BADM 482 Final (Ch. 5-8)
a
A high percentage of R&D/Revenue ratio indicates a(n) a. strong focus on innovation to improve current products and services. b. negligent investment toward research and development. c. inefficiency in the management to focus on new products. d. strong focus on marketing and sales to promote products and services.
Level of diversification
A large conglomerate is deciding on the range of new products and services it can offer to its customers to further expand its operations. This decision determines the firm's
Joint venture
A stand-alone organization created and jointly owned by two or more parent companies.
industry life cycle
the five different stages - introduction, growth, shakeout, maturity, and decline - that occur in the evolution of an industry over time
Razor-razor blades
the initial product is often sold at a loss or given away for free to drive demand for complementary goods
value innovation
the simultaneous pursuit of differentiation and low cost in a way that creates a leap in value for both the firm and the consumers; considered a cornerstone of blue ocean strategy
scope of competition
the size of the market in which a firm chooses to compete
Invention
the transformation of an idea into a new product or process, or the modification and recombination of existing ones
Pay-as-you-go
users pay for only the services they consumer
focused cost leadership strategy
same as the cost-leadership strategy except with a narrow focus on a niche market
focused differentiation strategy
same as the differentiation strategy except with a narrow focus on a niche market
Single Business
95% or more of revenue comes from a single business
a
A firm has 30 million shares outstanding, and each share is traded at $100. Also, each shareholder gets a dividend of $2,000 annually. In this case, the market capitalization is a. $3 billion, that is, 30 million shares × $100. b. 20:1, that is, $2,000/$100. c. $200,000, that is, $2,000 × $100. d. 30,000 shares, that is, 30 million shares/$100.
b
A blue ocean strategy typically allows a firm to a. add product features that raise costs without raising the perceived value. b. offer a differentiated product or service at low cost. c. provide unique product or service features at a premium price. d. reduce the value gap created by their products.
b
A factor favoring the success of disruptive innovation is that a. new entrants have highly formal organizational structures and processes. b. incumbent firms are slow to change. c. the low end of the market is highly guarded. d. incumbent firms focus on radical innovation rather than incremental innovation.
related linked diversification
Amazon expanded its single-product business by leveraging spare capacity into cloud computing and by offering its Kindle line of tablet computers and Echo line of digital assistants. This is an example of
b
According to the crossing-the-chasm framework, a firm's transition between the different parts of the industry life cycle is difficult because a. the firm tends to follow a predictable industry life cycle. b. there is a big gulf separating the early adopters from customer segments that make up the mass market. c. there are frequent changes in the supply and demand sides of the market throughout the industry life cycle. d. the number and size of competitors change throughout the industry life cycle.
a
All of the following are tools primarily used to achieve cost-leadership except a. offering products at a premium price. b. controlling the cost of inputs. c. leveraging economies of scale. d. learning by doing.
harvest strategy
Although Mountaintop Electronics still sells its DVD players, a product in its decline stage, the investments made by the company on improving or marketing the product are very low. The company has allocated the least amount of human and financial capital to this department. Which of the following strategies has Mountaintop Electronics adopted in this scenario?
c
An inverted U-shaped relationship between the type of diversification and overall firm performance indicates that a. firms that compete in single markets benefit the most from economies of scope. b. levels of vertical integration and overall firm performance share an inverse relationship. c. high and low levels of diversification are generally associated with lower overall performance. d. moderate levels of diversification fail to achieve additional value creation.
intrapreneur
someone who works inside an existing organization who sees an opportunity for a product or service and mobilizes the organization's resources to try to realize it
incremental innovation
squarely builds on an established knowledge base and steadily improves an existing product or service offering
a conglomerate
Argus Inc. is a large multinational company owned by two partners, is active in the petroleum, capital market, chemicals, steel, beverages, hospitality, airlines, education, automobiles, and consumer electronics industries. The company has multiple brands and a large product portfolio under its banner. Which of the following terms would best describe this company? -a single-business firm -a flagship brand - a dominant-business firm -a conglomerate
Business Model
stipulates how the firm conducts its business with its buyers, suppliers, and partners in order to make money
an intrapreneur
Bela is a marketing and sales employee at Hopscotch Foods Inc. She has invented a new way to process and pack the company's food products that would avoid the usage of chemical preservatives. Which of the following terms best describes Bela?
