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-
2) Shareholders are a part of an organization's specific environment. Answer: FALSE Page Ref:
61 Difficulty: Easy LO: 3-
3) Suppliers are a part of the specific environment of an organization. Answer: TRUE Page Ref:
61 Difficulty: Easy LO: 3-
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: 3-
5) Global supply chain management is the process of coordinating the flow of raw materials,
components, semi-finished goods, and finished products around the world. Answer: TRUE Page
Ref: 61 Difficulty: Easy LO: 3-
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-
7) The forces that constitute the specific environment shape the general environment and affect
the ability of all organizations in a particular environment to obtain resources. Answer: FALSE
Page Ref: 63 Difficulty: Moderate LO: 3-
8) Environmental complexity is a function of the strength, number, and interconnectedness of the
specific and general forces that an organization has to manage. Answer: TRUE Page Ref: 66
Difficulty: Easy LO: 3-
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: FALSE Page Ref: 66 Difficulty: Hard LO: 3-
10) As a company begins to produce a wider variety of products for different groups of
customers, its environmental complexity goes on decreasing. Answer: FALSE Page Ref: 66
Difficulty: Easy LO: 3-
11) By decreasing the number of suppliers, an organization can reduce the complexity of its
environment. Answer: TRUE Page Ref: 66 Difficulty: Easy LO: 3-
12) An organization can reduce environmental uncertainty by entering into global markets.
Answer: FALSE Page Ref: 67 Difficulty: Moderate LO: 3-
20) As the level of environmental complexity increases, the level of environmental uncertainty
decreases. Answer: FALSE Page Ref: 67 Difficulty: Easy LO: 3-
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-
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-
23) Symbiotic and competitive interdependencies exist in the specific environment. Answer:
TRUE Page Ref: 71 Difficulty: Easy LO: 3-
24) Interdependencies are symbiotic when the outputs of one organization are inputs for another.
Answer: TRUE Page Ref: 71 Difficulty: Easy LO: 3-
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-
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-
27) A collusion is an agreement that commits two or more companies to share their resources to
develop joint new business opportunities. Answer: FALSE Page Ref: 72 Difficulty: Easy LO: 3-
28) Cooptation is a strategy used for managing competitive resource interdependencies. Answer:
FALSE Page Ref: 72 Difficulty: Easy LO: 3-
29) A joint venture is the least formal type of strategic alliance. Answer: FALSE Page Ref: 73
Difficulty: Easy LO: 3-
30) The alliance resulting from a network is less formal than the alliance resulting from a
contract. Answer: FALSE Page Ref: 73 Difficulty: Easy LO: 3-
31) The keiretsu system is a form of minority ownership. Answer: TRUE Page Ref: 74
Difficulty: Easy LO: 3-
32) Both collusions and cartels are illegal in the United States. Answer: TRUE Page Ref: 77
Difficulty: Easy LO: 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-
39) ____ are a part of an organization's specific environment. A) Shop floor workers B)
Shareholders C) Suppliers D) Managers Answer: C Page Ref: 61 Difficulty: Easy LO: 3-
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 C) 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-
41) McDonald's is trying to determine whether it should make its own fast-food containers or
buy them from international suppliers. This decision is a part of the ____ management. A)
structural environment B) competitive interdependency C) global supply chain D) symbiotic
interdependency Answer: C Page Ref: 61 Difficulty: Easy LO: 3-
42) Which of the following forces is a general environment factor? A) suppliers B) interest rates
C) distributors D) customers Answer: B Page Ref: 63 Difficulty: Easy LO: 3-
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-
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-
45) Which of the following terms refers to the strength, number, and interconnectedness of the
specific and general forces that an organization has to manage? A) environmental complexity B)
environmental dynamism C) environmental richness D) environmental naturalness Answer: A
Page Ref: 66 Difficulty: Easy LO: 3-
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-
51) As the ____ of the environment increases, the resources become hard to obtain. A)
complexity B) dynamism C) richness D) depth Answer: A Page Ref: 67 Difficulty: Easy LO: 3-
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. Based on the information given
in this case we can say that the biotechnology companies in Boston have a ____environment. A)
broad B) complex C) dynamic D) rich Answer: D Page Ref: 67 Difficulty: Easy LO: 3-
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 C) the company
enters into a long-term contract with one of its suppliers D) the company enters into a foreign
market with new products Answer: D Page Ref: 67 Difficulty: Hard LO: 3-
54) 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-
55) As the ____, the environmental uncertainty decreases. A) environmental complexity
decreases B) environmental dynamism increases C) environmental richness decreases D)
environmental naturalness increases Answer: A Page Ref: 67 Difficulty: Easy LO: 3-
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 C) rich D) broad Answer: B Page Ref: 67 Difficulty: Easy LO: 3-
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 C) environmental complexity D)
environmental naturalness Answer: A Page Ref: 67 Difficulty: Easy LO: 3-
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 to manage remains stable C) 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-
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-
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-
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 C) resource dependence theory D) transaction cost theory Answer: C Page
Ref: 69 Difficulty: Easy LO: 3-
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 Ref: 69 Difficulty: Moderate LO: 3-
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-
68) ____ interdependencies exist among organizations that need the same scarce inputs and
market their products to the same group of potential customers. A) Competitive B) Distributive
C) Symbiotic D) Convolutional Answer: A Page Ref: 71 Difficulty: Easy LO: 3-
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
interorganizational linkage C) franchising D) a symbiotic interdependency Answer: B Page Ref:
71 Difficulty: Easy LO: 3-
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 C) symbiotic D) distributive Answer: C Page Ref: 71 Difficulty:
Moderate LO: 3-
75) A ____ is an agreement that commits two or more companies to share their resources to
develop joint new business opportunities. A) cartel B) strategic alliance C) licensing agreement
D) collusion Answer: B Page Ref: 72 Difficulty: Easy LO: 3-
76) Which of the following types of strategic alliances is the most formal? A) long-term contract
B) network C) minority ownership D) joint venture Answer: D Page Ref: 73 Difficulty: Easy
LO: 3-
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-
78) A joint venture is a type of ____. A) takeover B) collusion C) strategic alliance D) cartel
Answer: C Page Ref: 73 Difficulty: Easy LO: 3-
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-
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 C) hikouki D) keiretsu Answer: D Page Ref: 74 Difficulty: Easy LO: 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-
82) A ____ is a strategic alliance among two or more organizations that agree to establish and
share the ownership of a new business. A) collusion B) merger C) joint venture D) cartel
Answer: C Page Ref: 75 Difficulty: Easy LO: 3-
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-
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-
89) Typically, when a company gets associated with a third-party linkage mechanism, ____. 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 strategic alliance Answer: B Page Ref: 78 Difficulty: Moderate
LO: 3-
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-
91) The costs of negotiating, monitoring, and governing exchanges between people are known as
the ____ costs. A) transaction B) historical C) sunk D) opportunity Answer: A Page Ref: 79
Difficulty: Easy LO: 3-
92) Which of the following is most likely to increase transaction costs? A) having many possible
trading partners B) investing in specific assets C) operating in a stable environment D) adopting
a decentralized organizational structure Answer: B Page Ref: 81 Difficulty: Hard LO: 3-
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 C) opportunism
decreases D) opportunism increases Answer: D Page Ref: 81 Difficulty: Easy LO: 3-
94) Which of the following increases the threat that organization A will behave opportunistically
towards 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. C)
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-