Chapter 7-Combined

The fundemental question of ________ is how to combine entrepreneurship with the concepts of strategic management in order to acheive a competitive advantage.

strategic entrepreneurship

The ____ identifies how industries tend to develop and change over time

industry life cycle

Long Tail

A business model in which companies can obtain a large part of their revenues by selling a small number of units from among almost unlimited choices -Netflix

The process by which change agents (entrepreneurs) undertake economic risk to innovate. Create new products, processes is ____________.

Entrepreneurship

What is the relationship between innovation and competitive advantage?

Innovation is a powerful weapon for gaining and maintaining competitive advantage.

The second step of the four-step innovation process involves the transformation of an idea into a new product or process and is known as _____________________.

Invention

Requirements for an invention to be patented in the U.S.

It must be useful, novel, and non-obvious

Pipeline Businesses

Linear transformation through the value chain -R&D -> Design -> Manufacture -> Sell

1. In the context of the Netflix case, _____ refers to an extremely large selection of content or products.

Long Tail

A form of intellectual property that grants an inventor a temporary monopoly on a new product or process in exchange for disclosing the details of how the product or process is made is called a(n) _________________.

Patent

The customer segment known as _________ enjoy testing product prototypes and providing voluntary feedback that companies use to perfect their products.

Technology Feedbacks

Decline Stage

The size of the market contracts as demand falls, often rapidly

1. Netflix has used the long tail in the DVD-by-mail business to its advantage, crafting a business model that creates close ties with film studios. What do film studios stand to gain from taking advantage of the Netflix model targeted at increasing the firm's long-tail offerings? a. Discounted fees for marketing some of the less-popular titles from the studios b. A cut of the subscription revenue from every disk sent out by Netflix c. Greater bargaining power with movie rental firms such as Netflix, Blockbuster, and Wal-Mart d. Lower costs related to screening movies in cinemas by releasing them straight on DVD e. An equal share of revenue from the digital distribution model through online streaming

b

1. Which of the following is true of Netflix? a. It started as two separate services but is now viewed as a single subscription. b. It began as a DVD subscription model and then simultaneously introduced a video streaming subscription while maintaining the legacy business. c. It isn't a substitute good for conventional use-based media rental. d. It got its start offering a DVD-by-mail service for an annual, per-disc rate subscription fee. e. It started out as an IPO.

b

1. User ratings act as _____ for Netflix's customers. a. marginal costs b. fixed costs c. switching costs d. variable costs e. barriers to entry

c

17. The negative effect of innovative ride-sharing services like Uber and Lyft on traditional taxi cab companies is an example of a. Corporate social responsibility b. Peer management c. Creative destruction d. An adoption process

c. Creative destruction

13. The ________ identifies how industries tend to develop and change over time a. Network effect b. AFI framework c. Industry life cycle d. VRIO strategy

c. Industry life cycle

decline stage

changes in the external environment often take industries from maturity to decline the size of the market contracts further as demand falls innovation efforts along both product and process innovation dimensions cease managers have four strategic options: exit, harvest, maintain, or consolidate

During the decline state of the industry life cycle, product innovation efforts ___________

come to a halt

Entrepreneurs innovate by ______.

commercializing new ideas and inventions

The explosive growth of the Apple Iphone was due in part to the network effects created by _____________

complementary apps

The explosive growth of the apply iPhone was due in part to the network effects created by

complementary apps

crossing the chasm framework

conceptual model that shows how each stage of the industry life cycle is dominated by a different customer group

Benny's Baos is in a declining industry, but Benny thinks he can still survive by buying his competitors. Which strategic option is he planning to use? Multiple choice question. exit harvest maintain consolidate

consolidate

Contour Autos competes against the global leaders in the automobile industry by developing and selling acceptable quality vehicles at a lower price. This has been possible due to the company's large-scale production that reduces its manufacturing expenses. Which of the following generic business strategies is Contour Autos applying in this scenario?

cost-leadership strategy

The negative effect of innovative ride sharing services sugh as Uber and Lyft, on traditional taxi cab companies is an example of

creative destruction

Successfully transitioning from one stage of the industry life cycle to the next is referred to as

crossing the chasm

It is challenging for firms to "cross the chasm" because

each stage of the industry life cycle features a different group of customers with different preferences and demands

It is challenging for firms to "cross the chasm" because _________

each stage of the industry life cycle features a different group of customers with different preferences and demands

At which stage of the industry life cycle does the size of the market expand rapidly?

growth

Most firms consider laggards to be ________.

not worth the effort of pursuing

A company that resists change and sticks to formalized business processes and structures is likely experiencing

organizational inertia

The business structure that is linear and has producers at one end and consumers at the other is known as a(n) ______.

pipeline

A strategy canvas comparing JetBlue to the differentiated and low-cost airlines provides a visual depiction of some of the issues found in the JetBlue discussion throughout the chapter. Which three factors in the canvas (see Exhibit 6.11 in the text) most prominently show the key problems at JetBlue?

price, connections, and customer service

In order for a product or service to be considered patentable, it must be

useful, novel and non-obvious

Product and process innovations in the industry life cycle

-Product innovations are high in the introduction stage and decrease gradually over time -Process innovations are low in the introduction stage, peak in the maturity stage, and decrease in the decline stage (bell curve)

The process in which change agents create new products or processes at significant economic risk is known as _____________.

Entrepreneurship

According to the crossing-the-chasm framework, a firm's transition between the different parts of the industry life cycle is difficult because

There is a big gulf separating the early adopters from customer segments that make up the mass market

The primary reason incumbent firms are vulnerable to disruptive innovations is that ________________.

They are too committed to existing products to make rapid changes in the face of disruptive innovations

Which of the following statements about platform businesses is true?

They can grow faster than pipeline businesses.

Which of the following are characteristics of the early majority?

They weight benefits and costs carefully They rely on reviews by reputable magazines They have a strong sense of practicality

1. Although sometimes referred to as "rental," Netflix's model is really a substitute good for conventional use-based media rental.

True

True or False: Industries often tend to follow a predictable industry life cycle

True

1. A low _____ is usually key to a firm's profitability because acquiring a customer is more expensive than keeping one. a. subscription fee b. inventory size c. churn rate d. switching cost e. opportunity cost

c

15. Which of the following allows a firm to redefine a market in its favor? a. Implementation b. Identification c. Innovation d. Invention

c. Innovation

1. When firms enjoy economies of scale they: a. have a greater share of liquid assets than rivals. b. have bigger production facilities than their competitors. c. have a wider employee base than their competitors. d. leverage the cost of an investment across increasing units of production. e. leverage investment costs to decrease their subscriber acquisition costs.

d

In order for a product or service to be considered patentable, it must be ___________

-useful -non-obvious -novel

1. Even though Netflix is now mainly focused on digital distribution, it continues to offer the DVD-by-mail service in its base-price product.

False

1. In addition to serving as CEO of Netflix, Reed Hastings has also served as _______________ for two other leading tech companies, Facebook and Microsoft.

Member of the board of directors

Markets & Technology Framework

Model to categorize innovations along the market & technology (existing & new) dimensions.

INTRODUCTION stage "Technology Enthusiasts" (Industry Life Cycle)

Innovator's core competency is R&D. Objective is to achieve market acceptance. Small Market & growth, high entry barriers. One way to accomplish this is through NETWORK EFFECTS.

1. While the size of the tail in the long tail phenomenon is disputable, one fact that is critical to remain above this debate is that: a. traditional brick and mortar retailers offer selections that cannot be rivaled by Internet pure-plays. b. energy costs and worker wages drive up the costs of running stores like Netflix. c. selection attracts customers, and the Internet allows large-selection inventory efficiencies that offline firms can't match. d. the turnover rate of obscure titles in traditional video rental stores is only slightly higher than those for Internet pure-plays. e. the cost of store maintenance and real estate makes stores such as Netflix unattractive.

c

18. In the ________ stage of the industry life cycle, a moderate amount of large films compete for a share of a market that has reached its maximum size a. Introduction b. Growth c. Maturity d. Shakeout e. Decline

c. Maturity

1. Which of the following is true about the Netflix streaming business? a. Its marginal cost for title acquisition is zero as it is currently focusing on distributing digital content. b. It has the support of major studios such as Fox and Warner that have allowed it to stream any content the firm buys on DVD. c. Its cost of acquiring streaming content has fallen in the recent past due to its long tail advantages. d. It has attempted to counter rivals with exclusive content by securing exclusive streaming rights for several popular shows. e. From the beginning it has experimented with various streaming revenue models, including pay-per-view, download-to-own, and ad-supported content.

d

1. Which of the following is true of Netflix streaming? a. Its content acquisition cost is fixed. b. Its competitors have been mostly vanquished. c. It has little appeal for new entrants. d. Content providers enjoy greater bargaining power as the sole source for unique titles unavailable from any other source. e. It provides very little opportunity for innovation. f. None of the above

d

Which of the following statements is typically true of early adopters? - They enter the market in the maturity stage of the industry life cycle. - They appreciate new technology that can add value to their personal and professional lives. - They make up the mass market together with the technology enthusiasts. - They enjoy using beta versions of products and providing free suggestions to companies.

They appreciate new technology that can add value to their personal and professional lives. Early adopters recognize and appreciate the possibilities the new technology can afford them in their professional and personal lives. Early adopters' demand is fueled more by intuition and vision rather than technology concerns.

Janet is a marketing and sales employee at 4-Ever-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 Janet? - a category captain - an intrapreneur - a venture capitalist - a franchised dealer

an intrapreneur Janet is an intrapreneur. When innovating within existing companies, change agents are often called intrapreneurs: those pursuing corporate entrepreneurship.

innovation ecosystem

established companies are part of an ecosystem: suppliers, buyers, complementors

What statement can be said about the industry life cycle?

-industries can be rejuvenated, even during the decline stage -not all industries go through the entire life cycle

Which of the following are ways in which standars can emerge?

-through market competition -by being impose by government or other agencies

S-curve development of most industries in order

1. Demand for a new product is slow to take off 2. Demand accelerates 3. Demand decelerates 4. Demand turns to zero 5. Demand becomes negative as a market contracts

Place the S curve development of most industries in order, with the first step at the top.