b
Best Mobile and Turbo Tech Inc. are two competitors in the mobile phone market. The cost incurred by each company to manufacture smartphones is $200 per unit. Although both the companies sell their smartphones at the same price, Turbo Tech has a larger market share in the laptop industry. What does this imply? a. Best Mobile has a competitive advantage over Turbo Tech. b. Turbo Tech has been able to offer more perceived value than Best Mobile. c. Best Mobile has created a higher value gap than Turbo Tech. d. Turbo Tech has a cost advantage over Best Mobile.
availability of complements
Body Sync Inc. is a chain of gyms. It offers a fitness package that allows its members to use the gym facilities for 12 months by paying only for 10 months. Included in the package are two health checkups and a gym kit. These add-ons by themselves are not very valuable, but as a package they can enhance the perceived value of the service offerings. In this case, Body Sync's primary value driver is
low-cost input factors
Both BioThink Inc. and GD Pharma Inc. have discovered similar vaccines to prevent cancer. While GD Pharma's vaccine sells at $100 per unit, BioThink sells its vaccine at $90 per unit. This price differentiation has mainly been attributed to the companies' capital decisions. While BioThink used its retained earnings to develop the vaccine, GD Pharma borrowed funds from banks to develop the vaccine. Thus, GD Pharma pays a higher interest on its capital, which makes it necessary to price its vaccine higher. Thus, the key driver for BioThink's competitive advantage is
Blue Ocean Strategy
Business-level strategy that successfully combines differentiation and cost-leadership activities using value innovation to reconcile the inherent trade-offs.
Balanced Scorecard
strategy implementation tool that harnesses multiple internal and external performance metrics in order to balance financial and strategic goals
Decline Stage
the PLC stage in which a product's sales fade away
related diversification strategy
Corporate strategy in which a firm derives less than 70 percent of its revenues from a single business activity and obtains revenues from other lines of business that are linked to the primary business activity.
unrelated diversification strategy
Corporate strategy in which a firm derives less than 70 percent of its revenues from a single business and there are few, if any, linkages among its businesses.
Innovation
the commercialization of an invention
d
The strategic objective of a first mover during the introduction stage of the industry life cycle is to a. pursue a harvest strategy. b. lower entry barriers. c. survive by drawing on deep pockets. d. achieve market acceptance.
economic value created
The sum of consumer surplus and producer surplus for a good or service equals the
blue ocean strategy
Downtown Coffee Roasters is a premium cafe that is reputed for its superior customer service. The coffee shop also serves gourmet food to its customers, which allows it to charge a premium price. Budget Beans, in contrast, is a chain of coffee shops that charges the lowest price in the industry due to its self-service policy. However, Perky's Coffee Inc. has found a balance between these two strategic groups by using automated ordering to free up its employees to work as master baristas and bakers, thus focusing on creating excellent products. It charges a price slightly above that of Budget Beans. In this scenario, Perky's Coffee is following a -product diversification strategy. -market penetration strategy. -blue ocean strategy. -liquidation strategy.
process innovation
Dr. Shetty is able to drive down the cost of complex medical procedures from $100,000 to $2,000 not by doing one big thing, but rather by doing a thousand small things. This approach focuses on driving down the cost of healthcare through
consumer surplus plus firm profit
Economic value creation is best expressed as
increase their market power
Firms often consolidate industries through horizontal mergers and acquisitions to
incremental innovation
Foot Friendly is a manufacturer of athletic shoes. It has released an improved version of its premier running shoe in markets in which the company already operates. Which of the following types of innovations does this scenario best illustrate?
