Chapter 2—Organizational Environments and Cultures
TRUE/FALSE
1. The two kinds of external organizational environments are the general environment and the specific
environment.
2. External environments are the forces and events outside a company that have the potential to influence
or affect it.
3. According to its rate of environmental change, an organization’s environment can be either stable or
dynamic, but not both.
4. Environmental complexity refers to the degree of change in the external factors that affect
organizations.
5. Resource scarcity is the degree to which an organization’s external environment has an abundance or
lack of critical organizational resources.
6. Under conditions in which the rate of both environmental change and complexity go up while
environmental resources become scarce, environmental uncertainty can be expected to increase.
7. The general segment of a company’s external environment consists of the economy and the
technological, socio-cultural, and political/legal trends that indirectly affect all organizations.
8. The general segment of a company’s external environment is unique to each firm’s industry and
directly affects the way it conducts day–to-day business.
9. Changes in any sector of the general environment eventually affect most organizations.
10. The specific segment of an organization’s external environment is unique to its region of the country.
11. Business confidence indices are a viable alternative to economic statistics for management decision
making.
12. Managers often prefer economic statistics to business confidence indices as tools for managerial
decision making because of their inherently greater accuracy.
13. The best way to manage legal responsibilities is to retain a large staff of legal specialists to defend the
company against any charges.
14. In contrast to the general segment of the external environment that DIRECTLY influences an
organization, changes in the specific segment of an organization’s external environment INDIRECTLY
affect the way a company conducts its business.
15. Proactive customer monitoring is defined as identifying and addressing customer trends and problems
after they occur.
16. Managers often do a poor job of identifying potential competitors.
17. Buyer dependence is the degree to which a company relies on a supplier because of the importance of
the supplier’s product to the company and the difficulty of finding other sources of that product.
18. A decrease in either buyer dependence or supplier dependence can lead to opportunistic behavior.
19. Advocacy groups are typically composed of concerned citizens who have a strong feeling about a
common issue even though the members’ viewpoints differ significantly.
20. The three techniques used by advocacy groups to influence companies are public communications,
media advocacy, and product boycotts.
21. Advocacy groups cannot directly regulate organization practices.
22. Because external environments can be dynamic, confusing, and complex, managers use a three-step
process to make sense of the changes in their external environments. Those steps are (1) environmental
scanning, (2) interpreting environmental factors, and (3) acting on threats and opportunities.
23. Managers can make sense of their changing external environments by completing all three of the
following steps: environmental scanning, interpreting environmental factors, and acting on threats and
opportunities.
24. Organizational culture refers to the set of key values, beliefs, and attitudes shared by organizational
members.
25. A primary source of organizational culture is the company founder.
26. After the company founders are gone, stories and heroes can help to sustain the founder’s values,
attitudes, and beliefs in the organizational culture.
27. Organizational heroes can be used to make sense of organizational events and changes.
28. Extensive research demonstrates clearly that organizational culture is strongly related to organizational
success.
29. Successful organizational cultures seem to be based solely upon consistency (i.e., “strength” of the
organizational culture).
30. The term behavioral multiplication refers to the process of having managers and employees perform
new behaviors that are central to and symbolic of the new organizational culture that a company wants
to create.
31. When used together, the combination of behavioral substitution, behavioral addition, and changing
visible artifacts is extremely likely to achieve the desired changes in organizational culture.
MULTIPLE CHOICE
1. What are the two types of external organizational environments?
a.
general and the specific
b.
public and private
c.
global and the national
d.
organizational and the interpersonal
e.
market-specific and the product-specific
2. In terms of external organizational environments, the ____ environment affects all organizations while
the ____ environment is unique to each company.
a.
global; national
b.
customer-driven; production-driven
c.
general; specific
d.
informal; formal
e.
specific; general
3. All events outside a company that have the potential to influence or affect it occur in the ____
environment.
a.
specific
b.
external
c.
formal
d.
potential
e.
national
4. Which of the following companies is most likely operating in a dynamic environment?
a.
a video game manufacturer
b.
a bakery
c.
a brewery, winery, or distillery in the liquor industry
d.
