CHAPTER 4—THE EXTERNAL ENVIRONMENT. MULTIPLE CHOICE ‘An organization's domain is: the set of positions and departments within the organization the buildings and grounds that are owned or leased by the organization in which inputs are transformed into outputs the organization's niche that has been staked out for itself with respect to products. services, and markets served. the technical core that is buffered by other departments so that it can operate as a closed system. ANS: PTs: 1 REF: pg. 140 NAT: AACSB Reflective Thinking | Creation of Value 2. Sectors of the environment which have direct impact on the organization are called the: a. task environment. b. general environment. ©. organizational buffers 4d. envitonmental boundary-spanners ANS: A PIs: 1 REF: pg. 140 NAT; AACSB Reflective Thinking | Environmental Influence The task environment is all elements that exist outside the organizational boundary. sectors with which the organization interacts directly. domain. all jobs and positions inherent within the organizational activity ANS: B PIs: 1 REF. pg. 140 NAT: AACSB Reflective Thinking | Environmental Influence 4. An organization's environment includes all except: a, labor market, b. city, state, and federal laws. c. Competitors. d._ production processes, ANS: D PIs: 1 REF: pg. 140 NAT: AACSB Analytic | Environmental Influence5. The following examples illustrate how various sectors can impact organizations: in the industry sector, labor unions ate a significant force in the market sector, we see an increasing number of foreign-owned manufacturing plants builtin the US in the raw materials sector, we note that steel makers owned the beverage can market until the mid-1960s, in the human resources sector, brand names are fighting it out with lower-cost store brands, ANS: PTs: 1 REF: pg. 140 NAT: AACSB Analytic | Creation of Value 6. The includes those sectors that might not have a direct impact on the daily operations of a firm but will indirectly influence it a. general environment b. intemational context ¢. task environment 4. buffering roles ANS: A PIS: 1 REF: pg. 142 NAT: AACSB Reflective Thinking | Environmental Influence In the ___ sector, regulations influence every phase of organizational life. sociocultural ‘human resources international government NS: D PTs: 1 REF: pg. 142 AT: AACSB Reflective Thinking | Legal Responsibilities Allof the following, except __ are examples of the general environment. financial resources suman resources economic conditions ‘government sector ANS: B PIS: 1 REF: pg. 142 NAT: AACSB Analytic | Environmental Influence 9. Assessment of environmental uncertainty of an organization is based primarily on analysis of two dimensions, which are: a. the need for information about the environment and the need for resources from the environment, b. the number of sectors and the organization's niche. c. the extent of turbulence and the amount of available resources. . differentiation and integration, ANS: A PTS: 1 REF: pg. 144 NAT: AACSB Reflective Thinking | Environmental Influence 10. Which of the following is a proper dimension of the framework for assessing environmental uncertainty?Dispersion-contiguity Simple-complex Certain-uncertain d._Internal-external ANS: B PTS: 1 REF: pg. 145 NAT: AACSB Analytic | Environmental Influence 11. Which of the following means that decision makers do not have sufficient information about environmental factors and they have a difficult time predicting extemal change? a. Cooptation b. Differentiation ©. Uncertainty 4. Integration ANS: PIs: 1 REF: pg. 145 NAT: AACSB Analytic | Environmental Influence 12. Which of the following is a proper dimension of the framework for assessing environmental uncertainty? a. Stable-unstable b. Loose-tight c. Known-unknown 4. High competitiveness-low competitiveness ANS: A PIS: 1 REF: pg. 145 NAT: AACSB Analytic | Environmental Influence 13. When Johnson & Johnson had to cope with the unpredictable Tylenol poisoning issue, their experience best exemplified the____ dimension of the environment. a. simple b. complex ©. stable 4. unstable ANS: D PTS: 1 REF: pg. 146 NAT: AACSB Analytic | Environmental Influence 14, The greatest uncertainty for an organization occurs in which