External Transaction Costs
the costs of searching for a firm or an individual with whom to contracts, and then negotiating, monitoring, and enforcing the contract.
information asymmetries
Gerda, a real estate agent, is selling a moderately priced house in a subdivision. She knows from her uncle that the factory being built half a mile from the subdivision will be manufacturing dog food, using a process that creates a very strong odor that permeates the surrounding neighborhood. A buyer, who is unaware of the type of factory under construction, makes an offer on one of the houses Gerda is selling, and within a short time, the deal goes through. What does this scenario best illustrate?
superior customer service
GiftBasket.com has successfully created a higher perceived value in the e-commerce industry, though it offers the same products at slightly higher prices than the competitors. This has been mainly attributed to the company's easy-to-navigate website, simple return procedures, fast delivery, and cash on delivery option. Thus, the value driver for GiftBasket.com is its -lower value gap. -economies of scale. -superior customer service. -availability of complements.
$200
Global Reach Corp. is a public company whose shares are currently trading in the market at $150 each. The company manufactures smartphones at the cost of $300 per unit and sells them in the market for $500 each. What is the company's producer surplus?
forward vertical integration
HTC started as an original equipment manufacturing firm (OEM) for brand-name mobile device companies. Later, it started offering a line up of innovative and high-performance smartphones by acquiring One & Co., a San Francisco-based design firm. This strategic move of HTC is known as
a
How are the early majority and late majority different in their attitudes toward technology? a. The early majority is confident in their ability to master the new technology; the late majority is not. b. The early majority is concerned that many new technologies will fade away; the late majority is not. c. The early majority is strongly influenced by the endorsements of others; the late majority is not. d. The early majority is very concerned with what new technology can do for them; the late majority is not.
Business Strategy
How to compete (cost leadership, differentiation, or integration)
Consumer surplus
If a company has 25 million shares outstanding, and each share is traded at $400, the ______ is $10 billion.
market capitalization
If a company has 25 million shares outstanding, and each share is traded at $400, the ______ is $10 billion.
d
If costs are equal, when a firm has a higher value gap than its competitor, it can be inferred that the firm a. has achieved a competitive parity in its chosen industry. b. can adopt a cost-leadership strategy. c. has lost its competitive advantage to its competitor. d. can charge a premium price for its products and services.
c
In a focused cost-leadership strategy, a firm a. focuses on reducing the economic value created to drive down costs. b. caters to the segment of the market that is least cost-sensitive. c. delivers low-cost products and services to a specific, narrow part of the market. d. provides high-priced products for many different segments of the mass market.
b
In a focused differentiation strategy, a firm seeks to a. offer low-priced products and services with a narrow focus on a niche market. b. deliver products or services with unique features to a specific, narrow part of the market. c. focus on reducing the value gap to differentiate itself from the competitors. d. create higher customer value than the competitors in different segments of a mass market.
experience curve
In the _____, firms change the underlying technology while holding cumulative output constant.
b
In the financial year 2016, for every $100 in revenues, Microsoft earned $21.5 in profit, while Apple earned $20.6 in profit. This demonstrates that a. Microsoft was more efficient than Apple in producing its goods. b. Microsoft's return on revenue was higher than that of Apple. c. Microsoft was using its capital more efficiently to generate revenue than Apple. d. Apple's inventory turnover was more than that of Microsoft's.
b
In the third step of the innovation process, a(n) a. new idea is presented in terms of abstract concepts. b. invention is commercialized by entrepreneurs. c. invention is imitated by competitors. d. new idea is expressed as findings derived from basic research.
disruptive innovation
Japanese carmakers first introduced small fuel-efficient cars and then leveraged their low-cost and high-quality advantages into high-end luxury segments, dominated by brands such as Lexus, Infiniti, and Acura. This initiative best illustrates a(n)
early adopters
Julius bought his laptop and smartphone when these products had just entered their respective growth stages. More than the technological sophistication of these products, it was the idea that these products would allow him to multitask and work when traveling that drove him to make his purchase decision. Which of the following customer segments does Julius best represent?
b
North Carolina National Bank (NCNB) used its unique core competency of identifying, appraising, and integrating acquisition targets to be rebranded as Bank of America, one of the largest banks in the United States. This is an example of a firm a. building new core competencies to create and compete in markets of the future. b. leveraging existing core competencies to improve current market position. c. building new core competencies to protect new market position. d. redeploying and recombining existing core competencies to compete in markets of the future.
