Org. Theory and Design: Chapter 3 (True/False)

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An organization's environment refers to the set of pressures and forces surrounding it that have the potential to affect how it operates and its ability to acquire scarce resources.

True

The term 'organizational domain' refers to the specific range of goods and services that an organization produces and the customers it serves.

True

Expanding internationally is a way for an organization to enlarge and protect its domain by managing the forces in its environment.

True

The specific environment of an organization includes forces from outside stakeholder groups that directly affect its ability to secure resources.

True

Global supply chain management involves planning and controlling supply/distribution activities, including acquiring and storing raw materials, controlling work-in-process inventory, and efficiently moving finished goods from point of manufacture to point of sale.

True

The term 'organizational environment' only includes internal factors that impact an organization's operations.

False

An interlocking directorate occurs when a director from one company sits on the board of another company.

True

Strategic alliances involve an agreement between two or more companies to share their resources and develop joint business opportunities.

True

Keiretsu is a group of organizations where each one owns shares in the others and work together for their mutual interests.

True

Collusion is a legal agreement among competitors to share information for a deceitful or illegal purpose.

False

A cartel is an association of firms that explicitly agree to coordinate their activities.

True

Bureaucratic costs are external transaction costs.

False

Transaction costs increase when organizations exchange more specific goods and services.

True

Merger and takeover is considered the ultimate weapon for managing competitive interdependencies.

True

A third-party linkage mechanism is a regulatory body that allows organizations to share information and regulate the way they compete.

True

Long-term contracts are used to reduce costs by sharing resources or sharing the risk of research and development, marketing, construction, etc.

True

Environmental complexity increases if the company produces a wider variety of products for different groups of customers. (True/False)

True

Environmental dynamism is the degree to which forces in the specific and general environments change quickly over time and thus contribute to the uncertainty an organization faces. (True/False)

True

Environmental richness is a function of the amount of resources available to support an organization’s domain. In rich environments, uncertainty is high because resources are plentiful so organizations don’t need to compete over it. (True/False)

False

The resource dependence theory emphasizes that an organization's goal is to maximize its dependence on other organizations for the supply of scarce resources. (True/False)

False

According to the resource dependence theory, an organization must only respond to the needs and demands of the other organizations in its environment. (True/False)

False

The strength of one organization’s dependence on another for a particular resource is not affected by how vital the resource is to the organization’s survival. (True/False)

False

Interdependencies are symbiotic when the outputs of one organization are not inputs for another. (True/False)

False

Informal linkages involve direct coordination based on explicit written agreements or common ownership between organizations. (True/False)

False

To manage symbiotic interdependencies, organizations can use a strategy called cooptation, which involves bringing problematic forces within the organization to make them inside stakeholders. (True/False)

True

A formal way to manage symbiotic interdependencies with suppliers and customers is to develop a reputation, a state in which an organization is known for its fair and honest business practices. (True/False)

False

In rich environments, uncertainty is low because resources are plentiful so organizations need to compete over them. (True/False)

False

Environmental richness refers to the amount of resources available to support an organization’s domain. (True/False)

True

According to the passage, integration and communication are easy to achieve?

False

Managers have to spend their time in meetings rather than creating value, according to the passage?

True

Transaction cost theory can help managers choose an interorganizational strategy, as per the passage?

True

Keiretsu can be seen as a mechanism for achieve the benefits of a formal linkage mechanism without incurring its costs, according to the passage?

True

Outsourcing involves the process of moving a value creation activity that was performed inside an organization to outside where it is done by another company, according to the passage?

True

Franchising involves selling the right to use resources to a person or group in return for a flat fee or a share of the profits, as per the passage?

True

Managers deciding which strategy to pursue must take only one step, according to the passage?

False

According to the passage, managers have to weigh the saving in transaction costs against the bureaucratic costs of operating the linkage mechanisms?

True

Franchising and outsourcing are mentioned as two of the three linkage mechanisms that help organizations to avoid bureaucratic costs while still minimizing transaction costs?

True

According to the passage, managers do not need to consider estimating the transaction cost saving from using different linkage mechanisms?

False

Study Notes

Organizational Environment

  • An organization's environment refers to the set of pressures and forces surrounding it that have the potential to affect its operations and resource acquisition.
  • The specific environment of an organization includes forces from outside stakeholder groups that directly affect its ability to secure resources.

Organizational Domain

  • The term 'organizational domain' refers to the specific range of goods and services that an organization produces and the customers it serves.
  • Expanding internationally is a way for an organization to enlarge and protect its domain by managing the forces in its environment.

Supply Chain Management

  • Global supply chain management involves planning and controlling supply/distribution activities, including acquiring and storing raw materials, controlling work-in-process inventory, and efficiently moving finished goods from point of manufacture to point of sale.

Interorganizational Relationships

  • An interlocking directorate occurs when a director from one company sits on the board of another company.
  • Strategic alliances involve an agreement between two or more companies to share their resources and develop joint business opportunities.
  • Keiretsu is a group of organizations where each one owns shares in the others and work together for their mutual interests.
  • A cartel is an association of firms that explicitly agree to coordinate their activities.

Environmental Complexity and Dynamics

  • Environmental complexity increases if the company produces a wider variety of products for different groups of customers.
  • Environmental dynamism is the degree to which forces in the specific and general environments change quickly over time and thus contribute to the uncertainty an organization faces.

Resource Dependence Theory

  • The resource dependence theory emphasizes that an organization's goal is to manage its dependence on other organizations for the supply of scarce resources.
  • Environmental richness refers to the amount of resources available to support an organization’s domain.
  • In rich environments, uncertainty is low because resources are plentiful, so organizations don't need to compete over them.

Managing Interdependencies

  • To manage symbiotic interdependencies, organizations can use a strategy called cooptation, which involves bringing problematic forces within the organization to make them inside stakeholders.
  • A formal way to manage symbiotic interdependencies with suppliers and customers is to develop a reputation, a state in which an organization is known for its fair and honest business practices.
  • Transaction cost theory can help managers choose an interorganizational strategy.

Linkage Mechanisms

  • Franchising involves selling the right to use resources to a person or group in return for a flat fee or a share of the profits.
  • Outsourcing involves the process of moving a value creation activity that was performed inside an organization to outside where it is done by another company.
  • Managers deciding which strategy to pursue must weigh the savings in transaction costs against the bureaucratic costs of operating the linkage mechanisms.

Test your knowledge of strategic alliances and their types with this quiz. Learn about interlocking directorates, formal alliances, and other forms of collaboration between companies.

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