1. Demand for a new product is slow to take off 2. Demand accelerates 3. demand decelerates 4. demand turns to zero 5. demand becomes negative as a market contracts

S-Curve Development

1. Demand for a new product is slow to take off (Top) 2. Demand accelerates 3. Demand decelerates 4. Demand turns to zero 5. Demand becomes negative as a market contracts (Bottom)

Crossing the chasm framework

A bell curve visual that displays the different customer segments throughout the industry life cycle and where firms to tend to fall out of the industry -Consists of technology enthusiasts, early adopters, early majority, late majority, and laggards

Market-and-technology framework

A conceptual model to categorize innovations along the market (existing/new) and technology (existing/new) dimensions.

Incremental innovation

An innovation that squarely builds on an established knowledge base and steadily improves an existing product or service -Performed with existing technology in existing markets

An __________ Innovation is when known components, based on existing technologies, are reconfigured i na new way to create new markets. EX) Canon redesigned a copier so it didn't need professional service. People could buy replacement parts.

Architectural

Which of the following are ways in which standards can emerge

- by being imposed by government or other agencies - through market competition

First-mover disadvantages can include which of the following

- continuously perfect a product - educate potential customers about the product's benefits - find distribution channels

Innovation can

- make existing products or businesses obsolete - provide firms with a competitive advantage

Which of the following re advantages of platform businesses compared to pipeline businesses

- they scale more efficiently by eliminating gatekeepers - they unlock new sources of value creation and supply

How incumbent firms can respond to disruptive innovation

-Continue to innovate to stay ahead of the competition -Guarding against it by protecting the low end of the market -Disrupt yourself, rather than waiting for other firms to disrupt you

Why incumbent firms tend to focus on incremental innovation

-Economic incentives: they must defend their position -Organizational inertia: they have formalized processes and structures -Innovation ecosystem: they rely on certain suppliers, buyer, and complementors

Types of Innovation

-Incremental -Radical -Architectural -Disruptive

Which of the following statements about the industry life cycle are true?

-not all industires go through the entire life cycle -industries can be rejuventated, even during the decline stage.

During the growth stage of the industry life cycle, firms focus on process innovation in order to

-reduce per unit production costs -increase production volume

What are characteristics of an early majority?

-relies on review by reputable magazines -strong sense of practicality -weigh benefits and costs carefully

What ways can standards emerge?

-through market competition -by being imposed by government or other agencies

S Curve Steps

1. Introduction 2. Growth 3. Shakeout 4. Maturity 5. Decline

Place the four steps of the innovation process in order from first to last.

1. idea 2. invention 3 innovation 4. imitation

Time period for a patent in the U.S.

20 years from the filing date of the application

Architectural innovation

A new product in which known components, based on existing technologies, are reconfigured in a novel way to attack new markets

what is most likely to produce a radical innovation?

A new sportswear company with a handful of employees that perform a number of loosely defined roles

________ can introduce new products or services, new production processes, & new forms of organization. EX) Mark Zuckerberg, Oprah

Entrepreneurs

1. Fixed costs vary according to production volume.

False

1. Netflix competitors in streaming are small and mostly unprofitable.

False

1. Netflix gets to retain the entire subscription revenue for every disc sent out to a customer.

False

1. Netflix's decision to unbundle the single fee for its $10 base service into two separate $8 plans for DVD-by-mail and streaming over the Internet proved to be a welcome surprise to most customers.

False

1. One challenge that Netflix faced was that Blockbuster and Walmart were able to quickly extend their strong brands to also become synonymous with a DVD-by-mail subscription service.

False

1. The shift from atoms to bits does not stand to impact content creators, middlemen, and retailers.

False

True or Falst: Platform Businesses are organized as traditional linear pipelines.

False

Absorptive Capacity

Firms ability to understand external technological developments, evaluate them, and integrate them into current products or create new ones.

Innovators can benefit from a number of _______-MOVER ADVANTAGES. These are competitive benefits that accrue to the successful innovator. EX) Microsoft Word users might find switching to another Word processor too expensive. Too much time/money already invested.

First

Innovators may encounter ________-______ Disadvantages in the INTRODUCTION stage such as (1) need to educate customers about product. (2) find distribution channels. (3) continue to perfect new product.

First Mover

1. ________________ refers to a ruling which states that a firm can distribute physical copies of legally acquired copyright-protected products. This enables services such as libraries and video rental, but this right does not apply to streaming digital copies.

First sale doctrine

During which stage does a standard develop?

Growth

Herding effect

Happens when the early majority enter the market

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

Hearthstone Electronics and Influx Electronics share a differentiation parity.

1. In 2010, Reed Hastings was named Fortune Magazine's "Business Person of the Year." Yet according to readings and class discussions, what was the Netflix CEO's "biggest strategic regret" to that point? What was his reason for giving this answer?

His biggest strategic regret was taking his firm public too early. Once public, the firm was required to disclose its financial position, rivals saw firm's strong growth, and they invaded Netflix's market.

The fundamental question of strategic entrepreneurship

How to combine entrepreneurial actions, creating new opportunities or exploiting existing ones with strategic actions taken in pursuit of competitive advantage

The innovation process begins with an ______. This is often presented in abstract journals from basic research. EX) wireless technology is built on Albert Einsteins research over 100 years ago.

Idea

Four steps to an innovation process

Idea Invention Innovation Imitation

An _________ Innovation builds on Established knowledge base & steadily improves on an existing product or service offerings. (Existing Markets using Existing Technology) EX) Gilette adding one blade back in 1903, to 6 blades today.

Incremental

The type of innovation that focuses on improving an existing product by using existing technology and targeting existing markets is a(n) _______________ innovation.

Incremental

________ concerns the commercialization of an INVENTION. Companies must continue to innovate, in order to remain competitive for a long haul. EX) Netflix first offered home delivery DVD's, now they offer customized streaming services.

Innovation

Stages of the Industry Life Cycle

Introduction Growth Shakeout Maturity Decline

Which of the following statements about a business pipeline is true?

It is the traditional system of horizontal business organizations

Which of the following statements about the maturity stage of the idustry life cycle is true?

Only a few large firms remain.

Which of the following statements about the maturity stage of the industry life cycle is true?

Only a few large firms remain.

________ Innovation allows firms to benefit from internal and EXTERNAL ideas & inventions. Can share developments with other companies.

Open

During the decline stage of the industry life cycle, some firms choose to consolidate, meaning that they ___________

Purchase rival firms in order to acheive near-monopolistic control of the industry

Innovations that target NEW markets and represent a major break from existing technologies or ways of thinking, such as digital camera, the touch-screen smart phone, or the decoding of the human genome, are examples of __________________ innovations.

Radical

It is common for firms to start by introducing ____ innovation

Radical Innovation

Innovation helps firms acheive a competititve advantage by _______

Redifining the market in their favor

The development of most industries follows a(n)

S-Curve

In which stage of the industry life cycle does competition become more intense, forcing weaker firms out of the industry?

Shakeout

During the growth stage of an industry life cycle, the focus is on product innovation until an industry standard or dominant design is established. Once this standard has been set, a firm should do which of the following during the growth stage in order to maintain its competitive advantage(s)?

Shift to process innovation focus.

Additional characteristics of disruptive innovation

-It begins as a low-cost solution to an existing problem -Initially, its performance is inferior to existing technology, but its rate of technological over time is faster than the rate of performance increases by different market segments

Players in the platform ecosystem

-Owner: controller of IP platform -Providers: interface for the platform -Producers -Consumers

Which of the following are important core competencies for competitive advantage in the growth stage?

-R&D -Manufacturing capabilities -Marketing capabilitites

What can incumbent firms do to counter disruptive innovations?

-disrupt themselves -continue to innovate -protect the low end of the market

Which of the following are strategic options in the decline stage of the industry life cycle?

-harvest -consolidate -exit -maintain

During the growth stae of the industry life cycle, firms focus on process innovation in order to _____________

-increase production volume -reduce per-unit production costs

2. An innovation that targets a new market with existing technologies is called a. A disruptive innovation b. An architectural innovation c. An incremental innovation d. A radical innovation

b. An architectural innovation

Trade Secrets

Valuable proprietary information that is not in the public domain and where the firm makes every effort to maintain its secrecy

Trade Secrets

Valuable proprietary information that is not in the public domain where the firm makes every effort to maintain its secrecy. EX) Coca Cola recipe, secret for over a century.

The introductory stage of the industry life cycle is a __________ intensive process

capital

During the decline stage of the industry lifecycle, product efforts

come to a halt

The four strategic options that managers have in the decline stage are: exist, harvest, maintain, or

consolidate

When a blue ocean strategy is successfully formulated and implemented, investments in differentiation and low costs are not

substitutes but complements.

DaShawn likes to do a lot of research before he buys a new product and relies on the endorsement by others. He also wants to be sure the product will be practical. DaShawn is likely a member of which type of customer?

the early majority

Social Entrepreneurship

the pursuit of social goals while creating a profitable business

A strategic position is the firm's profile based on value creation and cost. Effective managers will create a large gap between the ______________ and the cost required to produce it.

value the firm creates with its product or service

Customers who desire a product because it stokes their imagination and creativity are known as ______

early adaptors

Customers who desire a product because it stokes their imagination and creativity are known as ______.

early adopters

Double-edged sword

Describing patents -On one hand, they provide a temporary monopoly which can lead to a competitive advantage -On the other hand, they require full disclosure of the underlying technology and the know-how so others can freely use when the patent expires

The primary objective of firms during the introductory stage of the industry life cycle is to

establish themselves as a market participant and position themselves for future growth

The primary objective of firms during the introductory stage of the industry life cycle is to _____________.

Establish themselves as a market participant and position themselves for future growth

The Chasm

Exists between the early adopters and early majority customer segments where many firms struggle have a high failure rate

_______________________________mover advantage refers to the competitive benefits that accrue to the successful innovator.

first

In the decline stage, managers have ___________ strategic options

four

The development of most industries follows a(n) ____________.

S-curve

Which two customer segments make up the largest percentage of the market potential?

