THE EXTERNAL ENVIRONMENT

CHAPTER FOUR
THE EXTERNAL ENVIRONMENT

MULTIPLE CHOICE

1. An organization's domain is:

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 itself with respect to 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

3. Sectors of the environment which have direct impact on the organization are called
the:
3. task environment.
3. general environment.
3. organizational buffers.
3. environmental boundary-spanners.
ANSWER: a

3. The task environment is:

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

4. An organization’s environment includes all except:

a. labor market.
b. city, state, and federal laws.
c. Competitors.
d. production processes.
ANSWER: d
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5. The following examples illustrate how various sectors can impact organizations:
a. in the industry sector, labor unions are a significant force.
b. in the market sector, we see an increasing number of foreign-owned manufacturing
plants built in the U.S.
c. in the raw materials sector, we note that steel makers 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. 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. international context
c. task environment
d. buffering roles
ANSWER: a

7. All of the following, except _______, are examples of the general environment.
a. financial resources
b. human resources
c. economic conditions
d. government sector
ANSWER: b

e. Assessment of environmental uncertainty of an organization is based primarily on

analysis of two dimensions, which are:
f. the need for information about the environment and the need for resources from
the environment.
g. the number of sectors and the organization’s niche.
h. the extent of turbulence and the amount of available resources.
i. differentiation and integration.
ANSWER: a

9. Which of the following is a proper dimension of the framework for assessing

environmental uncertainty?
a. Dispersion-contiguity
b. Simple-complex
c. Certain-uncertain
d. Internal-external
ANSWER: b
 THE EXTERNAL ENVIRONMENT

10. Which of the following means that decision makers do not have sufficient information
about environmental factors and they have a difficult time predicting external change?
a. Cooptation
b. Differentiation
c. Uncertainty
d. Integration
ANSWER: c

11. Which of the following is a proper dimension of the framework for assessing
environmental uncertainty?
a. Stable-unstable
b. Loose-tight
c. Known-unknown
d. High competitiveness-low competitiveness
ANSWER: a

12. 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
c. stable
d. unstable
ANSWER: d

13. 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
c. Airlines because of instability
d. Appliance manufacturers because of complexity
ANSWER: c

14. 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
CHAPTER FOUR

15. In 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. Boundary-spanning roles:

a. primarily link data to information
b. buffer the manufacturing department from outside intrusion that would interfere
with efficiency.
c. bring into the organization information about environmental changes.
d. 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. When she is doing this part of her job she is carrying out a
_____ role.
a. buffering
b. maintenance
c. boundary spanning
d. managerial
ANSWER: c

18. Allowing customers in an auto dealership service department to talk directly to the
mechanic rather than to a service manager:
a. is an example of creating a buffering role.
b. is creating a boundary-spanning role.
c. will make the company less fluid.
d. will make the company less responsive to customers.
ANSWER: b

19. 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.
b. resource dependence.
c. cooptation.
d. differentiation.
ANSWER: d
 THE EXTERNAL ENVIRONMENT

20. In organizations characterized by very _______ and _____ environments, almost no

managers are assigned to integration roles.
a. simple, stable
b. simple, unstable
c. complex, stable
d. complex, unstable
ANSWER: a

21. _______ is the quality of collaboration among departments.

a. Differentiation
b. Integration
c. Uncertainty
d. Cooptation
ANSWER: b

22. Organizations in rapidly changing environments tend to have _______ management

processes.
a. differentiated
b. mechanistic
c. organic
d. dependent
ANSWER: c

23. 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
c. There is a strict hierarchy of authority and control
d. Communication is horizontal
ANSWER: d

24. Which of the following characteristics most accurately describes mechanistic

organizations?
a. Authoritarian, unfriendly leadership
b. Communication is horizontal
c. It is a service organization with individualized customer demands
d. Tasks are broken down into specialized parts
ANSWER: d

25. All of 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
d. few departments, much boundary spanning
ANSWER: a
CHAPTER FOUR

26. _______ is a way that high uncertainty influences organizational characteristics.

a. Extensive planning and forecasting
b. Few departments
c. No integrating roles
d. Mechanistic structure
ANSWER: a

27. _______ 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
d. Cooptation
ANSWER: b