environment? a. Complex, stable b. Complex, unstable c. Simple, unstable 4. Simple, stable ANS: B PIS: 1 REF: pg. 147 NAT: AACSB Reflective Thinking | Environmental Influence 15. Organizations in which of the following types of industries would face the greatest amount of environmental uncertainty? a. Beer distributors because of simplicity b. Universities because of complexity©. Airlines because of instability 4d. Appliance manufacturers because of complexity ANS: C PIs: 1 REF: pg. 148 NAT: AACSB Analytic | Environmental Influence 16. Trend-setting toy companies or high-fashion clothing manufacturers have in common: an environment that is stable but complex, therefore requiring a mechanistic structure, bb. an organic structure, from which we can reason that the environment is highly uncertain. ¢. allarge number of dissimilar external elements, which remain about the same over time. 4. an environment that is simple but unstable, creating relatively high uncertainty ANS: D PTs: 1 REF. pg. 148 NAT: AACSB Analytic | Environmental Influence 17. Inthe framework for assessing environmental uncertainty: a. soft drink bottlers are examples of typical firms in the simple and unstable quadrant. b. universities are examples of organizations typically found in the complex and stable quadrant. electronic firms are typically found in the simple and stable quadrant fashion clothing or toy manufacturers would exemplify the complex and unstable quadrant. ANS: B PTs: 1 REF. pg. 148 NAT: AACSB Reflective Thinking | Environmental Influence 18. Boundary-spanning roles: a. primarily link data to information b. buffer the manufacturing department from outside intrusion that would interfere with, efficiency, ©. bring into the organization information about environmental changes 4d, move the firm to internationalism, ANS: PIS: 1 REF: pg. 150 NAT: AACSB Reflective Thinking | Environmental Influence 19. Bobby Barista is a researcher in the R&D department at 3M. Part of her job is to read echnical and scientific journals, and to attend conferences to find out what new developments are occurring When she is doing this part of her job she is carrying out a____role a. buffering b. maintenance ¢. boundary spanning dd. managerial ANS: C PIS: 1 REF: pg. 150 NAT: AACSB Analytic | Environmental Influence 20. Allowing customers in an auto dealership service department to talk directly to the mechanic rather than to a service manager: is an example of creating a buffering role. b. is creating a boundary-spanning role. ¢. will make the company less fluid. 4. will make the company less responsive to customers.ANS: B PIs: 1 REF: pg. 150 NAT: AACSB Analytic | Environmental Influence 21. ____refers to the high-tech analysis of large amounts of internal and external data to spot patterns and relationships that might be significant. a, Business intelligence b. Competitive intelligence ©. Boundary spanning d. Environment intelligence ANS: A PIs: 1 REF: pg. 151 NAT: AACSB Reflective Thinking | Information Technologies 22. Which of the following is a cross-functional group of managers and employees, led by a competitive intelligence professional, who work together to gain a deep understanding of a specific business issue? Intelligence team Business team Boundary team Task force ANS: A PIs: 1 REF. pg. 151 NAT: AACSB Analytic | Group Dynamics 23. The differences in cognitive and emotional orientations among managers in different functional departments, and the difference in formal structure among these departments is referred to as a. integration bb. resource dependence ©. cooptation. 4. differentiation ANS: D PTs: 1 REF: pg. 152 NAT: AACSB Reflective Thinking | Creation of Value 24. In organizations characterized by very _ and __environments, almost no managers are assigned to integration roles. a. simple, stable b. simple, unstable ©. complex, stable 4, complex, unstable ANS: A PIs: 1 REF: pg. 153 NAT: AACSB Reflective Thinking | Environmental Influence 25. ___ is the quality of collaboration among departments. a, Differentiation Integration Uncertainty Cooptation ANS: BNAT: AACSB Reflective Thinking | Creation of Value 26. Organizations in rapidly changing environments tend to have __ management processes, a. differentiated