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Chapter 4 THE External Environment

Organizational Theory And Design (Stanford University)

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CHAPTER 4 - THE EXTERNAL ENVIRONMENT

1. What is an organization’s “domain”?
a.
the set of positions and departments within the organization
b.
the buildings and grounds that are owned or leased by the organization in which inputs
are transformed into outputs
c.
the organization’s niche that has been staked out for its products, services, and markets served
d.
the technical core that is buffered by other departments so that it can operate as a closed system
ANSWER: c

2. What term is used for sectors of the environment that have direct impact on the organization?
a.
task environment
b.
general environment
c.
environmental buffers
d.
environmental boundary-spanners
ANSWER: a

3. What is the task environment?

a.
all elements that exist outside the organizational boundary
b.
sectors with which the organization interacts directly
c.
the domain
d.
all jobs and positions inherent within the organizational activity
ANSWER: b

4. Which sector in an organization’s environment relates to understanding consumer preferences?

a.
industry
b.
international
c.
sociocultural
d.
market
ANSWER: d

5. Which examples best illustrates how various sectors can have an impact on organizations?
a.
In the industry sector, labour unions are a significant force.
b.
In the market sector, an increasing number of foreign-owned manufacturing plants are built in
North America.
c.
In the raw materials sector, steelmakers owned the beverage can market until the mid-1980s.
d.
In the human resources sector, brand names are fighting it out with lower-cost store brands.
ANSWER: c

6. Which of the following includes those sectors that might not have a direct impact on the daily operations of
a firm but will indirectly influence it?
a.
the general environment
b.
the international context
c.
the task environment

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CHAPTER 4 - THE EXTERNAL ENVIRONMENT

d.
the buffering roles
ANSWER: a

7. Which aspect of the general environment affects an organization due to rapid changes and innovations?
a.
financial resources
b.
technology sector
c.
economic conditions
d.
the government sector
ANSWER: b

8. Which two dimensions are the basis for an assessment of the environmental uncertainty of an organization?
a.
the number of elements and how quickly they change
b.
the number of sectors and the organization’s niche
c.
the extent of turbulence and the amount of available resources
d.
differentiation and integration
ANSWER: a

9. What is a dimension of the framework for assessing environmental uncertainty?

a.
dispersion-contiguity
b.
simple-complex
c.
certain-uncertain
d.
internal-external
ANSWER: b

10. What is a dimension of the framework for assessing environmental uncertainty?

a.
stable-unstable
b.
loose-tight
c.
known-unknown
d.
high competitiveness–low competitiveness
ANSWER: a

11. When Johnson & Johnson had to cope with the Tylenol poisoning issue, which dimension of its
environment was most affected?
a.
simple
b.
complex
c.
stable
d.
unstable
ANSWER: d

12. Often, decision makers do NOT have sufficient information about environmental factors so they have
a difficult time predicting external change. What is this called?
a.
cooptation

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CHAPTER 4 - THE EXTERNAL ENVIRONMENT

b.
differentiation
c.
uncertainty
d.
integration
ANSWER: c

13. In which type of industry would organizations face the greatest amount of environmental uncertainty?
a.
beer distributors because of simplicity
b.
universities because of complexity
c.
airlines because of instability
d.
appliance manufacturers because of complexity
ANSWER: c

14. What do trend-setting toy companies or high-fashion clothing manufacturers have in common?
a.
an environment that is stable but complex, therefore requiring a mechanistic structure
b.
an organic structure, from which we can reason that the environment is highly uncertain
c.
a large number of dissimilar external elements, which remain about the same over time
d.
an environment that is simple but unstable, creating relatively high uncertainty
ANSWER: d

15. Which of the following is the best application of the 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.
c.
Electronic firms are typically found in the simple and stable quadrant.
d.
Fashion clothing or toy manufacturers would exemplify the complex and unstable quadrant.
ANSWER: b

16. What is the function of boundary-spanning roles?

a.
They primarily link data to information.
b.
They buffer the manufacturing department from outside intrusion that would interfere
with efficiency.
c.
They bring information about environmental changes into the organization.
d.
They move the firm to internationalism.
ANSWER: c

17. Bobby Barista is a researcher in the R&D department at 3M. Part of her job is to read technical and
scientific journals, and to attend conferences to find out what new developments are occurring. What sort of
role is she carrying out in this part of her job?
a.
buffering
b.
maintenance
c.
boundary spanning
d.
managerial
ANSWER: c

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18. What results from allowing customers in an auto dealership service department to talk directly to
the mechanic rather than to a service manager?
a.
It creates a buffering role.
b.
It creates a boundary-spanning role.
c.
It makes the company less fluid.
d.
It makes the company less responsive to customers.
ANSWER: b

19. What term is used for unique cognitive and emotional orientations among managers across
functional departments, and the specialized formal structures among these departments?
a.
integration
b.
resource dependence
c.
cooptation
d.
differentiation
ANSWER: d

20. What term is used to refer to high quality collaboration between departments?
a.
differentiation
b.
integration
c.
uncertainty
d.
cooptation
ANSWER: b

21. Which type of management process do organizations in rapidly changing environments tend to have?
a.
differentiated
b.
mechanistic
c.
organic
d.
dependent
ANSWER: c

22. Which of the following characterizes the mechanistic process?

a.
knowledge and control of tasks that are decentralized within the organization
b.
loosely defined tasks
c.
a strict hierarchy of authority and control
d.
horizontal communication
ANSWER: a

23. Which statement most accurately describes mechanistic organizations?

a.
They have authoritarian, unfriendly leadership.
b.
Communication is horizontal.
c.
They are service organizations with individualized customer demands.