Vertical Integration
the firm's ownership of its production of needed inputs or of the channels by which it distributes its outputs
freemium
Quick Connect is an instant messaging mobile application. Users have access to a basic version with limited message recipients for free, but they have to pay a fee to have unlimited message recipients or to use advanced features. Which of the following business models does this best illustrate?
a
Red Hot Inc. and Maverick Cycles Inc. are two competing motorcycle companies. While Red Hot's Cost of goods sold/Revenue is 63.4 percent, the Cost of goods sold/Revenue of Maverick Cycles is 54.2 percent. What do you infer from this financial data? a. Red Hot is less efficient than Maverick Cycles in producing goods. Correct b. Red Hot is able to command a greater price premium for its products than Maverick Cycles. c. Red Hot and Maverick Cycles have achieved a competitive parity. d. Red Hot has a higher profit margin than Maverick Cycles.
Accounting Profitability
Relies on historical costs
strategic outsourcing
Sequoia Inc., a large multinational conglomerate, has hired an external consultant to process and audit its payroll. This allows the company to focus on manufacturing and marketing activities rather than developing and maintaining its own human resource management systems. Which of the following alternatives to vertical integration has Sequoia Inc. adopted?
focused differentiation strategy
Swan Song is a spa that caters to the needs of a small percentage of highly health-conscious consumers. It offers state-of-the-art treatments in a luxurious setting. Since there are very few spas that offer the same unique services, customers are willing to pay a premium price for its products and services. In this scenario, Swan Song is following a
c
The Lynx Manufacturing Company produces components used in electronic toys. In fiscal year 2017, Lynx earned an accounting profit of $3 million. However, Lynx's production facilities might have also been used to produce components for mobile phones, which would have generated $2 million in revenues and saved the company $500,000 in production costs. Which of the following statements is true? a. Lynx suffered an economic loss of $500,000. b. Lynx suffered an economic loss of $2.5 million. c. Lynx earned an economic profit of $500,000. d. Lynx earned an economic profit of $5.5 million.
b
The executives of Night Sky Inc., a large conglomerate, are making decisions on the stages of the industry value chain the firm must participate in, the range of products and services it should offer, and the global markets it should compete in. What are the executives primarily determining? a. the firm's chain of command b. the boundaries of the firm c. the firm's economies of scale d. the absorptive capacity of the firm
efficient-market hypothesis
The idea that all available information about a firm's past, current state, and expected future performance is embedded in the market price of the firm's stock is called the -upper-echelons theory. -price-demand function. -time compression economies. -efficient-market hypothesis.
c
The managers at Camphor Plastics decided that their firm needed to diversify because of overall falling sales and lower performance in one sector. How does diversifying compensate for the lackluster performance in this sector? a. by sharing their market power b. by motivating managers c. by having higher performance in another sector d. by increasing the firm's risk in another sector
Reservation Price
The maximum price a consumer is willing to pay for a product or service based on the total perceived consumer benefits
c
The rationale behind related diversification is to a. avoid sharing resources and competencies across different business lines. b. limit learning-curve and experience-curve effects. c. benefit from economies of scale and scope. d. obtain only 10 percent of the revenues from the primary business activities.
a
The viability of a differentiation strategy is severely undermined when the a. differentiated products become commoditized throughout the industry. b. differential appeal is based more on intangible resources than tangible resources. c. focus of competition shifts to value-creating features rather than price. d. difference between perceived value and costs is significant.
a
There are several cost drivers that can be managed in order to establish a low-cost leadership advantage. One of the primary cost drivers is a. combining experience-based learning and process innovation to move onto a steeper learning curve. b. shifting to small-scale production processes in order to create highly customized products. c. creating personalized customer service in order to minimize price sensitivity among customers. d. adding unique features that turn standard commodities into differentiated products.
d
Though the microwaves manufactured by Emergo Inc. and Sensation Electronics Inc. sell at the same price of $600 per unit, the economic value created by Emergo Inc. is more than that of Sensation Electronics Inc. In the context of this scenario, which of the following statements is true? a. Emergo and Sensation Electronics have achieved a competitive parity. b. Sensation Electronics has differentiated its products more than Emergo Inc. has. c. Sensation Electronics has been able to create more producer surplus for itself than Emergo. d. Emergo has a relative cost advantage over Sensation Electronics.
