the environment D) increase in the complexity of the environment Answer: D Page Ref: 67 Difficulty: Easy LO: 3-2 62) A poor environment is most likely to lead to A) a decrease in the level of environmental complexity B) an increase in the level of environmental stability C) an increase in the level of profit D) an increase in the level of environmental uncertainty Answer: D Page Ref: 67 Difficulty: Easy63) The government attempted to control prescription drug prices during the 1990s. What would have been the effect of this change on this industry? A) It would have increased competition, thereby reducing the complexity of this environment. B) It would have made the environment more complex due to the reduction in profits. C) It would have increased the demand for drugs, thereby making the environment less dynamic. D) It would have enlarged the domain of this industry. Answer: B Page Ref: 68 Difficulty: Hard LO: 3-2 64) According to the an organization should minimize its dependence on other organizations for resources and find ways of influencing them to make resources available. A) organizational theory B) resource dependence theory C) contingency theory D) group theory Answer: B. Page Ref: 69 Difficulty: Easy LO: 3-4 65) Which of the following theories states that an organization must respond to the needs and demands of other organizations in its environment? A) contingency theory B) the enacted environment concept ) resource dependence theory D) transaction cost theory Answer: C Page Ref: 69 Difficulty: Easy LO: 3-4 66) As per the resource dependence theory, in which of the following situations is an “organization said to be weak? A) the organization is highly centralized B) there are only a few suppliers of a resource needed by the organization C) the organization uses a divisional organizational structure D) the organization manufactures a wide variety of products Answer: B Page Refi 69 Difficulty: Moderate LO: 3-467) interdependencies exist between an organization and its suppliers. A) Competitive B) Symbiotic C) Distributive D) Convolutional Answer: B Page Ref: 71 Difficulty: Easy LO: 3-4 68) interdependencies exist among organizations that need the same scarce inputs and. market their products to th A) Competitive B) Distributive ©) Symbiotic D) Convoluti Answer: A Page Ref: 71 Difficulty: Easy LO: 3-4 same group of potential customers nal 69) Two computer manufacturing companies, operating in the same industry, pool their resources to develop a new computer technology. This is an example of A) licensing, B) an interorganii C) franchising D)a symbiotic interdependency Answer: B Page Ref: 71 Difficulty: Easy LO: 3-4 tional linkage 70) Nova Electronics is a company that manufactures computers. It depends on H&L, Inc. for the supply of microprocessor chips. H&L, Inc. is the only company that manufactures the particular type and quality of microprocessor chips that are required by Nova electronics. The relationship between Nova Electronics and H&L, Inc. is an example of a interdependency. A) competitive B) sequential ©) symbioti D) distributive Answer: C Page Ref: 71 Difficulty: Moderate LO: 3-471) Which of the following is the least formal and the least direct way to manage symbiotic interdependencies with suppliers and customers? A) merger B) developing reputation ) cooptation D) minority ownership Answer: B Page Ref: 71 Difficulty: Easy LO: 3-4 72) The union does not like the work rules of an automobile plant. The plant forms a joint union- labor committee and gets key union leaders to join the committee. This is an example of A) a strategic alliance B) a joint venture C)a merger D) cooptation Answer: D Page Ref: 72 Difficulty: Easy LO: 3-4 73) Am) is @ linkage that results when a director from one company sits on the board of another company. A) interlocking directorate B) strategic alliance C) network D) keiretsu Answer: A Page Ref: 72 Difficulty: Easy LO: 3-4 74) Which of the following terms refers to a strategy that manages symbiotic interdependencies by neutralizing problematic forces in the specific environment? A) joint venture B) strategic alliance C) cooptation D) franchising Answer: C Page Ref: 72 Difficulty: Easy LO: 3-4BA is an agreement that commits two or more companies to share their resources to develop joint new business opportunities A) cartel B) strategic alliance ©) licensing agreement D) collusion Answer: B Page Ref: 72 Difficulty: Easy LO: 3-4 76) Which of the following types of strategie alliances is the most formal? A) long-term contract B) network ©) minority ownership D) joint venture Answer: D Page Ref: 73 Difficulty: Easy LO: 3-4 77) Which of the following types of strategic alliances is the least formal? A) long-term contract B) network C) minority ownership D) joint venture Answer: A Page Ref: 73 Difficulty: Easy LO: 3-4 78) A joint venture is a type of A) takeover B) collusion ©) strategic alliance D) cartel Answer: C Page Ref: 73 Difficulty: Easy LO: 3-479) The Japanese system of keiretsu is a type of A) long-term contract B) collusion C) minority ownership D) joint venture Answer: C Page Ref: 74 Difficulty: Easy LO: 3-4 80) A is a group of organizations, each of which owns shares in the other organizations in the group, and all of which work together to further the group's interests. It is a Japanese system, A) hoteru B) byouin ©) hikouki D) keiretsu Answer: D Page Ref: 74 Difficulty: Easy LO: 3-3 81) Which of the following strategies is most likely to be used for managing symbiotic resource interdependencies? A) collusion B) third-party linkage mechanism C) cartel D) minority ownership Answer: D Page Ref: 74 Difficulty: Easy LO: 3-4 82) A isa