MI375: Chapter 3

According to agency theory, the firm is viewed as a(n.:

"nexus of contracts" among self-interested individuals

Agency Theory

Firm is nexus of contracts among self-interested parties requiring supervision Firms experience agency costs (the cost of managing and supervising) which rise as firm grows

Transaction Cost Theory

Firms seek to economize on transaction costs (the costs of participating in markets)

What Is an Organization?

Formal social structure that processes resources from environment to produce outputs A formal legal entity with internal rules and procedures, as well as a social structure

Which of the following is an example of a divisionalized bureaucracy?

Fortune 500 firm

Understanding Organizational Resistance to Change: Four factors

Nature of the innovation Structure of organization Culture of organization Tasks affected by innovation

Routines (standard operating procedures

Precise rules, procedures, and practices developed to cope with virtually all expected situations

Which of the following substitute products would be of most concern for a cable TV distributor?

Satellite TV

Which of the following industries has the lowest barrier to entry?

Small retailer

Features of Organizations

Use of hierarchical structure Accountability, authority in system of impartial decision making Adherence to principle of efficiency Routines and business processes Organizational politics, culture, environments, and structures

Which of the following technologies disrupted the traditional publishing industry?

World Wide Web

Walmart's attempt to increase its online presence is an example of a firm using information systems to:

achieve low-cost leadership

The interaction between information technology and organizations is influenced:

by many factors, including structure, politics, culture, and environment

Along with capital, ________ is the primary production input that the organization uses to create products and services.

labor

The four major competitive strategies are:

low-cost leadership, product differentiation, focus on market niche, and customer and supplier intimacy

Firms use a ________ strategy to provide a specialized product or service for a narrow target market better than competitors.

market niche

The divergent viewpoints about how resources, rewards, and punishments should be distributed, and the struggles resulting from these differences are known as organizational:

politics

Under Mintzberg's classification of organizational structure, knowledge-based organizations fall under the category of:

professional bureaucracies

All organizations have bedrock, unquestioned assumptions that define their goals and products

true

Which of the following statements about organizations is not true?

An informal group can be considered to be an organization.

Which model is used to describe the interaction of external forces that affect an organization's strategy and ability to compete?

Competitive forces model