COGS/Revenue, R&D/Revenue, and SG&A/Revenue
Three additional financial ratios to break down return on revenue
Specialized Assets
Unique assets with high opportunity cost: They have significantly more value in their intended use than in their next best use. They come in three types: site specificity, physical asset specificity, and human-asset specificity.
restructuring
WJ Group Inc., a large multinational conglomerate, had begun to experience declining revenues over the years. The top management at the headquarters of the company decided that it was important for the company to avoid deviating from its core competencies. Thus, a few of the company's key businesses like energy, telecommunications, and automobiles were centralized, giving the top management more control over them. Also, relatively newer businesses like beverages and food processing were divested. In this scenario, WJ Group is involved in
a
When a blue ocean strategy is successfully formulated and implemented, investments in differentiation and low costs are not a. substitutes but complements. b. cost drivers but value drivers. c. value drivers but cost drivers. d. complements but substitutes.
Shakeout Stage
When growth and profitability are slowing due to strong competition; Growth has slowed; Intense competition; Increasing industry overcapacity; Decreased profitability; Increased cost cutting; Increased failures
b
When using the balanced scorecard approach to assess a firm's performance, which of the following is not a key question that managers need to answer? a. How do we create value? b. What intangible assets do we need? c. How do shareholders view us? d. How do customers view us?
Corporate Strategy
Where to compete (industry, markets, and geography)
d
Which of the following best describes a strategic trade-off? a. the tension between raising prices and keeping a loyal clientele b. the tension between innovation and keeping manufacturing costs down c. the tension between maintaining both high-quality products and service d. the tension between value creation and the pressure to keep costs in check
d
Which of the following best illustrates a dominant-business firm? a. Asphalt Autos is a company whose revenues solely come from selling automobiles. b. Alliance Metals is a firm that derives 50 percent of its revenues from its steel unit and another 50 percent from its automobile businesses. c. Fractal Products is a company whose multiple strategic business units contribute equally to the total corporate revenue. d. Riva Inc. is a luxury brand that derives 90 percent of its revenues from its apparel line and 10 percent of its revenues from its premium furniture business unit.
c
Which of the following best illustrates backward vertical integration? a. a shoe brand outsourcing its production unit to manufacturers in less developed nations b. a supplier of plastic bottles launching his or her own brand of sparkling water c. a chocolate manufacturing company setting up its own cocoa plantations d. an apparel company launching its line of premium wrist watches
d
Which of the following best illustrates physical-asset specificity? a. a unique training program developed in an organization b. a generic machine that can be used to churn different mixtures c. a ship container designed to carry more than the average load of iron ore d. a machine solely designed to give a candy its trademarked shape
c
Which of the following examples would most likely limit a firm's growth? a. An entrepreneur views joining a conglomerate as an important opportunity to reduce risks. b. An entrepreneur sees retraining managers to eliminate principal-agent problems as a main goal of her firm. c. A social entrepreneur makes conservation of the environment the primary goal of his firm. d. A social entrepreneur wants to combine large profits with a socially responsible approach.
d
Which of the following expressions accurately describes market cap? a. It is the difference between a firm's account receivables and account payables. b. It is the ratio of a firm's equity finance and its debt finance. c. It is the difference between the book value and the market value of a firm's assets. d. It is the product of the number of outstanding shares and the share price.