a manufacturer of pet food
e.
a cereal manufacturer
5. According to the ____theory, companies go through long, simple periods of environmental stability,
followed by short, complex periods of dynamic, fundamental environmental change, finishing with a
return to environmental stability.
a.
environmental change theory
b.
theory of environmental dynamics
c.
punctuated equilibrium theory
d.
theory of resource scarcity
e.
environmental cycle
6. Over the past 20 years, which of the following is an industry that has experienced both the stable and
dynamic environments predicted by punctuated equilibrium theory?
a.
the airline industry
b.
the baking industry
c.
the video game industry
d.
the breakfast cereal industry
e.
the landscaping industry
7. Suppose that a Mexican car manufacturer wants to export cars to Guatemala. The fact that the
distribution of income within Guatemala is highly unequal and that about 75 percent of the population
is below the poverty line would be a(n) ____ component in the manufacturer’s general environment.
a.
technological
b.
socio-cultural
c.
economic
d.
political/legal
e.
demographic
8. A company facing a simple environment would ____.
a.
most likely be in the first stage of the environmental cycle
b.
exhibit proof of the punctuated equilibrium theory
c.
be unable to succeed due to lack of innovation
d.
be influenced by only factors in its specific environment
e.
have few external factors in the environment that affect it
9. In terms of environmental complexity, ____ environments have few environmental factors, whereas
____ environments have many environmental factors.
a.
non-competitive; competitive
b.
simple; complex
c.
stable; dynamic
d.
scarce; abundant
e.
market-oriented; product-oriented
10. ____ is the degree to which an organization’s external environment has an abundance or scarcity of
critical organizational resources.
a.
Environmental complexity
b.
Environmental capacity
c.
Differentiation opportunity
d.
Environmental dynamism
e.
Resource scarcity
11. In a very strong economy, where the demand for qualified job applicants exceeds the supply, the
environmental characteristic of ____ is likely to be particularly salient for many companies.
a.
environmental complexity
b.
environmental change
c.
resource scarcity
d.
environmental uncertainty
e.
environmental risk
12. Environmental ____ is affected by environmental complexity, change, and resources.
a.
uncertainty
b.
differentiation
c.
difficulty
d.
essence
e.
entrepreneurship
13. Legislation concerning the disposal of biological wastes, the development of more sophisticated
imaging machines, and longer patient life spans would all be part of the ____ for a public hospital.
a.
internal environment
b.
specific environment
c.
socio-cultural environment
d.
general environment
e.
environmental differentiation
14. The ____ consists of the economy and the technological, socio-cultural, and political/legal trends that
indirectly affect all organizations.
a.
economic environment
b.
specific environment
c.
general environment
d.
indirect environment
e.
direct environment
15. Which of the following is a component of the specific environment that would directly influence a
restaurant’s day-to-day operation?
a.
its regular customers
b.
GNP
c.
a trend toward eating less fat
d.
more rigid enforcement of OSHA laws
e.
all of these
16. Changes in any sector of the general environment ____.
a.
will typically not impact most organizations
b.
tend to slow down how quickly an organization moves through the environmental cycle
c.
inhibit the innovation process
d.
influence customers first and then suppliers
e.
will eventually affect most organizations.
17. Which of the following is a component of Coca-Cola’s specific environment and will directly influence
how it does business?
a.
Pepsi-Cola
b.
laws concerning sanitation
c.
inflation
d.
the increased popularity of energy drinks
e.
the development of vending machines that accept debit cards
18. Which of the following is a component of a book publisher’s general environment and will indirectly
influence how it does business?
a.
other book publishing companies
b.
pornography laws
c.
an advocacy group supporting free books for children
d.
a trend toward less leisure time
e.
paper and ink suppliers
19. Which of the following is the LEAST aggressive approach likely to be used by an advocacy group?
a.
public communications
b.
media advocacy
c.
product boycotts
d.
class action lawsuits
e.
picketing
20. Consider a hamburger fast-food chain that began operations prior to World War II. In which of the
following would have been part of its specific environment after the start of World War II?
a.
other fast-food restaurants that sell hamburgers
b.