28. All of the following are strategies for controlling the environmental domain except
a. illegitimate activities.
b. political activities and regulations.
c. change of domain.
d. cooptation and interlocking directorates.
ANSWER: d

29. A(n) ____________ involves the purchase of one organization by another so that the
buyer assumes control.
a. acquisition
b. merger
c. joint venture
d. domain
ANSWER: a

30. Dave Dunn is a militant member of a faculty union at a medium-sized college. When the
union's negotiating committee is reporting to 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. This is an example of:
a. formal strategic alliance.
b. cooptation.
c. change of domain.
d. public relations.
ANSWER: b

31. 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
c. integration
d. indirect interlock
 THE EXTERNAL ENVIRONMENT

ANSWER: b

32. 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
d. Cooptation
ANSWER: d

33. _______ 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. 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.
d. moving to a more favorable structure.
ANSWER: c

35. _______ can be used to erect regulatory barriers against new competitors or to squash
unfavorable legislation.
a. Cooptation
b. Contracts
c. Joint venture
d. Political strategy
ANSWER: d

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.
ANSWER: False

2. 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.
ANSWER: False
CHAPTER FOUR

3. Generation Y refers to the sons and daughters of baby boomers who generally refuse to
give their support to high cost brand name goods such as Nike.
ANSWER: True

4. 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.
ANSWER: True

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

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

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

ANSWER: False

8. The greatest uncertainty for an organization occurs in the simple, unstable environment.
ANSWER: False

9. Most e-commerce companies focus on a specific competitive niche and operate in simple
but unstable environments as well.
ANSWER: True

10. 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.
ANSWER: True

11. 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.
ANSWER: True

12. 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.
ANSWER: False

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

14. Tommy Hilfiger is known for its ability to stay in close contact with its environment and
its customers.
ANSWER: True
 THE EXTERNAL ENVIRONMENT

15. Differentiation refers to differences in cognitive and emotional orientations among

managers in different functional departments.
ANSWER: True

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

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

18. When differentiation is high, integration should be high if the level of environmental
uncertainty is high.
ANSWER: True

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

ANSWER: True

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

21. In the organic organization, tasks are broken down into specialized, separate parts.
ANSWER: False

22. Row Furniture Company shifted to an organic system of management in order to produce
more rapidly on its assembly line.
ANSWER: False

23. Planning guarantees successful coping with an unstable environment.

ANSWER: False

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

25. Once an organization relies on their others for valued resources, those other organizations
can influence managerial decision making.
ANSWER: True

26. Transferring or exchanging executives offers a method of establishing favorable linkages

with external organizations.
ANSWER: True

27. In addition to establishing favorable linkages to obtain resources, organizations also may
try to change the environment.
ANSWER: True
CHAPTER FOUR

ESSAY

Test Bank Essay Case 4.0 - Questions 1 and 2

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 their product is stable. (Top management at corporate
headquarters 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 prepared for distribution in both cans and bottles. Occasionally at the end of a run, some bottles
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 little R&D takes place at the regional plant is done in Marketing.

1. Reference Test Bank Essay 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!]

2. Reference Test Bank Essay Case 4.0 to answer the following question. Would you
recommend that AligatorAde switch from its current strategy to a differentiation strategy
in which they market to the public in general? Why or why not?

3. List and describe each of the task environment sectors.

4. List and give examples of each of the general environment sectors.

5. Explain how the international context of organizations is bringing the international sector
more and more into the task environment of organizations today.

6. Why does environmental complexity lead to organizational complexity? Explain.

7. Distinguish between complexity and instability in an organization’s environment.

8. Contrast the two dimensions (axes) of the framework for environmental uncertainty.
 THE EXTERNAL ENVIRONMENT

9. Compare and contrast the four quadrants in the framework for environmental uncertainty.

10. 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?

11. Explain the pro and con arguments to creation of buffering roles.

12. List and describe three organizational adaptations to environmental uncertainty.

13. 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.

14. Discuss differentiation. How is integration connected to differentiation?

15. Describe both a mechanistic and an organic organization with which you are familiar
(from 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.

16. How do organizations use planning, forecasting, and responsiveness in stable and unstable
environments?

17. What methods are suggested for dealing effectively with resource dependence?

18. Explain how an organization could change its domain, and why it might want to do so.

19. 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 pursue and
why?