b. mechanistic c. organic d. dependent ANS: PTs: 1 REF: pg. 153 NAT: AACSB Reflective Thinking | Environmental Influence 27. Which of the following is not a characteristic of the mechanistic process? a. Knowledge and control of tasks are centralized at the top of the organization b. Tasks are rigidly defined ©. There isa strict hierarchy of authority and control 4. Communication is horizontal ANS: D PTS: 1 REF: pg. 154 NAT: AACSB Analytic | Creation of Value 28. Which of the following characteristics most accurately describes mechanistic organizations? a. Authoritarian, unfriendly leadership b. Communication is horizontal ¢. Itisa service organization with individualized customer demands d_ Tasks are broken down into specialized parts ANS: D PTs: 1 REF: pg. 154 NAT; AACSB Analytic | Creation of Value 29. Allof the following, except are ways high-moderate uncertainty influences organizational characteristics a. mechanistic structure: formal, centralized b. few integrating roles c. planning orientation; fast response 4. few departments, much boundary spanning ANS: A PIs: 1 REF: pg. 157 NAT: AACSB Reflective Thinking | Creation of Value ___is a way that high uncertainty influences organizational characteristics. Extensive planning and forecasting Few departments No integrating roles Mechanistic structure ANS: A PTs: 1 REF: pg. 157 NAT: AACSB Reflective Thinking | Creation of Value31, ____ means that organizations depend on the environment but strive to acquire control over resources to minimize their dependence. a, Integration b. Resource dependence c. Organic process dd. Cooptation ANS: B Z REF: pg. 158 NAT: AACSB Reflective Thinking | Environmental Influence 32. _All of the following are strategies for controlling the environmental domain except a. illegitimate activities. bb. political activities and regulations ©. change of domain. 4. cooptation and interlocking directorates. ANS: D PIs: 1 REF: pg. 159 NAT: AACSB Analytic | Creation of Value 33. A(o)___ involves the purchase of one organization by another so that the buyer assumes control a. acquisition b. merger ¢. joint venture 4. domain ANS: A PIS: 1 REF: pg, 159 NAT: AACSB Reflective Thinking | Creation of Value 34. ____result in the creation of a new organization that is formally independent of the parents. a. Strategic alliances b. Supplier arrangements ¢. Joint ventures . Cooptation ANS: C PIs: 1 REF: pg. 160 NAT: AACSB Reflective Thinking | Creation of Value 35. Roger Ramon is a militant member of a faculty union at a medium-sized college. When the union's negotiating committee is reporting (o a meeting of the faculty, he always finds fault with the work of that committee and strongly advocates striking, When a member of the negotiating committee resigns because of illness, the union's executive committee appoints Roger to take his place. This is an example of: a. formal strategic alliance. b. cooptation. ©. change of domain 4. public relations. ANS: B PTs: 1 REF: pg. 161 NAT: AACSB Analytic | Creation of Value36. A(n)____is a formal linkage that occurs when a member of the board of directors of ‘one company sits on the board of directs of another company. a. joint venture b. interlocking directorate ©. integration indirect interlock ANS: B PIs: 1 REF: pg. 161 NAT: AACSB Reflective Thinking | Individual Dynamics 37. Which of the following occurs when leaders from important sectors in the environment are made part of an organization? a, Integration b. Joint venture c. Resource dependence 4. Cooptation ANS: D PTS: 1 REF: pg. 161 NAT: AACSB Analytic | Environmental Influence 38. ___ is especially important in highly competitive consumer industries and in industries that experience variable demand. a. Advertising b. Cooptation ¢. Executive recruitment d. Contracts ANS: A PTS: 1 REF: pg. 161 NAT; AACSB Reflective Thinking | Creation of Value 39. An organization can change its domain most directly by: a. hiring a new CEO, b. changing the nature of the labor - management agreements. c. Divesting a division of the organization. dd. moving (o a more favorable structure. ANS: C PIs: 1 REF: pg. 162 NAT: AACSB Reflective Thinking | Creation of Value 40. ____can be used to erect regulatory barriers against new