Chapter 3: Organizational Environments and Culture
TRUE/FALSE
1. External environments are the forces and events outside a company that have the potential to influence
or affect it.
2. According to its rate of environmental change, an organization’s environment can be either stable or
dynamic, but not both.
3. Environmental complexity refers to the degree of change in the external factors that affect
organizations.
4. Resource scarcity is the degree to which an organization’s external environment has an abundance or
scarcity of critical organizational resources.
5. The two kinds of external organizational environments are the general environment that affects all
organizations and the specific environment that is unique to each company.
6. The general environment consists of the economy and the technological, sociocultural, and
political/legal trends that indirectly affect all organizations.
7. The greater the rate of environmental change, environmental complexity, and resource scarcity, the
less confident managers are that they can understand and predict the trends affecting their businesses.
8. When the owner of L’Occitane bath and beauty products realized how acute the sense of smell is in
people who are visually challenged, he began printing all of the company’s product instructions in
Braille. This change was a response to the customer component of the company’s specific
environment.
9. The general external environment is unique to each firm’s industry and directly affects the way it
conducts day-to-day business.
10. Changes in any sector of the general environment eventually affect most organizations.
11. Managers often prefer economic statistics to business confidence indices as tools for managerial
decision making because of their inherently greater accuracy.
12. Business confidence indices are a viable alternative to economic statistics for management decision
making.
13. Productivity is the knowledge, tools, and techniques used to transform inputs (raw materials,
information, etc.) into outputs (products and services).
14. In 2007, the national power company in Nigeria experienced a decline in its ability to generate
electrical power. This decline is due to the Nigerian government’s instability, a political/legal
component of the company’s specific environment.
15. The best way to manage legal responsibilities is to retain a large staff of legal specialists to defend the
company against any charges.
16. Proactive customer monitoring is identifying and addressing customer trends and problems after they
occur.
17. Managers are quite adept at identifying potential competitors.
18. 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.
19. A decrease in either buyer dependence or supplier dependence can lead to opportunistic behavior.
20. The three techniques that can be used by advocacy groups to influence companies are public
communications, media advocacy, and product boycotts.
21. Advocacy groups are typically composed of concerned citizens who have a strong feeling about a
common issue, even though the members’ points of view may differ significantly.
22. Advocacy groups cannot force organizations to change their practices.
23. 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.
24. Managers scan their environments to stay up-to-date on important factors in their industry, to reduce
uncertainty, to develop or maintain a competitive advantage, and to enhance organizational
performance.
25. Companies can use benchmarking to reduce uncertainty.
26. Perceptual maps are simplified models of external environments.
27. Managers can only 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.
28. Organizational culture refers to the set of key values, beliefs, and attitudes shared by organizational
members.
29. A primary source of organizational culture is the company founder.
30. After the company founders are gone, stories and heroes can help to sustain the founder’s values,
attitudes, and beliefs in the organizational culture.
31. Organizational heroes are used to make sense of organizational events and changes.
32. Extensive research demonstrates clearly that organizational culture is strongly related to organizational
success.
33. Successful organizational cultures seem to be based solely upon the strength of the organizational
culture.
34. 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.
35. A corporate philosophy stating, “Don’t respond to environmental change if the company is still
making a profit,” would not keep a company from developing a successful organizational culture.
36. An environmental scan might reveal that customers who are willing to pay $5 for a cup of coffee are
actually buying the atmosphere of the restaurant that sells the coffee.
37. Mission statements do not have to be specific to be effective tools for creating successful
organizational cultures.
38. 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.
