Self-EvaluationProblems

1-1.Briefly describe Economic Darwinism.

1-2.The Wall Street Journal¹¹ reports that

Franchisees, who pay fees and royalties in exchange for using franchisers' business formats, have become much more militant in recent years about what they see as mistreatment by franchisers. In general, Ms. Kezios is seeking federal and state laws to give franchisees more power in franchise arrangements. Among her goals: creating legally pro- tected exclusive territories for franchisees.

How would you expect existing franchisees to react to this proposed regulation? How would you expect a potential new franchisee to react to this proposed regulation?

Review Questions

1-1.What are the three aspects of organizational architecture?

1-2.In the process of benchmarking, a colleague of yours notes that Lincoln Electric, a producer of electric arc welders, has much higher productivity than does your company. Unlike your firm, Lincoln has an extensive piece-rate compensation system; much of its employees' total compensation is simply the number of units produced times the piece rate for that type unit. Your colleague recommends that your company adopt a piece-rate compensation sys- tem to boost productivity. What do you advise?

1-3.In the life insurance industry, we see two major ownership structurescommon stock in- surers and mutual insurers. In a common stock company, the ownersits stockholdersare a separate group from its customersthe policyholders. In a mutual, the policyholders are also the owners of the company. It has been argued that mutual insurance companies are dinosaursthey are large, slow, bureaucratic, and inefficient. How would you respond to such an argument?