competitors or to squash. unfavorable legislation. a. Cooplation b. Contracts ¢. Joint venture . Political strategy ANS: D PTS; 1 REF: pg. 162 NAT: AACSB Reflective Thinking | Creation of Value ‘TRUE/FALSE1. The general environment includes sectors with which the organization interacts directly and which have a direct and regular impact on the organization's ability to achieve its goals. ANS: F PTs: 1 REF: pg. 140 NAT: AACSB Analytic | Environmental Influence 2. The organizational environment is defined as all elements that exist outside the boundary of the organization and have the potential to affect all or part of the organization, ANS: T PTS: 1 REF: pg. 140 NAT: AACSB Analytic | Environmental Influence 3. The international environment includes sectors with which the organization interacts directly and that have a direct impact on the organization's ability to achieve its goals, ANS: F PTS: 1 REF: pg. 140 NAT: AACSB Analytic | Environmental Influence 4, The socio-cultural sector refers to city, state, federal laws and regulations, taxes, courts systems, and political processes that may be in an organization's environment. ANS: F PTs: 1 REF: pg. 141 NAT: AACSB Diversity | Environmental Influence 5. The technology sector refers to techniques of production, science, computers, information technology, and e-commerce, ANS: T PTS: 1 REF: pg. 141 NAT: AACSB Technology [Information Technologies 6. The general environment includes those sectors that might not have a direct impact on the daily operations of a firm but will indirectly influence it ANS: T PIs: 1 REF: pg. 142 NAT: AACSB Reflective Thinking | Environmental Influence 7. The environmental conditions of complexity and change create a greater need to gather information and to respond based on that information. ANS: T PTs: 1 REF: pg. 144 NAT: AACSB Analytic | Environmental Influence 8. Incompetence means that decision makers do not have sufficient information about environmental factors. ANS: F PTS: 1 REF: pg. 145 NAT: AACSB Analytic | Environmental Influence9. The complex-stable dimension concerns environmental complexity, which refers to heterogeneity, or the number and dissimilarity of external elements relevant to an. organization's operations. ANS: F PTS: 1 REF: pg. 145 NAT: AACSB Analytic | Environmental Influence 10. A hardware store would be in a complex environment. ANS: F PTS: 1 REF: pg. 145 NAT: AACSB Analytic | Environmental Influence LL, The greatest uncertainty for an organization occurs in the simple, unstable environment ANS: F PTs: 1 REF: pg. 147 NAT; AACSB Analytic | Environmental Influence 12. Complex + Unstable environments = high uncertainty ANS: T PTs: 1 REF: pg. 148 Exhibit 4.2 NAT; AACSB Analytic | Environmental Influence 13. As the complexity in the external environment increases, so does the number of positions and departments within the organization, which in turn increases internal complexity. ANS: T PTS: 1 REF: pg. 149 NAT: AACSB Analytic [Environmental Influence 14, Rather than establish buffer departments, a newer approach in many organizations is to drop the buffers and expose the technical core to its uncertain environment. ANS: T PTs: 1 REF: pg. 150 NAT: AACSB Analytic | Environmental Influence 15. The boundary-spanning role is designed to bring information to the organization about changes in the environment, but not to work in reverse to take information into the environment about the organization, ANS: F PTS: 1 REF: pg. 150 NAT: AACSB Analytic | Environmental Influence 16. Boundary spanners can prevent the organization from stagnating by keeping top managers informed about environmental changes, ANS: T PTS: 1 REF: pg. 150 NAT: AACSB Reflective Thinking | Environmental Influence 17, The purpose of boundary-spanning roles is to absorb uncertainty from the environment.ANS: F PIS: 1 REF: pg. 150 NAT: AACSB Analytic | Environmental Influence 18. Competitive intelligence refers to the high-tech analysis of large amounts of internal and external data to spot patterns and relationships that might be significant ANS: F PIs: 1 REF: pg. 151 NAT: AACSB Analytic | Environmental Influence 19. Differentiation refers to differences in cognitive and emotional orientations among managers in different