The early and late majority

Key objective during the growth stage

To stake out a strategic position not easily imitated by rivals

1. At Netflix, the majority of the DVD titles shipped are from back-catalog titles, not new releases.

True

The _________ determined whether an invention can be patented.

U.S. Patent and Trademark Office

A patent is also known as what?

an isolating mechanism

21. The development of most industries follows an: a. M-curve b. S-curve c. C-curve d. I-curve

b. S-curve

A distruptive innovation typically requires a _____ approach to capturing the market

bottom up

Firms that pursue a(n) ______ strategy minimize the amount of resources devoted to product support in order to maximize cash flow. Multiple choice question. consolidate maintain harvest exit

harvest

The tendency of customers to enter the market in large numbers during the growth stage of the industry life cycle is known as

herding effects

During the growth stage of the industry life cycle, firms focus on process innovation in order to

increase production volume and reduce per unit production costs

The type of innovation that focuses on improving an existing product by using existing technology and targeting existing markets is a(n) ______ innovation.

incremental

Which type of innovation applies to existing markets and existing technologies?

incremental

A(n) ________ occurs when a firm steadily improves an existing product thereby targeting an existing market while using existing technology. - radical innovation - incremental innovation - process innovation - architectural innovation

incremental innovation Incremental innovation squarely builds on an established knowledge base and steadily improves an existing product or service offering. It targets existing markets using existing technology.

After a firm has gained market acceptance with a radical innovation, it will typically follow up with

incremental innovations

What are the types of innovation?

incremental, architectural, radical and disruptive

Which of the following are types of innovation?

incremental, radical, disruptive, and architectural

Which of the following is a primary factor in avoiding creative destruction?

innovation

the commercialization of an invention by entrepreneurs is called ______

innovation

A manufacturer that relies on established network of suppliers to produce its goods is part of a _________ and is less likely to produce radical innovations

innovation ecosystem

People who pursue entrepreneurship within an existing company are called

intrapreneurs

People who pursue entrepreneurship within an existing company are called ______________

intrapreneurs

Apple famously ignores feedback from customers because

it is focused on producing disruptive innovations rather than incremental innovations based on the needs of existing customers

Apple famously ignores feedback from customers because ___________

it is focused on producing disruptive innovations rather than incremental innovations based on the needs of existing customers

Tomas recently acquired a cell phone but only because his company insisted that he do so. Tomas likely belongs to which of the following consumer segments?

laggards

Using a ______ strategy, a firm continues to market its products at the same level despite a decline in consumer demand. Multiple choice question. harvest growth maintain consolidate

maintain

Using a ______ strategy, a firm continues to market its products at the same level despite a decline in consumer demand. Multiple choice question. maintain growth consolidate harvest

maintain

What are the key factors in the shakeout stage?

manufacturing and process engineering capabilities that can be used to drive costs down

Winner-Take-All Markets

markets where the market leader captures almost all of the market share and is able to extract a significant amount of the value created

In the _____ stage of the industry life cycle, a moderate amount of large firms compete for a share of dwindling consumer demand.

maturity

In the ______ stage of the industry life cycle, a few number of large firms compete for a share of a market that has reached its maximum size. Multiple choice question. introduction growth shakeout decline maturity

maturity

Which of the following are stages of the industry life cycle? (Check all that apply.)

maturity introduction shakeout growth decline

What is an example of a creative destruction?

mobile phones replacing traditional telephones

Which of the following is an example of creative destruction

mobile phones replacing traditional telephones

When Apple launched the iPhone, it quickly became popular because man companies created apps that worked exclusively on the iPhone. What did Apple leverage to create a competitive advantage

network effects

product innovation

new or recombined knowledge embedded in new products

closed innovation

new products discovered, developed, and commercialized internally

process innovation

new ways to produce existing products or deliver existing services

What is true about the industry life cycle?

not all industries go through the entire life cycle and industries can be rejuvenated even during the decline stage

Most firms consider laggards to be

not worth pursuing

Which of the following statements about the maturity stage of the industry life cycle is true? Multiple choice question. The market has many competitors, each competing for a piece of the pie. Only a few large firms remain. Product innovation becomes the most important competitive weapon. Demand for the product increases.

only a few large firms remain

A form of intellectual property that grants an inventor a temporary monopoly on a new product or process in exchange for disclosing the details of how the product or process is made is called a(n)

patent

In a focused differentiation strategy, a firm seeks to

deliver products or services with unique features to a specific, narrow part of the market.

After a standard is established in an indusatry, firms tend to focus more on _________ innovations

process

After a standard is established in an industry, firms tend to focus more on ____ innovations

process

After a standard is established in an industry, firms tend to focus more on ______ innovations. Multiple choice question. process dominant personnel product

process

After a standard is establish in an industry, firms tend to focus more on_____ innovations

process innovations

Which of the following metrics are used by social entrepreneurs to evaluate performance? (Check all that apply.) Multiple select question. permanence profits people power planet

profits people planet

A firm that successfully leverages network effects can _________

push its industry into the growth stage

Because it targeted a new market and used new technologies, the first mass-produced automobile is considered an __________ innovation.

radical

What are the three types of innovation

radical, disruptive, incremental, architectural

During the introductory stage of the industry life cycle, innovators will likely devote most of their time, money, and effort to ______. Multiple choice question. management research and development human resource recruitment operations management

research and development

The development of most industries follows an

s-curve

What are the states of the industry life cycle?

shakeout, growth, maturity, introduction, and decline

1. _____ refers to a limit, imposed by the Internet Service Provider (e.g. cable or telephone company) on the total amount of traffic that a given subscriber can consume (usually per each billing period).

Bandwidth cap

Which of the following would not be a reason for Bic to decide to compete in Mont Blanc's market?

Bic is a large publicly traded company with significant financial resources.

1. The act of taking a job traditionally performed by a designated agent (usually an employee) and outsourcing it to an undefined generally large group of people in the form of an open call is known as _____.

Crowdsourcing

During the growth stage of the industry life cycle, ______________ increases rapidly.

Demand

Invention

Describes the transformation of an idea into a new product or processes, or the modification and recombination of existing ones

1. The Netflix customer experience was always weaker than the in-store experience of DVD rental firms, which had human staff. However, consumers were willing to overlook their dissatisfaction given Netflix's other benefits.

False

1. Why are streaming services considered more appealing to creative content creators than traditional TV?

For producers, writers, and directors, the creative side feels less constrained. Netflix execs state, "If you give people a more creative format, then they can tell their stories better." With streaming, there's no need to plan cliff-hangers at the end of a program or even write for the standard time lengths, like the 22-minute standard for commercial sitcom television. "In the world of weekly serialized television you get fifty minutes of joy watching a show and then 10,000 minutes of waiting for the next one." With binge watching, users can keep track of more complex plot lines and series with many characters. It also removes standard episode length (like 22 minutes for commercial broadcast sitcoms). The kind of artistic creativity offered by streaming makes Netflix, as stated by the Hollywood Reporter, "one of the most attractive buyers of original programming in town."

Transformation of an idea into new product is an ________, can be a modification of existing ones, & can be patented or kept secret.

Invention

Which of the following is not a recommended strategic option for firms competing during the decline stage of an industry life cycle?

Invest in a large marketing campaign.

Growth Stage

Occurs after the innovation has gained some market acceptance -Demand and market growth increase -Standards emerge -Core competencies move toward manufacturing and market capabilities

Idea

Often presented in terms of abstract concepts or as findings derived from basic research -Starts the beginning of the innovation process

Which of the following about the maturity stage on the industry life cycle is true?

Only a few firms remain

A company that resists change and sticks to formalized business processes and structures is likely experiencing ____________.

Organizational inertia

24. At which stage of the industry life cycle does the size of the market expand rapidly? a. Maturity b. Introduction c. Shakeout d. Growth e. Decline

d. Growth

33. The innovation process is a four-step process that exists of idea, invention, innovation, and _____ a. Imagination b. Irrigation c. Inspiration d. Imitation

d. Imitation

In the ____ stage of the industry life cycle, failing demand leads to a reduction in market size

decline

In the ______ stage of the industry life cycle, falling demand leads to a reduction in market size. Multiple choice question. shakeout consolidation growth decline introduction

decline

Timex and Rolex both compete in the wristwatch market, but they follow different business strategies. Rolex creates a high-quality timepiece with unique features that last a lifetime. Timex efficiently produces a watch of acceptable quality. What generic business strategy is Rolex using?

differentiation

Introducing a new technology to an existing market to better address consumer needs is known as ____________ innovation

disruptive

Introducing a new technology to an existing market to better address consumer needs is known as

disruptive innovation

Which of the following innovations below is said to invades an existing market from the bottom up by leveraging novel technologies in order to penetrate existing markets? - disruptive innovation - architectural innovation - radical innovation - incremental innovation

disruptive innovation Disruptive innovation leverages new technologies to attack existing markets.