its customers who eat burgers at least once a week
c.
the meat packing company that supplied its beef
d.
government-mandated beef rationing as a result of World War II
e.
all of these
21. Managers often prefer to use business confidence indices ____.
a.
to identify socio-cultural trends
b.
as predictors of future economic activity when making business decisions
c.
which are based on intuition and experience
d.
to encourage customers to make long-term buying decisions
e.
to improve consumer confidence forecasts
22. Technology is the ____ used to transform inputs (raw materials, information, etc.) into outputs
(products or services).
a.
knowledge, tools, and techniques
b.
knowledge and machinery
c.
plans and machinery
d.
tools and techniques
e.
strategy and tactics
23. More premature babies than ever before are surviving due to improvements in medical knowledge and
care. This improved survival rate can be attributed to the ____ component of hospitals.
a.
technological
b.
socio-cultural
c.
economic
d.
political/legal
e.
demographic
24. Tourism was not the only travel-associated industry that was visibly hurt by what happened on 9/11.
People decided to vacation at home and sales of luggage and similar travel gear decreased
significantly. Sales of home swimming pools increased. This decision to stay at home reflects a change
in attitudes toward the perceived safety of long-distance traveling. This is an example of a change in
the ____ component of the general environment.
a.
technological
b.
socio-cultural
c.
economic
d.
competitive
e.
geographic
25. Fear of a lawsuit prevents many employers from giving totally honest recommendations to former
employees. This reflects a change in the ____ component of the general environment.
a.
technological
b.
social
c.
economic
d.
political/legal
e.
demographic
26. The manager of a company that produces a soy-based sausage wants to conduct a competitive analysis.
During this competitive analysis, he should look at ____.
a.
companies that produce other brands of pork-based sausage
b.
Morningstar, a company that has a complete line of soy-based products
c.
companies that produce other forms of breakfast meats like bacon
d.
individuals who make their own sausage
e.
The manager should consider all of the listed factors.
27. A fast-food restaurant chain is famous for its small, square hamburgers. Which of the following would
be a component of its socio-cultural environment?
a.
a period of business prosperity
b.
the development of fully automated drive-through windows
c.
a price war with Burger King and McDonald’s
d.
the fact most consumers prefer eating out rather than at home
e.
regulations passed by the Food & Drug Administration
28. Which of the following is NOT a dimension of the political/legal component of the general
environment that governs and regulates business behavior?
a.
legislation
b.
competitive products
c.
court decisions
d.
regulation
e.
customer-initiated lawsuits
29. A fast-food restaurant chain is famous for its small, square hamburgers. Which of the following would
be a component of its general environment?
a.
meat processing companies that provide its ground beef
b.
consumers who will drive miles out of their way to eat a burger
c.
boycotts by the Chicago organization of People for the Ethical Treatment of Animals
(PETA)
d.
local zoning laws that designate the appropriate distance from the street for a restaurant to
be located
e.
inflation
30. Which of the following is NOT a potential legal risk associated with traditional managerial decisions
like recruiting, hiring, and firing employees?
a.
negligent supervision
b.
invasion of privacy
c.
product liability
d.
defamation
e.
a charge of emotional distress
31. Two homebuilders are building homes in nearby subdivisions. One is offering 2,500-square-foot
homes with two-acre yards. The other is offering a similarly sized house with quarter-acre yards. The
builder offering the smaller lots cannot keep up with demand. The builder offering the larger lots has
several unsold houses. The builder with the larger lots could use ____ to determine why his homes are
not selling.
a.
proactive customer monitoring
b.
consumer confidence forecasts
c.
demographic information
d.
reactive customer monitoring
e.
a competitive location study
32. ____ is used to refer to a company’s practice of identifying and addressing customer trends and
problems after they occur.
a.
Consumer confidence forecasts
b.
Competitive analysis
c.
Reactive customer monitoring
d.
Proactive customer monitoring
e.