functional departments ANS: T PIs: 1 REF: pg. 152 NAT; AACSB Reflective Thinking | Individual Dynamics 20. A.company in a highly uncertain environment is more likely to need a formal integrator. ANS: T PIs: 1 REF: pg. 152 NAT; AACSB Reflective Thinking | Environmental Influence 21. One outcome of high differentiation is that coordination between departments becomes more difficult until integrative devices are put in place. ANS: T PIS: 1 REF: pg. 152 NAT: AACSB Analytic | Creation of Value 22. When differentiation is high, integration should be high if the level of environmental uncertainty is high ANS: T PTs: 1 REF: pg. 153 NAT: AACSB Reflective Thinking | Environmental Influence 23. In rapidly changing environments, an organic structure is usually better. ANS: T PTs: 1 REF: pg. 153 NAT: AACSB Analytic | Environmental Influence 24. Ifthe external environment is stable, a mechanistic and formal organization can be successful. ANS: T PTS: 1 REF: pg. 153 NAT: AACSB Analytic | Environmental Influence 25. In the organic organization, tasks are broken down into specialized, separate parts, ANS: F PTS: 1 REF: pg. 154 NAT: AACSB Analytic | Creation of Value 26. In the mechanistic organization, communication is vertical.ANS: T PIS: 1 REF: pg. 154 NAT: AACSB Communication | Creation of Value 27. Planning guarantees successful coping with an unstable environment, ANS: F PIs: 1 REF: pg. 155 NAT: AACSB Analytic | Environmental Influence 28. Resource dependence means that organizations depend on the environment but strive to acquire control over resources to minimize their dependence. ANS: T PIS: 1 REF: pg. 158 NAT: AACSB Analytic | Environmental Influence 29. An acquisition is the unification of two or more organizations into a single unit. ANS: F PIS: 1 REF: pg. 159 NAT: AACSB Analytic | Strategy 30. When organizations depend on the environment but strive to acquire control over resources to minimize their dependence, itis referred to as cooptation. ANS: F PIs: 1 REF: pg. 161 NAT: AACSB Analytic | Environmental Influence 31. An interlocking directorate is a formal linkage that occurs when a member of the board. of directors of one company sits on the board of directors of another company. ANS: T PTS: 1 REF: pg. 161 NAT: AACSB Ethics | Ethical Responsibilities 32. Once an organization relies on their others for valued resources, those other organizations can influence managerial decision making. ANS: T PTs: 1 REF: pg. 161 NAT: AACSB Reflective Thinking | Creation of Value 33. Transferring or exchanging executives oflers a method of establishing favorable linkages ‘with external organizations ANS: T PTs: 1 REF: pg. 161 NAT: AACSB Reflective Thinking | Strategy 34. In addition to establishing favorable linkages to obtain resources, organizations also may {ry to change the environment ANS: T PTS: 1 REF: pg. 162 NAT: AACSB Analytic | Environmental Influence ESSAYCase 4.0 AligatorAde, a regional soft drink bottling plant in Clovis, California, produces according to the forecast given to them by corporate planning in Michigan, The company uses the focus strategy, designating a market of persons involved in athletic sports. AligatorAde sponsors Clovis Little League, and has a reputation for positive support of sports activities On the few occasions when production exceeds demand, corporate warehousing juggles the distribution so that the regional producers such as AligatorAde experience no significant loss. Although competitors have switched formulas several times, AligatorAde has not changed their formula because market demand for theit product is stable, (Top management at corporate headquatters is considering adding a more fruity-flavored drink to their product line, but a decision is not yet made.) (On the line, the Manufacturing Department produces large batches of their drink. The product is prepated for distribution in both cans and bottles. Occasionally at the end of a run, some boitles will have special team labels affixed by machine; profitability on those few special runs is particularly high. ‘The plant's organization chart shows that there is a plant manager with four department heads reporting to her: Manufacturing Manager, Administrative Manager, Marketing Manager, and Warehousing