1. Netflix offered its subscribers a selection of over one hundred thousand DVD-by-mail titles, while other video rental firms can only offer as much as three thousand. This presents a significant _____ for Netflix over its rivals. a. marginal cost b. price advantage c. variable cost d. studio preference e. scale advantage

e

1. The long tail is a phenomenon whereby firms can make money by: a. selling the same product at different prices with only minor tweaks in their design. b. leveraging customers to promote their products or services. c. reselling multiple versions of a single product under different brand names. d. offering a selection of products or services vastly greater than conventional retailers. e. sell the same product to virtually every customer the Internet can reach.

e

1. What solution has Netflix come up with to address the need to deliver content to customers' televisions? a. Netflix has entered into a revenue sharing agreement with Apple to produce customized set top boxes. b. Netflix makes custom chips for television makers so they can offer Netflix in a way that replicates Google Chromecast and Amazon FireTV. c. Netflix launched a self-branded hardware division to build and market its own set top boxes. d. Netflix has acquired Vudu, a firm that specializes in the online streaming business. e. Netflix provides tools to firms seeking to build Netflix access into their devices.

e

Taking on an economic risk in order to innovate is known as

entepreneurship

Because Lorraine wants to introduce innovative new production processes to the local restaurant industry, she is considered a(n)

entrepreneur

Taking on an economic risk in order to innovate is known as ______.

entrepreneurship

Taking on an economic risk in order to innovate is known as ______. Multiple choice question. strategic objectivization disruptive innovation entrepreneurship intrapreneurship

entrepreneurship

Taking on an economic risk in order to innovate is known as ______. Multiple choice question. strategic objectivization disruptive innovation intrapreneurship entrepreneurship

entrepreneurship

Taking on an economic risk in order to innovate is known as ___________

entrepreneurship

The process in which change agents create new products or processes at significant economic risk is known as ______. Multiple choice question. competitive advantage franchising entrepreneurship branding

entrepreneurship

The process in which change agents create new products or processes at significant economic risk is known as ____________

entrepreneurship

The primary objective of firms during the introductory stage of the industry life cycle is to ______. Multiple choice question. establish themselves as a market participant and position themselves for future growth refine existing distribution channels and standards produce large quantities for mass distribution develop complementary products to increase market visibility

establish themselves as a market participant and position themselves for future growth

The primary objective of firms during the introductory stage of the industry life cycle is to ___________

establish themselves as a market participant themselves for furture growth.

economic incentives

established companies are focused on defending their position

During the decline stage of the industry life cycle, which strategic option requires firms to declare bankruptcy or undergo liquidation?

exit

What is the commercialization of an invention called? Multiple choice question. First-mover advantage Imitation The introduction stage Innovation

innovation

What is the commercialization of an invention called? Multiple choice question. Imitation The introduction stage Innovation First-mover advantage

innovation

When a company introduces a new product or process or business model with the intent of gaining a competitive advantage, that company is engaging in

innovation

1. How does Cinematch offer Netflix additional operational advantages for the DVD-by-mail business? a. Cinematch offers alternate recommendations of movies based on critical acclaim and box office performance parameters. b. Cinematch is linked to warehouses and recommends movies that are likely to be in stock. c. Cinematch is often used by movie studios to plan movie scripts based on user preferences. d. Cinematch is a source of additional revenue to Netflix as a marketing tool for recommending newly-released movies. e. Netflix leases the Cinematch collaborative filtering software to smaller firms at a fee, withholding the valuable user ratings.

b

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) - disruptive innovation - incremental innovation - radical innovation - progressive innovation

disruptive innovation. Japanese carmakers successfully followed a strategy of disruptive innovation by first introducing small fuel-efficient cars, and then leveraging their low-cost and high-quality advantages into high-end luxury segments, captured by brands such as Lexus, Infiniti, and Acura. More recently, the South Korean carmakers Kia and Hyundai have followed a similar strategy.

It is challenging for firms to "cross the chasm" because ______. Multiple choice question. each stage of the industry life cycle features a different group of customers with different preferences and demands firms have difficulty moving from process to product innovation transitioning between stages requires significant amounts of capital firms are not able to deal with the technological challenges required

each stage of the industry life cycle features a different group of customers with different preferences and demands

What stage does process innovation ramp up as firms attempt to keep up with rapidly rising demand while attempting to bring down costs at the same time?

growth stage

What type of innovation applies to existing markets and existing technologies?

incremental innovation

Creating new poructs out of new or existing ideas is known as

invention

A form of intellectual property that grants an inventor a temporary monopoly on a new product or process in exchange for disclosing the details of how the product or process is made is called a(n) ______. Multiple choice question. trademark patent copyright invention

patent

What is a form of intellectual property and gives the inventor exclusive rights to benefit from commercializing technology for a specified period of time in exchange for public disclosure?

patent

Business model innovations that use technology to interactively connect organizations information resources and people in value generating transactions are

platforms

Business model innovations that use technology to interactively connect organizations, information, resources, and people in value-generating transactions are ____________

platforms

Innovations that target NEW markets and represent a major break from existing technologies or ways of thinking, such as the digital camera, the touch-screen smart phone, or the decoding of the human genome, are examples of _____ innovations

radical

Innovations that represent a major break from existing technologies or ways of thinking are examples of

radical innovations

A firm that follows the differentiation strategy is protected from the threat of new entrants primarily due to its

reputation for quality.

Benny's Baos had an edge in the market, but other companies began to enter the market. Benny is now losing customers even though he has launched an aggressive marketing campaign in an attempt to attract customers. Benny's Baos is likely in the ______ stage of the industry life cycle. Multiple choice question. introduction decline shakeout growth

shakeout

Successfully transitioning from one stage of the industry life cycle to the next is referred to as ______.

crossing the chasm

Incumbent firms that are part of an innovation ecosystem are less likely to produce radical innovations because ___________

radical innovations disrupt established relationships within the ecosystem

One way to counter a disruptive innovation is to

stay ahead of the competition with continued innovation (there are 2 more ways)

Place the S-curve developement of most industries in order, with the first step at the top.

1. Demand for a new product is slow to take off. 2. Demand accelerates. 3.Demand decelerates 4. Demand turns to zero 5. Demand becomes negative as a market contracts.

Which of the following are types of innovation?

1. Disruptivef 2. archetectural 3. radical 4. incremental

During the shakeout stage of the industry life cycle, profits degrade for ______. Multiple choice question. all firms in the industry all but the most efficient firms a few of the weakest firms the most efficient firms only

all but the most efficient firms

Using known components, based on existing technologies, in a new configuration to create a new market is known as ______.

architectural innovation

The negative effect of innovative ride-sharing services, such as Uber and Lyft, on traditional taxi cab companies is an example of ______. Multiple choice question. peer management an adoption process corporate social responsibility creative destruction

creative destruction

During the decline stage of the industry life cycle, which strategic option requires firms to declare bankruptcy or undergo liquidation? Multiple choice question. maintain consolidate harvest exit

exit

Which of the following statements about patents is not true? - A patent over a product translates into a permanent monopoly position. - A patent can be enforced in court. - A patent is a form of intellectual property. - A patent can be obtained when an invention is useful, novel, and non-obvious.

A patent over a product translates into a permanent monopoly position. In the United States, the time period for the right to exclude others from the use of the technology is 20 years from the filing date of a patent application. Exclusive rights often translate into a temporary monopoly position until the patent expires.

1. Describe Netflix's streaming video business model.

Today the firm is focused on digital distribution that it offers its streaming-only subscription as the default option for consumers. The default page at Netflix.com doesn't even mention DVDs; the disc subscription service that Netflix built its user-base with had become an optional add-on that the firm is actively discouraging new consumers from joining. For $9 a month, customers gain unlimited access to the entire Netflix streaming library (which is smaller than the number of DVDs available for mailing). Netflix streaming is now available on PCs, as well as all major tablets, smart phones, and Internet-connected televisions, DVD players, and video game consoles.

1. Durable brands are built through customer experience.

True

1. Netflix uses data to create tailored audience promotions.

True

1. Original content is an investment in allowing a firm to provide differentiated goods, a way to entice and retain customers with exclusive programming not available anywhere else.

True

1. Ownership of digital assets isn't always as it appears to consumers. Many Netflix original series like "House of Cards" are actually not own by Netflix, and other firms can license these titles, while Netflix may need to acquire additional rights to stream these titles overseas.

True

1. Physical retailers are limited by shelf space and geography (meaning the density of customers around a particular location).

True

1. The business of streaming video is radically different from DVD-by-mail in several key ways, including content costs, content availability, revenue opportunities, rivals and their motivation.

True

True or false: Innovation can create value for one firm while destroying value for another.

True

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?

Turbo Tech has been able to offer more perceived value than Best Mobile.

Which of the following is the best example of a platform business? - McDonald's restaurants - L.L. Bean clothing retailers - Coca Cola soft drink producer - Uber ride-hailing services

Uber ride-hailing services Platforms can be defined along three dimensions: 1. A platform is a business that enables value-creating interactions between external producers and consumers. 2. The platform's overarching purpose is to consummate matches among users and facilitate the exchange of goods, services, or social currency, thereby enabling value creation for all participants. 3. The platform provides an infrastructure for these interactions and sets governance conditions for them. Uber is the best example of a platform business.

1. Why is bargaining power shifting to content providers as the video content industry shifts from atoms to bits?

Video content is perfectly differentiated, and as we learned in the Strategy and Technology chapter, providers of differentiated goods also have stronger bargaining power. There are only a small number of firms offering high-demand content, essentially operating as an oligopoly with concentrated supplier power. Over the past several years the ranks of bidders jostling elbows at the streaming media negotiating table has increased. When you buy a DVD you own it for life, but streaming costs are usually licensed for a limited time period.

Elon Musk's approach to social entrepreneurship is quite different than that of Jimmy Wales as discussed in the text. However, both men looked beyond the financials to a greater social good for their organizations. What is the major difference in the organization Jimmy Wales founded from those started by Elon Musk?

Wales founded a non-profit organization though it could have generated many millions in ad revenue.

Introduction Stage

When an individual inventor or company launches a successful innovation, a new industry may emerge -Innovator's core competency is R&D and is a very capital intensive process

While the industry for tablet computers is in the growth stage, the laptop industry is in its shakeout stage. What does this imply?

While the market demand for tablets will be high, the demand for laptops will be limited.

While the industry for tablet computers is in the growth stage, the laptop industry is in its shakeout stage. What does this imply? - The tablet industry is ahead of the laptop industry in the industry life cycle. - While the market demand for tablets will be high, the demand for laptops will be limited. - The number of competitors entering the laptop industry will be more than those entering the tablet computers industry. - While competition for the tablet industry is primarily based on price, it is not so for the laptop industry.

While the market demand for tablets will be high, the demand for laptops will be limited. Given the large market size achieved from the growth stage, any additional market demand in the next stage is limited. Demand now consists of replacement or repeat purchases only. This limited market demand in turn increases competitive intensity within the industry.