MULTIPLE CHOICE
1. According to the __________, 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
2. 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
3. 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 only by factors in its specific environment
e.
have few external factors in the environment that affect it
4. 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
5. What are the two types of external organizational environments?
a.
general and specific
b.
public and private
c.
global and the national
d.
organizational and the interpersonal
e.
market-specific and the product-specific
6. 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
7. 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.
global
8. Imagine that a Venezuelan appliance manufacturer wants to export its refrigerators to Guatemala. The
knowledge that the distribution of income within Guatemala is highly unequal and 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.
sociocultural
c.
economic
d.
political/legal
e.
demographic
9. __________ 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
10. Environmental __________ determines how well managers can understand or predict the external
changes and trends affecting their businesses.
a.
complexity
b.
change
c.
adaptability
d.
synergy
e.
uncertainty
11. Environmental __________ is affected by environmental complexity, change, and resources.
a.
uncertainty
b.
differentiation
c.
complexity
d.
essence
e.
entrepreneurship
12. The __________ consists of the economy and the technological, sociocultural, and political/legal
trends that indirectly affect all organizations.
a.
economic environment
b.
specific environment
c.
general environment
d.
indirect environment
e.
direct environment
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.
sociocultural environment
d.
general environment
e.
environmental differentiation
14. Which of the following is a component of the specific environment that would directly influence a
museum’s day–to-day operation?
a.
other museums in the area
b.
inflation levels
c.
a growing consumer preference for more primitive art
d.
more rigid enforcement of the American with Disabilities Act laws
e.
all of these
15. 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
16. Which of the following is a component of a local newspaper’s general environment and will indirectly
influence how it does business?
a.
an Internet-based newspaper that carries local news
b.
lobbyists for the local airport
c.
a local advocacy group demanding the newspaper not print ads for fur coats
d.
a trend toward less leisure time
e.
its supplier of paper
17. White Castle is a fast-food restaurant chain that 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 White Castle 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 White Castle
restaurant to be located
e.
inflation
18. A CEO who is considering opening a manufacturing business in the Dominican Republic would need
to know that the country contains about 2.6 million laborers and has a 17 percent unemployment rate.
Its unemployment rate would be part of the expanding business’s _____ environment.
a.
technological
b.
social
c.
economic
d.
cultural
e.
political
19. More premature babies than ever before are surviving due to improvements in medical knowledge and
care. The __________ component of hospitals has influenced this improved survival rate.
a.
technological
b.
sociocultural
c.
economic
d.
political/legal
e.
demographic
20. Technology is the __________ used to transform inputs (raw materials, information, etc.) into outputs
(goods or services).
a.
knowledge, tools, and techniques
b.
knowledge and machinery
c.
plans and machinery
d.
tools and techniques
e.
strategy and tactics
21. Home networking is predicted to be the wave of the future. Microprocessors can be used to run up to
85 different appliances and such in the average home. You will be able to set a program to record a
television show, check to see if you turned off your curling iron, turn on and off lights, and do
hundreds of other similar tasks from wherever you happen to be. This change in the _____
environment will influence all kinds of businesses from appliance manufacturers to security systems.
a.
technological
b.
social
c.
economic
d.
cultural
e.
political
22. Managers often prefer to use business confidence indices:
a.
to identify sociocultural 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
23. Ten years ago, upper- and middle-class Chinese enjoyed various forms of hard liquor such as brandy,
gin, and bourbon. Today, these same Chinese classes are ordering wine rather than hard liquor. This
is an example of a change in the __________ component of the general environment of a distiller.
a.
technological
b.
sociocultural
c.
economic
d.
competitive
e.
geographic
24. When Hurricane Katrina pounded her way through the Gulf Coast, Orleans Parish, La., and Harrison
County, Miss., were among the areas hardest hit. The counties, which are home to New Orleans and
Biloxi, Miss., respectively, also share other traits. Data from the U.S. Census Bureau show that with
median household incomes of about $31,000, they lag the national average of $44,684 by 44 percent.