and Distribution Manager. The purchasing function is carried out in Manufacturing, and what litte R&D takes place at the regional plant is done in Marketing 1. Reference Case 4.0 to answer the following question, Using the framework for environmental uncertainty, analyze AligatorAde's environment, and then make recommendations to the regional management of the plant based on your application of the framework. [Hint: Application of the textbook is what gets points!) Ps: 1 REF: pg. 148 NAT: AACSB Analytic | Environmental Influence 2. List and describe each of the task environment sectors, PTS: 1 REF: pg. 140 NAT: AACSB Reflective Thinking | Environmental Influence 3. Explain how an organization could change its domain, and why it might want to do so, PTS: 1 REF: pg. 140 NAT: AACSB Analytic | Creation of Value 4, List and give examples of each of the general environment sectors. PTS: 1 REF: pg. 142 NAT: AACSB Reflective Thinking | Environmental Influence5. Explain how the international context of organizations is bringing the international sector more and more into the task environment of organizations today PTS: 1 REF: pg. 143-144 NAT: AACSB Reflective Thinking | Environmental Influence 6. Why does environmental complexity lead to organizational complexity? Explain, PTS: 1 REF: pg. 144-145 NAT: AACSB Analytic | Environmental Influence 7. Distinguish between complexity and instability in an organization's environment. PTS: 1 REF: pg. 145-146 NAT; AACSB Reflective Thinking | Environmental Influence 8. Contrast the two dimensions (axes) of the framework for environmental uncertainty. PIS: 1 REF: pg. 145 NAT; AACSB Reflective Thinking | Environmental Influence 9. What type of environment would Tommy Hilfiger have on the stable-unstable dimension? Explain and defend, Then use Tommy Hilfiger as an example for illustrating proper adaptation to that dimension of the environment PTS: 1 REF: pg. 146 NAT; AACSB Analytic | Environmental Influence 10. Compare and contrast the four quadrants in the framework for environmental uncertainty PTS: 1 REF: pg. 148 NAT: AACSB Analytic | Environmental Influence IL. What is the environment of most e-commerce companies? What does your analysis of their environment lead you to conclude about appropriate adaptation of e-commerce companies to their environment? PIS: 1 REF: pg. 148 NAT: AACSB Analytic | Environmental Influence 12. Explain the pro and con arguments to creation of buffering roles, PIS: 1 REF: pg. 150 NAT: AACSB Analytic | Creation of Value 13. List and describe three organizational adaptations to environmental uncertainty PIS: 1 REF: pg. 150 NAT: AACSB Reflective Thinking | Environmental Influence14. Describe the roles of boundary-spanning and the different approaches to boundary spanning. PTS: 1 REF: pg. 150-151 NAT: AACSB Reflective Thinking | Environmental Influence 15. Discuss differentiation. How is integration comnected to differentiation? PTS: 1 REF: pg. 152 NAT: AACSB Analytic | Strategy 16. What can an organization do to have effect on controlling its environment? If you were president of a medium-sized state supported college, what strategy would you purstie and why? PTS: 1 REF: pg. 152-153 NAT; AACSB Analytic | Environmental Influence 17. Describe both a mechanistic and an organic organization with which you are familiar (ftom reading or personal experience), explaining why you have classified them as such. ‘Comment on how well this structure is suited to the environment of each organization. PTS: 1 REF: pg. 154 NAT: AACSB Analytic | Environmental Influence 18. How do organizations use planning, forecasting, and responsiveness in stable and unstable environments? PIS: 1 REF: pg. 155-156 NAT: AACSB Analytic | Environmental Influence 19. Draw and label the contingency framework for environmental uncertainty and organizational responses, PTS: 1 REF: pg. 157 NAT: AACSB Reflective Thinking | Environmental Influence 20. What methods are suggested for dealing effectively with resource dependence? PIS: 1 REF: pg. 158 NAT: AACSB Analytic | Creation of Value 21. Explain the differences between acquisitions, mergers, joint ventures, and partnerships. PTS: 1 REF: pg. 159-160 NAT: AACSB Reflective Thinking | Environmental Influence