1. The marginal cost of digital goods is typically considered to be _____________

Zero

standard

an agreed upon solution about a common set of engineering features and design choices

34. Which type of innovation applies to existing markets and existing technologies? a. Radical b. Incremental c. Disruptive d. Architectural

b. Incremental

Benny's Baos is in a declining industry, but Benny thinks he can still survive by buying his competitors. What strategic option is he planning to use?

consolidate

1. An internal team at Netflix developed a prototype set top box to enable the direct streaming of content to customers' television sets. However, the idea of offering it to Netflix customers was dropped because: a. the market for online streaming was nascent and unprofitable. b. all major US cable firms built Netflix streaming into their set-top boxes. c. the Blu-ray standard requires streaming features, as well. d. of the brutally competitive nature of the consumer electronics business. e. the entire software team was recruited by TiVo after LinkedIn made it easy to target and poach rival talent.

d

22. Entrepreneurs innovate by a. Limiting competition in a given market b. Increasing demand for existing products c. Acquiring promising start-up companies d. Commercializing new ideas and inventions

d. Commercializing new ideas and inventions

29. The most common type of innovation is a. Technological innovation b. Disruptive innovation c. Radical innovation d. Incremental innovation

d. Incremental innovation

Demand declines most rapidly in the ______ stage of the industry life cycle.

decline

Demand declines most rapidly in the ______ stage of the industry life cycle. Multiple choice question. decline maturity introduction shakeout

decline

In the _____ stage of the industry life cycle, falling demand leads to a reduction in market size

decline

Firms focusing on operating a cost-leadership strategy are most likely to develop their product or service to emphasize the

functional aspects.

The stage during which a new product has gained some acceptance, thus causing first-time buyers to eagerly acquire the product and accelerate demand, is the ____ stage

growth

The innovation process is a four step process that exist of idea, invention, innovation, and _____

imitation

Creating new products out of new or existing ideas is known as

invention

Creating new products out of new or existing ideas is known as ______. Multiple choice question. invention ideation innovation imitation

invention

Creating new products out of new or existing ideas is known as _________.

invention

Describes the transformation of an idea into a new product or process, or the modification and recombination of existing ones.

invention

Incorporating technological advances and innovative ideas from outside agencies into a firm's internal research and development efforts is known as _____ innovation

open

Innovation helps firms achieve a competitive advantage by

redefining the market in their favor

winner take all markets

the market leader captures almost all of the market share and is able to extract a significant amount of the value created

which of the following statements about platform business is true?

they can grow faster than pipeline businesses

True or false: Once a standard is reached, process innovations occur more often than product innovations. True false question. True False

true

what are important core competencies for competitive advantage in the growth stage?

-R&D -marketing capabilities -manufacturing capabilities

What are the stages of the industry life cycle

-introduction -growth -maturity -shakeout -decline (check order, may not be right)

Which of the following metrics are used by social entrepreneurs to evaluate performance

-people -profits -planet

1. The Netflix work culture is in many ways similar to its peers.

False

Which of the following statements about platform business is true?

It creates value not only for the businesses but also for consumers.

The success of Netflic can be attributed to which of the following?

It disrupted the TV industry more than once to gain a competitive advantage

Key success factors during the shakeout stage

Manufacturing and process engineering capabilities that can be used to drive down costs

Winner-take-all markets

Many markets where network effects are important, where the market leader captures most of the market share

A firm that successfully leverages network effects can _______________.

Push its industry into the growth stage

What are important core competencies for competitive advantage in the growth stage?

R&D, marketing capabilities, and manufacturing capabilities

Standard

Signals the market's agreement on a common set of engineering features and design choices. - Standards can emerge from the bottom up through competition in the marketplace - Or imposed from the top down by government

During the GROWTH stage, a ________ signals the market's agreement on a common set of engineering features & design choices. Helps reduce confusion, & can persist a long time.

Standard

__________ Entrepreneurship is the pursuit of innovation using Strategic Management concepts. Striving to combine entrepreneurial actions, creating new opportunities, or exploiting existing ones. Can take place in new ventures (Telsa Motors) or existing ones (Apple)

Strategic

Entrepreneurs

The agents that introduce change into the competitive system -They do this by not only figuring out how to use inventions, but also introducing new products or services, new production processes, and new forms of organizations

Technology Enthusiasts

The customer segment in the introductory stage of the industry life cycle -Smallest market segment (2.5%) -Tend to have an engineering mindset, pursue technology actively, offering free feedback, and enjoy using beta versions

Early majority

The customers entering the market during the shakeout stage -Their main consideration in deciding whether or not to adopt a new technological innovation is a strong sense of practicality

Innovation

The discovery, development & transformation of new knowledge into a four step process captured with the 4 I's=Idea, Invention, Innovation, & Immitation.

Which of the following are advantages of platform businesses compared to pipeline businesses? (Check all that apply.)

They unlock new sources of value creation and supply. They scale more efficiently by eliminating gatekeepers.

_______ is best described as the process by which people undertake economic risk to innovate—to create new products, processes, and sometimes new organizations. - crowdsourcing - headhunting - cannibalization - entrepreneurship

Entrepreneurship Entrepreneurship describes the process by which change agents undertake economic risk to innovate—to create new products, processes, and sometimes new organizations.

A _________ Innovation draws on novel methods from a different knowledge base to target new markets. (New Markets using New Technologies) EX) the invention of Airplanes.

Radical

32. Introducing a new technology to an existing market to better address consumer needs is known as _______ innovation a. Incremental b. Architectural c. Radical d. Disruptive

d. Disruptive

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?

early adopters

A significant difference between technology enthusiasts and early adopters is that

early adopters are interested in how a new technology will improve their lives, rather than in the details of the technology itself

In a typical industry life cycle, an industry immediately moves to the ________ after the introduction stage. - maturity stage - growth stage - shakeout stage - decline stage

growth stage If successful in the introduction stage, the industry moves to the next stage of the life cycle; the growth stage.

_______ Innovation states all R&D is conducted in house & not allowed to leave firm. Outside ideas lead to "not invented here" syndrome."

Closed

During the growth stage of the industry life cycle, firms focus on process innovation in order to ____

- reduce per unit production costs - increase production volume

Simone was the first among her peers to try the new unicorn hair dye. For months she was the only person with unicorn hair. After some time, though, the product became available everywhere, and nearly every other person began sporting unicorn hair, even Simone's mom. This situation describes which of the following?

the crossing-the-chasm framework

PixelPower is a small app developer seeking to enter the highly competititive mobile games idustry. In order to overcome the industry's barriers to entry and compete against incumbent firms, Pixel Power has an economic incentive to _____________

pursue radical innovations

A significant different between the early majority and the late majority is that ______

the late majority is not confident in using new technologies

Which of the following is NOT a strategy an established firm can adopt in order to protect itself from disruptive innovation by rivals

rely primarily on architectural innovation to frequently offer "reconfigured" products.

An agreed upon solution about a common set of engineering features and design choices is known as a _________.

standard

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?

An inrapreneur

Elon Musk has shown an ability to combine strategically important actions and innovative entrepreneurial actions in his several startup firms. The text also discusses this combination of actions leading to competitive advantage in large established organizations. What firm does the text discuss that has used the AFI principles to continuously innovate and enter new markets such as wearables?

Apple

First-Mover Advantages

Includes economies of scale, learning-curve effects, experience-curve effects, network effects -Benefits successful innovators

After a firm has gained market acceptance with a radical innovation, it will typically follow up with _____________.

Incremental innovations

What is the successful introduction of a new product, process, or business model?

Innovation

Standard

Signals the market's agreement on a common set of engineering features and design choices -Can be created bottom-up through competition or from the top-down by the government or other standard-setting agencies

_________ Entrepreneurship is the pursuit of social goals while creating a profitable business. Use a triple bottom line approach to assess performance. Profits, Planet, People. EX) Toms Shoes, Tacos for life.

Social

Musk is a serial entrepreneur. The case compares Zip2 (his first startup) to PayPal (his second startup). He finds several similar characteristics for the firms, such as building with a small group of people, a non-hierarchical organization, and

a focus on the customer experience.

An architectural innovation is ______.

a new product in which existing technologies are used in a novel way to create new markets

Architectural Innovation

a new product in which known components, based on existing technologies, are reconfigured in a novel way to attack new markets

architectural innovation

a new product in which known components, based on existing technologies, are reconfigured in a novel way to attack new markets

Successfully transitioning from one stage of the industry life cycle to the next is referred to as ______. Multiple choice question. stage-transitioning stepping off the bridge minding the gap crossing the chasm

crossing the chasm

A large incumbent firm that has established a number of formalized practices and procedures may have a difficult time producing radical innovations due to its

organizational inertia

During the decline stage of the industry life cycle, some firms choose to consolidate, meaning that they ______. Multiple choice question. put strong downward pressure on prices to stimulate demand purchase rival firms in order to achieve near-monopolistic control of the industry introduce complementary products to encourage network effects focus on process innovation more than product innovation

purchase rival firms in order to achieve near-monopolistic control of the industry

Which of the following types of entrepreneurship involves leveraging innovation for competitive advantage?

strategic

trade secrets

valuable proprietary information that is not in the public domain and where the firm makes every effort to maintain its secrecy

When employees feel that a new product cannot be good because research and development is not conducted in-house, the company suffered from ____- syndrome

not invented here

social entrepreneurship

pursuit of social goals while creating profitable businesses evaluate by financial, social, ecological contributions

Increases in the value of a product or service that result from a corresponding increase in the number of users are known as ___.

network effects

Apple's first-generation iPad was priced at over $800 when it launched in 2010. Three years later the same model was priced at under $300. This change is supported by all of the statements below except

Apple is using a harvest strategy for cash flow focus.

The text provides an example of a firm "stuck in the middle." JCPenney attempted a change in strategic position under the leadership of CEO Ron Johnson (who was lured away from Apple retailing). Mr. Johnson was fired less than 18 months after his arrival at JCPenney due to a stark drop in sales after implementing some of his planned changes. What is a key lesson to be learned from this example?

Changing strategic positioning too quickly is risky.