strategic alliance among two or more organizations that agree to establish and share the ownership of a new business. A) collusion B) merger ©) joint venture D) cartel Answer: C Page Ref: 75 Difficulty: Easy LO: 3-483) Which of the following interorganizational strategies for managing symbiotic interdependencies is the most formal? A) cooptation B) takeover C) strategic alliance D) franchising Answer: B Page Ref: 76 Difficulty: Easy LO: 3-4 84) A is a secret agreement among competitors to share information for a deceitful ot illegal purpose. A) joint venture B) collusion C) strategic alliance D) cartel Answer: B Page Ref 77 Difficulty: Easy LO: 3-3 85) A is an association of firms that explicitly agree to coordinate their activities. A) cartel B) strategic alliance C) collusion D) joint venture Answer: A Page Ref: 77 Difficulty: Easy LO: 3:3 86) Which of the following statements is true regarding a cartel? A) Forming a cartel is illegal in the United States B) A cartel is a strategie alliance among two or more organizations that agree to establi skare the ownership of a new business, C) A cartel is formed by companies to manage their symbiotic resource interdependencies. D) Participating in a cartel decreases the richness of a company's environment. Answer: A. Page Ref: 77 Difficulty: Moderate LO: 33 and87) Which of the following strategies of managing competitive resource interdependencies involves a regulatory body that allows organizations to share information and regulate the way they compete? A) cartel B) third-party linkage mechanism C) joint venture D) cooptation Answer: B Page Ref: 78 Difficulty: Easy LO: 3:3 88) A trade organization is an example of a A) cartel B) joint venture C) third-party linkage mechanism D) collusion Answer: C Page Ref: 78 Difficulty: Easy LO: 3-3 89) Typically, when a company ges associated with a third-party linkage mec! A) the richness of the company’s environment decreases B) the company can react more easily to the dynamism of the environment C) the complexity of the company's environment increases D) it loses its ability to enter into a strategie alliance Answer: B Ref: 78 ilty: Moderate LO: 34 90) Which of the following methods of managing competitive interdependencies is most likely to be used by an organization to monopolize an industry and become the sole player in the industry? A) enter into a cartel B) enter into a joint venture C) enter into a merger D) enter into a long-term contract Answer: C Page Ref: 79 Difficulty: Easy LO: 3-395) Formal linkage mechanisms should be used when companies ‘A) exchange specific assets B) have many possible exchange partners C) operate in stable environment D) have matrix organizational structure Answer: A Page Ref: 82 Difficulty: Moderate LO: 3-4 96) Internal transaction costs are called costs to distinguish them from the transaction costs of exchanges between organizations in the environment. A) historic B) sunk C) opportunity D) bureaucratic Answer: D. Page Ref: 82 Difficulty: Easy LO: 3-4 97) Which of the following statements about the difference between transaction cost theory and resource dependence theory is true? A) Transaction cost theory proposes the use of a merger as an interorganizational strategy but resource dependence theory advocates the use of joint venture, B) Transaction cost theory explains how to manage symbiotic interdependencies but resource dependence theory explain how to manage competitive interdependencies. C) Transaction cost theory is a better predictor than a resource dependence theory of why companies choose a certain form of interorganizational strategy. D) Resource dependence theory proposes the use of strategic alliances, but transaction cost theory recommends not using alliances. Answer: C Page Ref: 82,83 Difficulty: Moderate LO: 3-4 98) A is a business authorized to sell a company's products in a certain area, A) cartel B) joint venture ©) franchise D) collusion Answer: C Page Ref: 84 ulty: Easy91) The costs of negotiating, monitoring, and governing exchanges between people are known as the costs. A) transaction B) historical ©) sunk D) opportunity Answer: A Page Ref: 79 Difficulty: Easy LO: 3-4 92) Which of the following is most likely to inerease transaction costs? ‘A) having many possible trading partners B) investing in specific assets © operating in a stable environment D) adopting a decentralized organizational structure Answer: B Page Ref: 81 Difficulty: Hard LO: 3-4 93) When an organization is forced to rely on a small number of trading partners, the risk of A) bounded rationality increases B) bounded rationality decreases ©) opportunism decreases D) opportunism increases Answer: D. Page Refi 81 Difficulty: Easy LO: 3-4 94) Which of the following increases the threat that organization A will behave opportunistically tewards organization B? A) Organization A is dependent on organization B for scarce resources, B) The environment of organization A is richer than the environment of organization B. ©) Organization A provides a service to organization B that only a few organizations can replicate D) The environment that both organizations operate in is stable. Answer: C Page Ref: 81 Difficulty: Moderate LO: 3-499) is the process of moving a value creation activity that was performed inside an organization to outside where it is done by another company. A) Outsourcing B) Cooptation ) Franchising D) Licensing Answer: A Page Ref: 85 Difficulty: Easy LO: 3-4 100) A small restaurant hires an advertising firm to handle promotions and advertising. This is an example of. . A) franchising B) licensing ©) outsourcing D) cooptation Answer: C Page Refi 85 Difficulty: Easy LO: 3-4