c
Which of the following is a disadvantage faced by first movers in an industry? a. They will have no access to intellectual properties such as critical patents. b. They cannot benefit much from network effects. c. They will have to find distribution channels and complementary assets. d. They cannot benefit from learning and experience curve effects like the late entrants.
a
Which of the following is a disadvantage of the balanced scorecard approach to measure firm performance? a. It provides only limited guidance about which performance metrics to choose. b. It fails to allow managers and executives to find a balance between financial and strategic goals. c. It fails to allow managers to align their different perspectives to create a more focused corporation overall. d. It only relies on an internal view of the firm, ignoring the external view.
a
Which of the following is a feature of the growth stage of the industry life cycle? a. The consumer demand increases. b. The prices of goods begin to rise. c. The number of competitors decreases. d. The basis of competition moves away from process innovation.
a
Which of the following is a feature of the shakeout phase of the industry life cycle? a. Competitive intensity within the industry increases. b. The mode of competition shifts from price to non-price in this stage. c. Market demand in this stage primarily consists of first-time adopters. d. There is rapid industry growth during this stage.
a
Which of the following is an advantage of accounting data? Accounting data can be easily transformed into financial ratios to help assess and evaluate the competitive performance of firms. b. Accounting data consider off-balance sheet items, which makes comparing companies with different capital structures easy. c. Accounting data focus mainly on intangible assets, which are more important than tangible assets in firms' stock market valuations. d. Accounting profitability ratios not only show us the outcomes from past decisions, but also provide information to guarantee future performance.
d
Which of the following is an example of internal transaction costs? a. the costs associated with negotiating prices with a business consultancy b. the costs associated with searching for suitable manufacturer contracts c. the costs linked to outsourcing payroll maintenance d. the costs pertaining to setting up a shop floor
a
Which of the following is an example of related-constrained diversification? a. an automobile company that manufactures petrol cars expanding into the diesel car industry b. a consumer electronics company launching its own line of designer apparel and accessories c. a grocery store leveraging its extra shelf space by stocking kitchen appliances d. a company dealing in home appliances hiring another company to carry out its marketing strategies
a
Which of the following is not a disadvantage of the balanced scorecard approach? a. It fails to allow managers to prepare the company for future growth. b. It fails to provide much insight into how metrics that deviate from the set goals can be put back on track. c. It is a tool merely for strategy implementation, not for strategy formulation. d. It provides only limited guidance about which metrics to choose to measure competitive advantage.
b
Which of the following provides an example of a firm in a red ocean? a. Top Drawer Apparel offered clothing at a higher price than competitors and, as a result, failed to make a profit. b. Chique Apparel offered clothing at a low price but failed to differentiate its product as being exclusive. c. Cheap Apparel offered clothing at a price matching that of its competitors and, as a result, it had lower profit margins. d. Goode Apparel offered clothing at a mid-range price but failed to differentiate its product as being of decent quality.
c
Which of the following statements about competitive advantage is true? a. Competitive advantage is permanent and not transitory; once gained by a firm it stays with the firm. b. Competitive advantage is an absolute measure; it is not relative. c. Competitive advantage can be assessed by measuring accounting profit, shareholder value, or economic value. d. Competitive advantage is a one-dimensional concept.
c
Which of the following statements about patents is not true? a. A patent can be enforced in court. b. A patent is a form of intellectual property. c. A patent over a product translates into a permanent monopoly position. d. A patent can be obtained when an invention is useful, novel, and nonobvious
d
Which of the following statements accurately brings out the difference between economies of scale and learning effects? a. Economies of scale reduce cost per unit, whereas learning effects increase cost per unit. b. Firms experience economies of scale when output increases, and they experience learning effects when output decreases. c. While there are no diseconomies to scale, there are diseconomies to learning. d. Learning effects occur over time, whereas economies of scale are captured at one point in time when output is increased.
c
Which of the following statements is true of the growth stage in the industry life cycle? a. The basis of competition tends to move away from process innovations toward product innovations. b. The objective of firms during this stage is to pursue a harvest strategy. c. The prices begin to fall during this stage when compared to the introduction stage. d. The type of buyers during this stage consists of the late majority.