1. Crowdsourcing is: a. a phenomenon whereby firms can make money by offering a near-limitless selection. b. the act of taking a job traditionally performed by a designated agent and contracting it out to an undefined generally large group of people in the form of an open call. c. a classification of software that monitors trends among customers and uses this data to personalize an individual customer's experience. d. the removal of an organization from a firm's distribution channel. e. an industry practice whereby content is available to a given distribution channel for a specified time period or 'window,' usually under a different revenue model.

b

1. Collaborative filtering is a classification of software that: a. is used to gather user ratings and calculate a gross average user rating for each movie. b. provides Netflix users with parental controls and other options while streaming movies online. c. selectively sorts movies based on their censor ratings and delivers age-appropriate search results. d. monitors trends among customers to personalize an individual customer's experience. e. collates user ratings for a movie and creates a ranked list of movies most liked by users.

d

1. By going public, Netflix encountered competition from the large, established firms Wal-Mart and Blockbuster. What aspect of Netflix going public lured these firms into the market? a. By going public, Netflix was required to disclose its financial position. b. By going public, Netflix was forced to reveal the Cinematch algorithm used to classify user ratings. c. Netflix's model of flat-rate monthly subscriptions was found to be more profitable than a per-disc rental fee model. d. Netflix's plan to enter the online movie streaming market alerted rivals to the possibility of losing their market share. e. The migration of Netflix services to cover the Blu-ray disc market opened up opportunities for rivals.

a

Innovation Ecosystem

a firm's embedded ness in a complex network of suppliers, buyers, and complementors, which requires interdependent strategic decision making

An incumberent firm in a winner -take-all market will typically seek to extend the time in can extract profits through ________

a focus on incremental innovations

1. Marginal costs: a. are minor, insignificant costs. b. are associated with each additional unit produced. c. are the costs incurred as a result of choosing one option over another. d. are constant and do not vary according to production volume. e. are also known as overhead.

b

Process innovations

New ways to produce existing products or deliver existing services -Do not need to be high-tech to be impactful

GROWTH stage "Early Adopters" (Industry Life Cycle

Objective: stake out strong position & imitation risk. Accelerated market growth, Both efficient & inefficient firms thrive. Moves from PRODUCT innovation to PROCESS innovation after a "standard" is established.

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 that the platform manages is a(n) _________________.

Platform business

Business model innovations that use technology to interactively connect organizations, information, resources, and people in value-generating transactions are _________________.

Platforms

Incumbent firms that are part of an innovation ecosystem are less likely t produce radical innovations because ______________.

Radical innovations disrupt established relationships within the ecosystem

Early Adopters

The customers entering the market in the growth stage -Are eager to buy into a new technology or product concept -Ask "what can this product do for me and my business?"

1. In exchange for a percentage of the DVD-by-mail subscription revenue for every disk sent out by Netflix, movie studios offer Netflix: a. online streaming rights free of cost. b. higher fees for marketing less-popular movies. c. DVD titles at a discounted or wholesale price. d. distribution rights to certain movies free of cost. e. strong bargaining power in negotiations for digital distribution rights.

c

A significant difference between technology enthusiasts and early adopters is that ______.

early adopters are interested in how a new technology will improve their lives, rather than in the details of the technology itself

Radical innovation occurs when an existing firm recombines its ________ with a new stream of knowledge for ________. - existing knowledge; new markets - new knowledge; existing markets - competitor's analysis; industry penetration - value chain; older markets

existing knowledge; new markets Radical innovation draws on novel methods or materials, is derived either from an entirely different knowledge base or from a recombination of existing knowledge bases with a new stream of knowledge.

When a company introduces a new product or process or business model with the intent of gaining a competitive advantage, that company is engaging in ______.

innovation

Increase in the value of a product or service that result from a coreesponding increase in the number of users are known as ____________

network effects

Increases in the value of a product or service that result from a corresponding increase in the number of users are known as

network effects

Attempting to address social or ecological issues when building a for-profit business is known as ______. Multiple choice question. sustainable entrepreneurship social entrepreneurship strategic entrepreneurship intrapreneurship

social entrepreneurship

Cantaloupe Technologies follows a business model in which the performance of the company is not only based on how much profits were generated, but also on how the community in general benefited from its operations. Thus, the company under its "Plant a Life" campaign promises to plant a tree with every customer purchase. Which of the following terms best describes the performance valuation model of Cantaloupe Technologies?

social entrepreneurship

open innovation

framework for R&D that process permeable firm boundaries to allow a firm to benefit not only from internal ideas and inventions, but also from external ones the sharing goes both ways: some external ideas and inventions are insourced while some are spun out ideas an innovation can originate from external sources

Which of the following characteristics change as the industry life cycle progresses?

- number and size of competitors - type and level of innovation - type of customer

Which statement best describes the speed of innovation over the past hundred years?

It has accelerated dramatically.

Network Effects

Positive effect that one user of a product has on the value of that product for the other users. EX) Apple-launching Iphone, gaining a lot of users, then adding applications like App Store.

A ________ Innovation is a new way to produce existing products or deliver existing services. EX) Shipping containers.

Process

In developed countries, the industry for flash drives is in the maturity stage, and the industry for floppy disks is in the decline stage. What does this imply?

While the flash drive industry has reached its maximum market size, the market size for floppy disks is small and contracting.

1. The phrase __________________ refers to the media industry practice of making content available through a given distribution channel for a specified time period, usually under a different revenue model.

Windowing

True or false: Industries often tend to follow a predictable industry life cycle.

True

Imitation

Where competitors copy the successful innovation and thus ends the innovation process

Stuart 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 Stuart best represent? - technology enthusiasts - early adopters - late majority - laggards

early adopters Stuart belongs to the category of early adopters. The customers entering the market in the growth stage are early adopters. They recognize and appreciate the possibilities the new technology can afford them in their professional and personal lives.

According to crossing-the-chasm framework, the largest difference in consumer expectations is between ________.

early adopters and the early majority

According to the crossing the chasm framework, the largest difference in consumer expectation is between

early adopters and the early majority

A significant difference between technology enthusiasts and early adopters is that __________.

early adopters are interested in how a new technology will improve their lives, rather than in the details of the technology itself.

The process in which change agents create new products or processes at significant economic risk is known as

entrepreneurship

What are the four strategic options available to managers in the decline stage?

exit, harvest, maintain or consolidate

Platform businesses are organized as traditional linear pipelines

false

In the maturity stage of the industry life cycle, industry growth ______.

flattens or even declines

In the maturity stage of the industry life cycle, industry growth ______. Multiple choice question. maintains the same pace as during the growth stage increases slightly flattens or even declines increases dramatically

flattens or even declines

At what stage of the industry life cycle does the size of the market expand rapidly.

growith

The stage during which a new product has gained some acceptance, thus causing first-time buyers to eagerly acquire the product and accelerate demand, is the ______ stage.

growth

The stage during which a new product has gained some acceptance, thus causing first-time buyers to eagerly acquire the product and accelerate demand, is the ______ stage. Multiple choice question. shakeout maturity innovation growth

growth

The stage during which a new product has gained some acceptance, thus causing first-time buyers to eagerly acquire the product and accelerate demand, is the __________ stage.

growth

Suppose that a company has successfully used architectural innovation to reconfigure a product and is now the market leader. In order to improve its product offering, extend the time that it can extract profits from its products, and maintain high entry barriers for new rivals, it will most likely engage in __________ innovation next.

incremental

The second step of the four-step innovation process involves the transformation of an idea into a new product or process and is known as ______. Multiple choice question. imitation initiation implementation invention

invention

The second step of the four-step innovation process involves the transformation of an idea into a new product or process and is known as ____________

invention

Innovations that taret NEW markets and represent a major break from existing technologies or ways of thinking, such as the digital cameram the touch-screen smart phone, or the decoding of the human genome, are examples of ___________ innovations.

radical

Innovations that target NEW markets and represent a major break from existing technologies or ways of thinking such as the digital camera, the touch screen smartphone or the decoding of the human genome, are examples of ___________ innovations

radical

Benny's Baos had an edge in the market, but other companies began to enter the market . Benny is now losing customers even though he has launched an aggressive marketing campaign in an attempt to attract customers. Benny's Baos is likely in the ______ stage of the industry life cycle

shakeout

Benny's Baos had an edge in the market, but other companies began to enter the market. Benny is now losing customers even though he has launched an aggressive marketing campaign in an attempt to attract customers. Benny's Baos is likely in the ______ stage of the industry life cycle.

stakeout

A value innovation strategy requires trade-offs between differentiation and low costs. These are two distinct business-level positions that often require very different internal value chain activities. An example of a low-cost activity that may not be appropriate for a differentiator is

standardizing the production processes for higher output levels with fewer model changes.

Which two customer segments make up the largest percentage of the market potential?

the early majority and late majority

Industry Life Cycle

the five different stages -- introduction, growth, shakeout, maturity, and decline -- that occur in the evolution of an industry over time

idea

the innovation process begins with an idea the idea is often presented in terms of abstract concepts or as findings derived from basic research

Laggards

the last consumer segment to come into the market, entering during the decline stage -Customers who only adopt the product if necessary

1. How does the Cinematch recommendation system work? a. Cinematch develops a map of user ratings and steers users toward titles preferred by people with similar tastes. b. Cinematch gathers user ratings to calculate a gross average user rating which is continually updated with each subsequent user rating. c. Cinematch requests users to create profiles detailing their interests and preferences and serves recommendations accordingly. d. Cinematch uses a team of professional movie critics to create a comprehensive ranking system for each movie in its inventory. e. Cinematch ranks movies in two separate lists based on their critical and box office ratings, and subsequently alters user preferences.

a

1. How is scale important to Netflix streaming business? a. A larger firm with more customers can spend more on content licenses b. The firm can build larger data centers as it competes with the likes of Amazon Prime c. Netflix can continue to expand its network of nationwide distribution centers to overseas locations d. It will allow the firm to improve the marginal cost of its titles, which will also improve profitability e. All of the above

a

7. Using known components, based on existing technologies, in a new configuration to create a new market, is known as _______ a. Architectural innovation b. Planned emergence c. Strategic implication d. Disruptive creation

a. Architectural innovation

12. Successfully transitioning from one stage of the industry to the next is referred to as a. Crossing the chasm b. Stage-transitioning c. Stepping over the bridge d. Jumping the gap

a. Crossing the chasm

maturity stage

after the stakeout stage is completed and few firms remain industry structure morphs into an oligopoly with only a few large firms process innovation reaches its maximum as firms attempt to lower cost level of product innovation sinks to its maximum remaining firms tend to enjoy economies of scale

During the shakeout stage of the industry life cycle, profits degrade for

all but the most efficient firms

An innovation that targets a new market with existing technologies is called

an architectural innovation

radical innovation

an innovation that draws on novel methods or materials, is derived from an entirely different knowledge base or from a recombination of existing knowledge bases with a new stream of knowledge

disruptive innovation

an innovation that leverages new technologies to attack existing markets from the bottom up how to respond: continue to innovate, guard, disrupt yourself

incremental innovation

an innovation that squarely builds on an established knowledge base and steadily improves an existing product or service

An innovation that targets a new market with existing technologies is called ___________ innovation

architectural

An innovation that targets a new market with existing technologies is called a __________ innovation

architectural

What are the advantages of platform businesses compared to pipeline businesses?

they scale more efficiently by removing gatekeepers and they unlock new sources of value creation and supply.