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d.
Tasks are broken down into specialized parts.
ANSWER: d

24. High-moderate uncertainty environments are unstable but simple. What organizational responses are
elicited by this environment?
a.
mechanistic structure; formal, centralized
b.
few buffering roles
c.
planning orientation; fast response
d.
many departments; few boundary spanning
ANSWER: c

25. Which of the following is an example of the way high uncertainty influences organizational
design responses?
a.
requiring extensive planning and forecasting
b.
having few departments
c.
having no integrating roles
d.
using a mechanistic structure
ANSWER: a

26. What term refers to the idea that organizations need the environment but strive to minimize
their vulnerabilities?
a.
integration
b.
resource dependence
c.
organic process
d.
cooptation
ANSWER: b

27. Which of the following is likely in organizations characterized by very simple and stable environments?
a.
Almost no managers are assigned to integration roles.
b.
Many departments are added.
c.
There is formal, centralized authority.
d.
There is extensive planning, forecasting, and high-speed responses.
ANSWER: a

28. What term refers to the purchase of one organization by another so that the buyer assumes control?
a.
acquisition
b.
merger
c.
joint venture
d.
domain
ANSWER: a

29. Dave Dunn is a militant member of a faculty union. When the union’s negotiating committee is reporting to

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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 Dave to take his place. What is this is an example of?
a.
formal strategic alliance
b.
cooptation
c.
change of domain
d.
public relations
ANSWER: b

30. If an organization were engaging in illegitimate behaviours, which of the following might it be trying to do?
a.
control its environmental domain
b.
attempt to influence political activities
c.
change its domain
d.
cooptation of interlocking directorates
ANSWER: d

31. What is the term for 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?
a.
joint venture
b.
interlocking directorate
c.
integration
d.
indirect interlock
ANSWER: b

32. What occurs when leaders from important sectors in an organization’s environment are asked to join
that organization?
a.
integration
b.
joint venture
c.
resource dependence
d.
cooptation
ANSWER: d

33. What is especially important in highly competitive consumer industries and in industries that
experience variable demand?
a.
advertising
b.
cooptation
c.
executive recruitment
d.
contracts
ANSWER: a

34. How can an organization change its domain most directly?

a.
by hiring a new CEO

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b.
by changing the nature of the labour–management agreements
c.
by divesting a division of the organization
d.
by moving to a more favourable structure
ANSWER: c

35. What can be used to erect regulatory barriers against new competitors or squash unfavourable legislation?
a.
cooptation
b.
contracts
c.
joint venture
d.
political strategy
ANSWER: d

36. The general environment includes sectors with which the organization interacts directly and that have
a direct and regular impact on the organization’s ability to achieve its goals.
a.
True
b.
False
ANSWER: False

37. The sociocultural sector refers to municipal, provincial, and federal laws and regulations; taxes;
court systems; and political processes that may be in an organization’s environment.
a.
True
b.
False
ANSWER: False

38. 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.
a.
True
b.
False
ANSWER: True

39. The growing importance of the international sector means that the environment of all organizations
is becoming extremely simple and extremely stable.
a.
True
b.
False
ANSWER: False

40. Organizations must cope with and manage uncertainty to be effective.

a.
True
b.
False
ANSWER: True

41. The environmental conditions of complexity and change create a greater need to gather information and
to respond based on that information.
a.
True

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b.
False
ANSWER: True

42. Most e-commerce companies focus on a specific competitive niche and operate in simple but
unstable environments.
a.
True
b.
False
ANSWER: True

43. A hardware store would be in a complex environment.

a.
True
b.
False
ANSWER: False

44. The greatest uncertainty for an organization occurs in the simple, unstable environment.
a.
True
b.
False
ANSWER: False

45. 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.
a.
True
b.
False
ANSWER: True

46. 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.
a.
True
b.
False
ANSWER: False

47. Boundary spanners can prevent the organization from stagnating by keeping top managers informed
about environmental changes.
a.
True
b.
False
ANSWER: True

48. Joe Fresh Style is known for its ability to stay in close contact with its environment and its customers.
a.
True
b.
False
ANSWER: True

49. Differentiation refers to differences in cognitive and emotional orientations among managers in
different functional departments.

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a.
True
b.
False
ANSWER: True

50. A company in a highly uncertain environment is more likely to need a formal integrator.
a.
True
b.
False
ANSWER: True

51. One outcome of high differentiation is that coordination between departments becomes more difficult
until integrative devices are put in place.
a.
True
b.
False
ANSWER: True

52. When differentiation is high, integration should be high if the level of environmental uncertainty is high.
a.
True
b.
False
ANSWER: True

53. Planning guarantees successfully coping with an unstable environment.

a.
True
b.
False
ANSWER: FALSE

54. Once an organization relies on other organizations for valued resources, those other organizations
can influence managerial decision making in the original organization.
a.
True
b.
False
ANSWER: True

55. In rapidly changing environments, an organic structure is usually better.

a.
True
b.
False
ANSWER: True

56. If the external environment is stable, a mechanistic and formal organization can be successful.
a.
True
b.
False
ANSWER: True

57. 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.
a.
True

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b.
False
ANSWER: True

58. In the organic organization, tasks are broken down into specialized, separate parts.
a.
True
b.
False
ANSWER: False

59. The learning organization is an organic structure.

a.
True
b.
False
ANSWER: True

60. When organizations depend on the environment but strive to acquire control over resources to
minimize their dependence, it is referred to as cooptation.
a.
True
b.
False
ANSWER: False

61. Transferring or exchanging executives offers a method of establishing favourable linkages with
external organizations.
a.
True
b.
False
ANSWER: True

62. In addition to establishing favourable linkages to obtain resources, organizations also may try to change
the environment.
a.
True
b.
False
ANSWER: True

63. Sometimes nonprofit organizations have tried to reduce their resource dependence through illegal activities.
a.
True
b.
False
ANSWER: True

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