Org. Theory and Design: Chapter 3 (MC)

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What is the organizational environment?

The set of pressures and forces surrounding an organization that can affect the way it operates

What does the term 'organizational domain' refer to?

The specific range of goods/services that the organization produces and the customers it serves

How can an organization enlarge and protect its domain?

By expanding internationally

What does global supply chain management involve?

Planning and controlling supply/distribution activities related to the movement of goods

Which forces are part of the specific environment of an organization?

Competitors and market demand

What is the main goal of an organization in managing its environment?

To maximize its ability to secure resources

What is the main challenge associated with integration and communication according to the text?

Bureaucratic costs

According to transaction cost theory, what must managers do when deciding which strategy to pursue?

Estimate the transaction cost saving from using different linkage mechanisms

What is an example of a linkage mechanism mentioned in the text that helps organizations avoid bureaucratic costs while minimizing transaction costs?


What does franchising involve according to the text?

Selling the right to use a company's resources in return for a flat fee or share of profits

What does outsourcing involve according to the text?

Moving value creation activity outside the organization where it is done by another company

What is the purpose of using transaction cost theory according to the text?

To weigh the saving in transaction costs against bureaucratic costs of operating linkage mechanisms

How can managers use transaction cost theory when choosing an interorganizational strategy?

By weighing transaction cost saving against bureaucratic costs of operating linkage mechanisms

What are three examples of linkage mechanisms mentioned in the text?

Keiretsu, franchising, strategic alliance

How does keiretsu function as a linkage mechanism according to the text?

It helps achieve benefits of a formal linkage mechanism without incurring its costs

What is the significance of estimating bureaucratic costs when choosing an interorganizational strategy?

To evaluate the cost of operating different linkage mechanisms

What is an interlocking directorate?

A linkage resulting from a director sitting on the board of another company

What is the purpose of long-term contracts in strategic alliances?

To reduce competitive uncertainty

What is a keiretsu?

A group of organizations owning shares in each other and working together to further their interests

What is the ultimate weapon for managing competitive interdependencies?

Merger and takeover

According to transaction cost theory, when do transaction costs increase?

When organizations begin to exchange more specific goods and services

What is the goal of an organization according to transaction cost theory?

To minimize the costs of exchanging resources in the environment

What are sources of transaction costs?

Environmental uncertainty and bounded rationality

When will an organization start using more formal linkages such as long-term contracts to govern its exchanges?

When transaction costs increase

What are the three factors that cause uncertainty in the organizational environment?

Environmental complexity, environmental dynamism, and environmental richness

According to the resource dependence theory, what are the two aspects of an organization's resource dependence that need to be managed?

Influence over other organizations and response to the needs of other organizations

What is environmental richness a function of?

The amount of resources available to support an organization's domain

What do symbiotic interdependencies generally exist between?

An organization and its suppliers and distributors

How does an organization manage symbiotic interdependencies by neutralizing problematic forces in the specific environment?

By bringing problematic forces within the organization

What is the main goal of an organization according to the resource dependence theory?

To minimize its dependence on other organizations for resources

What are the factors that determine the level of demand for products and price of inputs?

Economic forces and demographic forces

In what type of environment are uncertainty levels low because resources are plentiful?

Stable environment with predictable force effects

What is environmental dynamism a measure of?

The degree to which forces in the specific and general environments change quickly over time

Test your knowledge of strategic alliances with this quiz focusing on the types and characteristics of strategic alliances, including interlocking directorates and formal alliances. Explore how companies can share resources and develop new business opportunities through strategic partnerships.

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