What are the ways in which standards can emerge?

through market competition and by being imposed by government or other agencies

The key objective for firms in the growth stage of the industry life cycle is

to establish a strong strategic position so that rivals cannot imitate it easily

The key objective for firms in the growth stage of the industry life cycle is __________

to establish a strong strategic position so that rivals cannot immitate it easily

Musk describes his early days in his first startup, Zip2, as very tight with cash. For example, he and the two other founders began the firm on a very small budget by sleeping on futons in the office. This matches which part of the text's description of entrepreneurship?

to undertake economic risk

True or false: Innovation can create value for one firm while destroying value for another. True false question. True False

true

When a firm reconfigures components of an existing technology to enter into new markets, they are said to be employing - radical innovation - incremental innovation - architectural innovation - disruptive innovation

architectural innovation. An architectural innovation occurs when a product is reconfigured in a novel way to create new markets.

28. Innovation helps firms to achieve a competitive advantage by a. Raising prices b. Redefining the market in their favor c. Eliminating competition d. Identifying key business activities

b. Redefining the market in their favor

Innovation

Concerns the commercialization of an invention -Leads to temporary monopoly profits and competitive advantage

Benny's Baos is in a declining industry, but Benny thinks he can still survive by buying his competitors. Which strategic option is he planning to use?

Consolidate

Maintain strategy

Continuing to support marketing efforts at a given level despite the decrease in demand

1. _____ is a situation where two or more firms are both competitors and collaborators, or "frenemies."

Coopetition

Demand declines most rapidly in the __________ stage of the industry life cycle

Decline

Entrepreneurs innovate by

commercializing new ideas and inventions

1. Churn rate is a term that refers to the: a. average number of recommended titles in a user's queue. b. rate at which the demand for a product or service fluctuates with price change. c. number of movie titles that are difficult to assign reliable user ratings. d. rate at which customers leave a product or service. e. number of new users that each existing user attracts through word-of-mouth and social sharing.

d

Which of the following are types of innovation? (Check all that apply.)

disruptive architectural incremental radical

An innovation that targets existing markets with new technologies is called

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)

disruptive innovation

1. Brands are built through _____. a. customer awareness b. data assets c. excessive advertising d. customer profiling e. customer experience

e

Entrepreneurship

Describes the process by which change agents undertake economic risk to innovate - to create new products, processes, and sometimes new organizations -Innovate by commercializing ideas and inventions -Seek or create new business opportunities and then assemble the resources necessary to exploit them

Strategic Entrepreneurship

Describes the pursuit of innovation using tools and concepts from strategic management

Social entrepreneurship

Describes the pursuit of social goals while creating profitable businesses -Use the triple bottom line to evaluate their performance

Resetting the industry life cycle

Occurs if a significant technological or business model breakthrough emerges

Network Effects

The positive effect that one user of a product or service has on the value of that product for other users

Which of the following statements is true of the growth stage in the industry life cycle? - The objective of firms during this stage is to pursue a harvest strategy. - The prices begin to fall during this stage when compared to the introduction stage. - The type of buyers during this stage consists of the late majority. - The basis of competition tends to move away from process innovations toward product innovations.

The prices begin to fall during this stage when compared to the introduction stage. Prices begin to fall in the growth stage, often rapidly, as standard business processes are put in place and firms begin to reap economies of scale and learning.

Strategic objective during the introduction stage

To achieve market acceptance and seed future growth -Can use network effects to achieve it

1. The shift from atoms to bits is realigning nearly every media industry.

True

1. While it may be possible for rivals to match technology, the true exploitable resource created and leveraged through collaborative filtering technology is the data asset.

True

Which of the following is most likely to produce a radial innovation

a new sportswear company with a handful or employees that perform a number of loosely defined roles

innovation

a successful introduction of a new product, process, or business model - is a powerful driver in the competitive process can be a powerful strategic weapon to gain and sustain competitive advantage first mover advantages are competitive benefits that accrue to the successful innovator

35. A firm's ability to integrate external technological developments into its own current products is known as _____ capacity a. Absorptive b. Production c. Intake d. Retention

a. Absorptive

Mont Blanc uses a differentiation strategy that focuses on the social and emotional aspects of their product to appeal to a specific consumer segment. Which of the following initiatives would most be in keeping with their strategy?

an engraving service for pen owners who may wish to will their pens to loved ones

Platform Businesses

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

Radical Innovation

an innovation that 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

The invention of small desktop copiers to create a new consumer market using the same technology as large, stand-alone copiers is an example of a(n) ______ innovation.

architectural

The invention of small desktop copiers using the same technology as large, stand-alone copiers is an example of a __________ innovation

architectural

The innovation of small desktop copiers using the same technology as large, stand-alone copiers is an example of

architectural innovation

1. Netflix enjoys the triple scale advantage of the largest customer base, the largest selection, and the largest network of distribution centers. This can be attributed to: a. Netflix's specialized focus on advertising and marketing. b. Netflix's first-mover advantage. c. Netflix going public to generate funds for expansion. d. Netflix's effective and aggressive pricing strategy. e. the bargaining clout it exercises over movie studios and the government.

b

the four strategic options that managers have in the decline stages are: exit, harvest, maintain, or

consolidate

In the ______ stage of the industry life cycle, falling demand leads to a reduction in market size.

decline

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)

disruptive innovation.

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

blue ocean strategy.

The four strategic options that managers have in the decline stage are: exit, harvest, maintain, or ______. Multiple choice question. innovate revive consolidate restart

consolidate

1. Explain the long tail phenomenon at Netflix.

The long tail is a phenomenon whereby firms can make money offering a near-limitless selection. This nearly limitless selection allows Internet retailers to leverage what is often called the long tail. While traditional retailers stock their shelves with the most popular items, it turns out there's actually more money to be made selling obscure stuff (the stretched-out, but larger area right-side of the curve) if you can reach the greater customer base provided by the Internet

Successfully transitioning from one stage of the industry cycle to the next is referred to as

crossing the chasm

1. Netflix can send out any DVD it buys because of a Supreme Court ruling known as the _____. a. clickwrap agreement b. Betamax ruling c. fair use law d. First Sale Doctrine e. Copyright Directive

d

1. Costs that do not vary according to production volume are called _____. a. total costs b. marginal costs c. switching costs d. variable costs e. fixed costs

e

Establishing a solid strategic position that competitors cannot easily imitate is the key objective of a company in the

growth stage

1. Choose the correct answer: Why is the "First-Sale Doctrine," including understanding when it does and doesn't apply, relevant to Netflix? a. It means content acquisition costs for DVDs are more predictable than streaming costs. b. It means that content acquisition costs for streaming are more predictable than DVDs. c. In cases of streaming media, it facilitates a shift of bargaining power to content suppliers. d. In cases of streaming media, it facilitates a shift of bargaining power to firms paying to license content from suppliers. e. None of the above. f. a & d g. b & c h. a & c i. b & d

h

Firms that pursue a __________ strategy minimize the amount of resources devoted to product support in order to maximize cash flow.

harvest

Firms that pursue a(n) ______ strategy minimize the amount of resources devoted to product support in order to maximize cash flow. Multiple choice question. exit consolidate harvest maintain

harvest

The tendency of customers to enter the market in large numbers during the growth of the industry life cycle is known as the ____ effect

herding

In the introductory stage of the industry life cycle, an innovator can achieve market acceptance by

increasing the number of user to encourage network effects.

In the introductory stage of the industry life cycle, an innovator can achieve market acceptance by ______. Multiple choice question. demanding industry performance standards increasing the number of users to encourage network effects tinkering with the product design changing the number and size of competitors in the industry

increasing the number of users to encourage network effects

The ______ identifies how industries tend to develop and change over time.

industry life cycle

The ___________ identifies how industries tend to develop and change over time

industry life cycle

Broadly viewed ___________ describes the discovery, development, and transformation of new knowledge in a four-step process captured in the four I's.

innovation

What is a primary factor in avoiding creative destruction?

innovation

patent

intellectual property gives the inventor exclusive rights to benefit from commercializing technology for a specified time period in exchange for public disclosure of the underlying idea

________ is best described as the process of transformation of an idea into a new product or process, or the modification and recombination of existing ones. - invention - direct imitation - bootstrapping - lean manufacturing

invention Invention describes the transformation of an idea into a new product or process, or the modification and recombination of existing ones.

Which are the four steps of the innovation process?

invention innovation imitation idea

What is the positive effect that one user of a product or service has on the value of that product for other users?

network effect

The business structure that is linear and has producers at one end and consumers at the other is know as ________

pipeline

If a pharmaceutical company develops a first-of-its-kind vaccine to prevent HIV/AIDS and thus creates a whole new market for the product (non-infected civilians), it would be a(n)

radical Innovation

If a pharmaceutical company develops a first-of-its-kind vaccine to prevent HIV/AIDS and thus creates a whole new market for the product (non-infected civilians), it would be a(n)

radical innovation.