The _____ environments in those counties will influence the general environment of businesses that
try to locate there.
a.
technological
b.
sociocultural
c.
economic
d.
demographic
e.
political/legal
25. White Castle is a fast-food restaurant chain that is famous for its small, square hamburgers. The chain
began prior to World War II. Which of the following would have been part of its general environment
during the war?
a.
other fast-food restaurants that sell hamburgers
b.
its customers who eat White Castle 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
26. The popularity of natural, organic supermarkets such as Whole Foods Markets has negatively
impacted the sales at Kroger, Albertsons, and Safeway supermarkets. The negative impact on sales
was due to changes in the ______ environment.
a.
technological
b.
sociocultural
c.
economic
d.
demographic
e.
political
27. Many urban areas have installed roadside cameras to record motorists running red lights and give
tickets to those whose cars are photographed racing through the intersections. This attempt to save
lives by getting people to drive more safely reflects a change in the __________ components of the
general environment.
a.
technological and political/legal
b.
social and political/legal
c.
economic and sociocultural
d.
political/legal and demographic
e.
demographic and political/legal
28. White Castle is a fast-food restaurant chain that is famous for its small, square hamburgers. Which of
the following would be a component of its sociocultural 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 that most consumers prefer to eat out rather than at home
e.
regulations passed by the Food & Drug Administration
29. 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
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. Laura Childs found a charming old cottage in which to set up her herbal business and tea house, but
the bathroom was not big enough for a wheelchair. Lawrence Li wanted to set up a paintball alley in
an old factory but there was no ramp entrance. Many other small business owners have found how
expensive it is to comply with Americans with Disabilities Act regulations in new businesses. This
federal law is an example of a component of the _____ environment.
a.
technological
b.
sociocultural
c.
economic
d.
demographic
e.
political/legal
32. The Bailey Wildlife Fund was created to act as a protector of wolves, grizzly bears, and other
predatory animals. It works with landowners to prevent or reduce predator problems. The nonprofit
organization asks landowners to suggest plans that can be implemented to prevent predators from
attacking their herds, and then the Fund pays to implement those that offer the most universal benefit.
The landowners are part of the _____ component of the Fund’s specific environment.
a.
competitor
b.
industry regulation
c.
supplier
d.
customer
e.
political/legal
33. __________ 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
34. The best way for an organization to manage legal responsibilities is to:
a.
retain a large legal staff
b.
educate managers and employees
c.
continuously scan the environment for legal developments
d.
develop clear in-house procedures for investigating complaints
e.
never do anything illegal
35. Two homebuilders are building homes in nearby subdivisions. One is offering 2,500-square-foot
homes with two-acre yards. The other is offering similar-size houses 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 analysis
36. Even after bloggers revealed that the standard Kryptonite U-shaped lock could be easily opened with a
Bic pen, the Kryptonite Company tried to deny there were any problems with its product. Finally, it
agreed to address customers’ concerns by replacing the locks if the customer still had his or her sales
slip. Kryptonite engaged in:
a.
proactive customer monitoring
b.
consumer confidence forecasts
c.
demographic information
d.
reactive customer monitoring
e.
a competitive analysis
37. Which of the following is a component of Volkswagen’s specific environment and will directly
influence how it does business?
a.
Renault, a French car maker
b.
laws concerning air bags
c.
inflation
d.
gasoline prices
e.
the fact consumers are buying fewer SUVs
38. Two homebuilders are building homes in nearby subdivisions. One is offering 2,500-square-foot
homes with two-acre yards. The other is offering similar-size houses 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 home buyers desired.
a.
reactive customer monitoring
b.
proactive customer monitoring
c.
competitive analysis
d.
environmental munificence
e.
consumer confidence forecasts
39. In response to changes in the _____ component of its specific environment, McDonald’s in Europe has
installed iPods in its restaurants, introduced higher-quality coffee, and developed comfortable chairs.
a.
supplier
b.
customer
c.
industry regulation
d.
advocacy group
e.
demographic
40. In the spring of 2007, Howard Schultz, the chairman of Starbucks, expressed his concern over the
encroachment of fast-food operations into the coffeehouse business. Schultz is concerned with the
_____ component of the specific environment of Starbucks.
a.
supplier
b.
customer
c.
industry regulation
d.
advocacy groups
e.
competitor
41. The manager of a company that produces soy-based sausage wants to conduct a competitive analysis.
During this competitive analysis, she should look at:
a.
companies that produce Tennessee Pride, Jimmy Dean, and 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 meat like bacon
d.
individuals who make their own sausage
e.
all of these
42. __________ 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
43. 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
44. The Bailey Wildlife Fund was created to act as a protector of wolves, grizzly bears, and other
predatory animals. It works with landowners to prevent or reduce predator problems. The nonprofit
organization asks landowners to suggest plans that can be implemented to prevent predators from
attacking their herds, and then the Fund pays to implement those that offer the most universal benefit.