Continuous data mining
33. Two homebuilders are building homes in nearby subdivisions. One is offering 2,500-square-foot
homes with two-acre yards. The other is offering a similar size of house with quarter-acre yards. The
builder offering the smaller lots cannot keep up with demand. The builder offering the larger lots has
several unsold houses. The builder with the smaller lots most likely used ____ to determine what
homebuyers desired.
a.
reactive customer monitoring
b.
proactive customer monitoring
c.
competitive analysis
d.
environmental munificence
e.
consumer confidence forecasts
34. ____ involves deciding who your competitors are, anticipating competitors’ moves, and determining
competitors’ strengths and weaknesses.
a.
Competitive mapping
b.
A market audit
c.
A SWOT analysis
d.
A proactive strategy
e.
A competitive analysis
35. Companies doing a competitive analysis typically err by ____.
a.
doing an incomplete job of identifying competitors
b.
overestimating their competition
c.
ignoring proactive monitoring
d.
relying on competitive intelligence
e.
doing all of these
36. Typically the most important factor in the relationship between companies and their suppliers is ____.
a.
how dependent they are on each other
b.
how much they know about each other
c.
how compatible their organizational cultures are
d.
the type of product being manufactured
e.
all of these
37. An increase in ____ can lead to opportunistic behavior in which one party benefits at the expense of
the other.
a.
managerial commitment
b.
buyer dependence
c.
industry regulation
d.
advocacy group activities
e.
consumer confidence indicators
38. The creation of Ingram Distribution allows booksellers to streamline the ordering and return
procedures of their books. Ingram made all the books bookstore owners wanted available in one
centralized warehouse. Many new bookstore owners would be unwilling and/or unable to return to the
method of ordering books from the individual publishers. This is an example of the creation of ____.
a.
high buyer dependence on a supplier
b.
pure competition
c.
transactional freedom
d.
high supplier dependence on a buyer
e.
none of these
39. Small manufacturers are successful often because Wal-Mart agrees to carry their products. If Wal-Mart
does not like a price increase, it often will refuse to do business with the manufacturer. At this point,
many small manufacturers will offer price reductions because they fear failure if they lose the
Wal-Mart account. The relationship between these small manufacturers and Wal-Mart can be
described as ____.
a.
buyer dependent
b.
relationship-based
c.
transformational
d.
supplier dependent
e.
none of these
40. A high degree of buyer or seller dependence can lead to ____ in which one party benefits at the
expense of the other.
a.
relationship behavior
b.
transactional behavior
c.
behavioral monogamy
d.
relational monopoly
e.
opportunistic behavior
41. In setting up his new office, an attorney wanted furnishings that were elegant and that would make him
look successful. He wanted thick, plush carpeting in his office, but federal regulations state that his
office must be wheelchair accessible because it is a public area. Wheelchairs do not maneuver well in
thick carpeting. The building inspector had him remove the expensive carpeting and replace it with a
carpet that did allow for wheelchair maneuverability. This is an example of how the ____ component
of a company’s specific environment influences it.
a.
socio-cultural
b.
economic
c.
political/legal
d.
supplier
e.
industry regulation
42. An emphasis on ____ is likely to decrease opportunistic behavior but will never completely eliminate
it.
a.
buyer dependence
b.
supplier dependence
c.
industry regulation
d.
relationship behavior
e.
competitive advocacy
43. A fast-food restaurant chain is famous for its small, square hamburgers. Which of the following would
be an industry regulation component of its specific environment?
a.
an increase in the prime lending rate
b.
local health inspectors
c.
class-action suits against all fast-food restaurants
d.
inflation
e.
all of these
44. ____ is a tactic in which an advocacy group actively tries to convince consumers not to purchase a
company’s product or service.
a.
Lobbying
b.
Public communications
c.
Media advocacy
d.
Product boycott
e.
Market denigration
45. Advocacy groups use a variety of tactics to convince businesses to comply with the group’s stand on
issues. Which of the following advocacy group tactics would be most likely to cause a business to fail?
a.
media advocacy
b.
product boycotts
c.
public communications
d.
requiring a business license
e.
lobbying
46. The first step managers use to make sense of their changing environments is ____.
a.
environmental scanning
b.
perceptual re-engagement
c.
modifying budgets
d.
downsizing
e.
benchmarking