c
Which of the following statements is true? a. Platform businesses have a major weakness: they are not very successful at value creation. b. A platform business usually must rely on pipeline businesses to connect it with consumers. c. A platform business exists to help make matches among users and facilitate the exchange of goods, services or social currency. d. Platform businesses are dependent on electronic media and thus are a new development in the business world.
d
Which of the following statements is typically true of early adopters? a. They enjoy using beta versions of products and providing free suggestions to companies. b. They enter the market in the maturity stage of the industry life cycle. c. They make up the mass market together with the technology enthusiasts. d. They appreciate new technology that can add value to their personal and professional lives.
d
While Influx Electronics Inc. incurs $350 to manufacture a laptop, its competitor, Hearthstone Electronics Inc., incurs $300. However, laptops of both the companies have been able to create the same value among customers. From the given scenario, it can be inferred that a. Influx Electronics has a competitive advantage over Hearthstone Electronics. b. Hearthstone Electronics can charge a higher price for its laptops. c. Influx Electronics is a cost leader when compared to Hearthstone Electronics. d. Hearthstone Electronics and Influx Electronics share a differentiation parity.
a
While the industry for Ultra-High Definition televisions is in the introduction stage, the industry for LCD televisions is in the maturity stage. What does this imply? a. The market for LCD televisions has reached its maximum size, whereas the market for Ultra-High Definition televisions is still small in size. b. The Ultra-High Definition television industry will focus on pursuing an integration strategy, while the LCD television industry will focus on pursuing a differentiation strategy. c. The LCD television industry is likely to focus on achieving market acceptance, while the Ultra-High Definition television industry is likely to focus on the harvest strategy. d. The Ultra-High Definition television industry will focus on process innovation, whereas the LCD television industry will focus on product innovation.
d
While the industry for tablet computers is in the growth stage, the laptop industry is in its shakeout stage. What does this imply? a. While competition for the tablet industry is primarily based on price, it is not so for the laptop industry. b. The tablet industry is ahead of the laptop industry in the industry life cycle. c. The number of competitors entering the laptop industry will be more than those entering the tablet computers industry. d. While the market demand for tablets will be high, the demand for laptops will be limited.
Entrepreneurship
_______ is best described as the process by which people undertake economic risk to innovate—to create new products, processes, and sometimes new organizations.
Licensing
a form of long-term contracting in the manufacturing sector that enables firms to commercialize intellectual property
credible commitment
a long-term strategic decision that is both difficult and costly to reverse
Architectural Innovation
a new product in which known components, based on existing technologies, are reconfigured in a novel way to attack new markets
Maturity Stage
a period during which sales increase at a decreasing rate
Taper integration
a way of orchestrating value activities in which a firm is backwardly integrated but also relies on outside market firms for some of its supplies, and/or is forwardly integrated but also relies on outside market firms for some of its distribution
Transaction Costs
all internal and external costs associated with an economic exchange, whether within a firm or in markets
Platform Business
an enterprise that creates value by matching external producers and consumers in a way that creates value for all participants, and that depends on the infrastructure or platform that the enterprise manages
Dominant Business
between 70% and 95% of revenue comes from a single business
Internal Transaction Costs
costs pertaining to organizing an economic exchange within a hierarchy; also called administrative costs
Radical Innovations
draws on novel methods or materials, is derived either from an entirely different knowledge base or from a recombination of the existing knowledge bases with a new stream of knowledge
Agency
in this model the producer relies on agent or retailer to sell the product, at predetermined percentage commission
Economic contribution
is created when the price a customer is willing to pay for a good or service is more than the cost the firm incurs to produce it.
Disruptive Innovation
leverages new technologies to attack existing markets
strategic outsourcing
moving one or more internal value chain activities outside the firm's boundaries to other firms in the industry value chain
Product Innovations
new or recombined knowledge embodied in new products
Process Innovations
new ways to produce existing products or deliver existing services
Freemium
provides the basic features of a product or service free of charge, but charges the user for premium services such as advanced features or add-ons