This is an example of:
a.
proactive customer monitoring
b.
consumer confidence forecasts
c.
demographic information
d.
reactive customer monitoring
e.
a competitive analysis
45. Albertsons is one of the top three supermarket chains in the United States. It is searching for new
ways to attract the fickle U.S. consumer. As it looks to attract more customers to its stores, it has
identified its competitors including smaller stores, such as Whole Foods Market and Aldi, and
examined their strengths and weaknesses. Albertsons has conducted:
a.
competitive mapping
b.
a market audit
c.
a SWOT analysis
d.
a proactive audit
e.
a competitive analysis
46. A key factor influencing 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
47. Scientists have developed a fast and inexpensive test for bacterial contamination to detect salmonella
and listeria in food. The test will help restaurants maintain food safety and customer loyalty. Litmus
is the only company manufacturing and marketing the test and holds the patent for the test
methodology. If the FDA requires all restaurants to use this test, which can only be purchased
directly from Litmus, then _____ will be strong.
a.
buyer dependence
b.
pure competition
c.
transactional freedom
d.
supplier dependence
e.
resource scarcity
48. When a hardware store agrees to be an exclusive dealer of Husqvarna power tools, it turns over about
25 percent of its floor space to the manufacturer’s displays. If Husqvarna were to experience a
long-term strike that made it impossible to deliver products, than the hardware store’s sales would
likely decline due to:
a.
cognitive perceptions
b.
supplier dependence
c.
industry regulation
d.
resource scarcity
e.
retail complexity
49. 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
50. Scientists have developed a fast and inexpensive test for bacterial contamination to detect salmonella
and listeria in food. The test will help restaurants maintain food safety and customer loyalty. In
terms of the specific environment of the restaurant industry, if the FDA requires all restaurants to buy
and use this test, it would be an example of the _____ component of the environment.
a.
supplier
b.
advocacy group
c.
industry regulation
d.
technological
e.
competitor
51. 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
because his office is a public area, it must be wheelchair accessible. 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 wheelchair maneuverability. This is an example of how the __________
component of a company’s specific environment influences it.
a.
sociocultural
b.
economic
c.
political/legal
d.
supplier
e.
industry regulation
52. __________ is the establishment of mutually beneficial, long-term exchanges between buyers and
suppliers.
a.
Transactional partnering
b.
Buyer-seller co-dependence
c.
Relationship behavior
d.
Cooperative transformation
e.
Influential partnering
53. The designer of Tranquility Yoga Wear thought she had finally got the break she needed to make a
success of her product when QVC announced that it wanted to carry the product. She had several
thousand tops and pants manufactured. The hour-long QVC show sold $250,000 less than predicted.
The designer of the sportswear was told that she would no longer be a part of the QVC family, and she
would have to look elsewhere to sell her returned inventory. In this case, the designer of Tranquility
Yoga Wear experienced a high degree of:
a.
buyer dependence
b.
supplier dependence
c.
industry regulation
d.
resource scarcity
e.
retail complexity
54. Regulators in the European Union have accused brewers of Inbev, Heineken, Grolsch, and Bavaria
brand beers of collusion in the Netherlands. The brewers will have to pay 10 percent of their annual
global sales if they are found guilty. This is an example of how the _____ environment affects
industries.
a.
specific
b.
sociocultural
c.
competitor
d.
demographic
e.
general
55. White Castle is a fast-food restaurant chain that 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
56. An increase in __________ can lead to opportunistic behavior in which one party benefits at the
expense of the other.
a.
managerial initiatives
b.
buyer dependence
c.
industry regulation
d.
advocacy group activities
e.
consumer confidence indicators