Erkan Nil - 11412116

BUS 332 Midterm

1)

a) Asset specificity refers to the degree of specialization associated with the transaction.
Investments with high asset specificity represent costs with little or no value other than the
relevant transaction. If environmental factors are very complex and variable, businesses may
have difficulty seeing or predicting all aspects of the transaction they want to do. This
situation leaves the organization confronted with the uncertainty problem. Frequency has a
strong impact on transaction costs. It is very unlikely that a company will produce a product
or service that it rarely uses. For example, many companies do not establish their own
management consultancy departments because they do not use it often. If a firm decides to
establish its own consultancy service, it has to try to be a service seller to others when it does
not serve its own firm.

b) Uncertainty is high (unstable environment) in women shoes industry, design is special, we

hire very special and highly skilled workers, this causes asset specifity to rise. In this context,
“Make” decision (keep the design division) is important for the company.

2) a) Bounded rationality is expressed as the limited ability of people to collect and process
information; opportunism is the situation where individuals prioritize their own interests and
mislead the other party if necessary. Another problem is that the risk attitudes of the principal
and the agent do not match. In this case, the principal and the agrnt will not be able to exhibit
the same behavior due to different risk attitudes. The problem of asymmetric information
arises here as well, since the principal's knowledge for the assessment of the agent is lacking.

b) This depends on size and complexity of the company. Since my company is one of the
biggest 500 companies in Turkey, so it is more complex and size is huge. In this case,
monitoring can reduce agency costs. I have to hire managers and principles to monitor and
delegate my company.

3) a) Downsizing.

b) Leveling – Advertising .
4) a) Furtniture. Changing peripheral features are beneficial for furniture because they protect
furniture companies from uncertainty by bufferring and broadening organisations connections
to its environment.

The tendency towards digitalization has increased in the new era, where social distance is
shaping the way of doing business due to health and safety. Digitalization and online trade
have turned its potential into a significant growth momentum in every sector in our country as
well as in the world. Until recently, the furniture industry was reaching its target audience
with retail retailing and periodically different sales strategies. With the development of digital
channels, which are an alternative channel today, as in many other sectors, online platforms
with less cost and more gain have started to be preferred in the furniture sector.

b) Mobilyacılar Federasyonu standards and rules shape the competitive environment , this is
an example of normative isomorphism (because professionalism arises). Also, some firms
mimick IKEA in the case of digital transformation, delivery service and so on. This is
mimetic isomorphism.