Innovation helps firms to achieve a competitive advantage by

redefining the market in their favor

What is the key objective for firms during the growth stage?

stake out a strong strategic position not easily imitated by rivals

Applying concepts from strategic management to the innovation process is known as _____________

strategic entrepreneurship

The fundamental question of ___________ is how to combine entrepreneurship with the concepts of strategic management in order to achieve a competitive advantage?

strategic entrepreneurship

The fundamental question of ____________ is how to combine entrepreneurship with the concepts of strategic management in order to achieve a competitive advantage.

strategic entrepreneurship

Which is the most common customer segment in the introductory stage of the industry life cycle

technology enthusiasts

According to the crossing-the-chasm framework, the largest difference in consumer expectations is between _____________

the early adopters and the early majority

The shakeout stage of the industry life cycle is dominated by

the early majority

The shakeout stage of the industry life cycle is dominated by ______.

the early majority

One of the largest customer segments of the market that include customers who research the product, wait until new-product kinks have been resolved, and purchase from well-established companies is

the late majority

One of the largest customer segments of the market that includes customers who research the product, wait until new-product kinks have been resolved, and purchase from well-established companies is ______.

the late majority

Which two customer segments make up the largest percentage of the market potential? (Check all that apply.)

the late majority the early majority

According to the crossing-the-chasm framework, a firm's transition between the different parts of the industry life cycle is difficult because

there is a big gulf separating the early adopters from customer segments that make up the mass market.

Which of the following are characteristics of the early majority?

- they have a strong sense of practicality - they rely on reviews by reputable magazines - the weigh benefits and costs carefully

What characteristics change as the industry life cycle progresses?

-number and size of competitors -type and level of innovation -type of customer

An incumbent firm in a winner-take-all market will typically seek to extend the time it can extract profits through ______________.

A focus on incremental innovations

Patent

A form of intellectual property that gives the inventor exclusive rights to benefit from commercializing technology for a specified time period in exchange for public disclosure of the underlying idea

Which statement describes the long tail?

A large amount of revenue derived from a small number of units among almost unlimited choices

Reverse innovation

Developing products in emerging markets and then distributing them to developed markets -Allows a firm to disrupt itself

A ________ Innovation is an innovation that leverages new technologies to attack existing markets from the bottom up. Begins as low cost solution to a problem. EX) Laptop computers disrupted desktop computers. EX) Dollar shave club disrupting Gillette

Disruptive

Educational organizations, such as Coursera, offer massive open online courses on the web as an alternative to traditional universities. This is an example of a(n) ____________ innovation.

Disruptive innovation - Leverages new technologies to attack existing markets

It is challenging for firms to "cross the chasm" because _______.

Each stage of the industry life cycle features a different group of customers with different preferences and demands.

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?

Early Adopters

Which customer segment dominates the market growth stage of the industry life cycle?

Early adopters

Platform Business

Enables interaction between producers and consumers -Overarching purpose is to enable matches among users and facilitate the exchange of goods, services, or social currency

Late Majority

Enter the market in the maturity stage -Not as confident in their ability to master new technology -Prefer to buy from well-established firms with a strong brand image

Which of the following is a disadvantage faced by first movers in an industry? - They will have no access to intellectual properties such as critical patents. - They cannot benefit much from network effects. - They cannot benefit from learning and experience curve effects like the late entrants. - They will have to find distribution channels and complementary assets.

They will have to find distribution channels and complementary assets. First movers must educate potential customers about the product's intended benefits, find distribution channels and complementary assets, and continue to perfect the fledgling product.

1. The practice of windowing involves: a. making content available to a distribution channel for a specified time period under a different revenue model. b. scheduling movies to be streamed online at primetime periods to pull in more revenue from advertising. c. relaying advertisements for limited time periods during online movie steaming, as opposed to frequent ad breaks. d. displaying content in apps and browser windows. e. streaming movies to customers' computers beforehand and then relaying them on television.

a

Markets-and-Technology Framework

a conceptual model to categorize innovations along the market (existing/new) and technology (existing/new) dimensions

An architectural innovation is

a new product in which existing technologies are used in a novel way to create new markets

Architectural innovation

A new product in which known components, based on existing technologies are reconfigured in a novel way to create new markets.

1. A manager's decision making is often shaped by its perception of the competition. Which of the following does Netflix see as being in competition with the firm? a. Video games b. Magazines c. DVD watching d. Amazon Prime e. All of the above

e

1. Internet retailers serve a larger geographic area with comparably smaller infrastructure and staff. This fact suggests that Internet businesses are more _____. a. churn-prone b. asymptotic c. capitalized d. vertically integrated e. scalable

e

organized inertia

established companies rely on formalized business processes and structures

During the decline stage of the industry life cycle, which strategic option requires firms to declare bankruptcy or undergo liquidation? Multiple choice question. consolidate exit maintain harvest

exit

At which stage of the industry life cycle does the size of the market expand rapidly

growth

Four Steps of the Innovation Process

idea, invention, innovation, imitation

In the third step of the innovation process, a(n) - invention is imitated by competitors. - new idea is presented in terms of abstract concepts. - new idea is expressed as findings derived from basic research. - invention is commercialized by entrepreneurs.

invention is commercialized by entrepreneurs. The innovation process begins with an idea. In the next step, invention describes the transformation of an idea into a new product or process, or the modification and recombination of existing ones. This is followed by commercialization. Innovation concerns the commercialization of an invention by entrepreneurs.

Which customer segment will only adopt a new product when it becomes absolutely necessary?

laggards

Using a ________ strategy, a firm continues to market its products at the same level despite a decline in consumer demand.

maintain

Innovation can ______. (Select all that apply.)

make existing products or businesses obsolete provide firms with a competitive advantage

Netflix was able to attract subscribers and grow because

media executives did not view it as a threat

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

process innovation.

New methods for producing existing products or delivering existing services are known as

process innovations

Innovation can

provide fins with a competitive advantage -make existing products/businesses obsolete

strategic entrepreneurship

pursuit of innovation using tools and concepts from strategic management

Applying concepts from strategic management to innovation process is known as

strategic entrepreneurship

Applying concepts from strategic management to the innovation process is known as ____

strategic entrepreneurship

The customer segment known as ______ enjoy testing product prototypes and providing voluntary feedback that companies use to perfect their products.

technology enthusiasts

Which is the most common customer segment in the introductory stage of the industry life cycle?

technology enthusiasts

Entrepreneurs

the agents that introduce change into the competitive system

The one key advantage of the effective us of technology for business platforms is that _______________

the barriers of time and space are reduced

Winners in the shakeout stage are generally ___________

the cost leaders

Shakeout stage

the rate of growth declines, firms begin to directly compete against each other for market share, and the weaker firms are forced out of the industry -Price becomes a more competitive weapon

How are the early majority and late majority different in their attitudes toward technology?

The early majority is confident in their ability to master the new technology; the late majority is not.

How are the early majority and late majority different in their attitudes toward technology? - The early majority is very concerned with what new technology can do for them; the late majority is not. - The early majority is confident in their ability to master the new technology; the late majority is not. - The early majority is concerned that many new technologies will fade away; the late majority is not. - The early majority is strongly influenced by the endorsements of others; the late majority is not.

The early majority is confident in their ability to master the new technology; the late majority is not.

1. How is Comcast vertically integrated?

The firm owns a cable provider, broadcast channels such as NBC, and studios that produce content.

Harvest strategy

The firm reduces investments in product support and allocates only a minimum of human and other resources

Maturity Stage

The industry morphs into an oligopoly with only a few large firms -Demand now consists of the replacement or repeat purchases

During the growth stage of the industry cycle,_____ increases rapidly

demand

During the growth stage of the industry life cycle, ______ increases rapidly. Multiple choice question. imitation the cost of production demand research and development

demand

growth stage

demand increases after introduction competitive rivalry muted standard emerges product/process innovations made

invention

describes the transformation of an idea into a new product or process, or the modification and recombination of existing ideas

reverse innovation

developed for emerging economies before being introduced in developed economies, frugal innovation

What type of innovation applies to existing markets and existing technologies

incremental

The commercialization of an invention by entrepreneurs is called

innovation

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 that the platform manages is a(n) ______.

platform business

A firm that successfully leverages network effects can

puts its industry into the growth stage

In which stage in the industry life cycle does competition become more intense, forcing weaker firms out of the industry?

shakeout

In which stage of the industry life cycle does competition become more intense, forcing weaker firms out of the industry?

shakeout

Winners in the shakeout stage are generally

the cost leaders

A significant difference between the early majority and the late majority is that ____________

the late majority is not confident in using new technologies

Strategic Entrepreneurship

the pursuit of innovation using tools and concepts from strategic management

The chasm separating the early adopters from the early majority is the largest

true

Which of the following are ways in which standards can emerge?

- By being imposed by government or other agencies - Through market competition

Innovation can _______________.

- Provide firms with a competitive advantage - Make existing products or business obsolete

Innovation

- Successful introduction of a new product, process or business model - Powerful driver in the competitive process - Allows firms to redefine the marketplace in their favor and achieve a competitive advantage

Strategic options during the decline stage

-Exit -Harvest -Maintain -Consolidate

Advantages of the platform business model

-They scale more efficiently by eliminating gatekeepers -They unlock sources of value creation and supply -They benefit from community feedback

The Four I's of Innovation

1. Idea 2. Invention 3. Innovation 4. Imitation

Which are the four steps of the innovation process

1. Innovation 2. Invention 3. Imitation 4. Idea

Which of the following are ways in which standards can emerge?

By being imposed by government or other agencies. Through Market Competition

Innovation ________ competition, while simulatneously creates & _______ value.

Drives, Destroys

The _______ identifies how industries tend to develop and change over time.

Industry life cycle

Match the type of innovation (on the left) with an example (on the right).

Product - Electric Vehicle Process - Biotechnology

Innovation can _____________.

Provide firms with a competitive advantage Make existing products or businesses obsolete

Innovation helps firms achieve a competitive advantage by __________.

Redefining the market in their favor

Innovations can __________

-make existing products or businesses obsolete -provide firms with a competitive advantage.

What question is asked along the horizontal axis of the markets-and-technology framework?

Does the innovation build on existing technologies or create new ones?

Which of the following statements about a business pipeline is true?

It is the traditional system of horizontal business organization.

Decline Stage "Laggards" (Industry live cycle)

Market size contracts. Strategic options are (1)Exit- by bankruptcy. (2) Harvest- Reduce investments in product support. (3) Maintain- survive by marketing efforts. (4) Consolidate- Buying rivals to reduce competition.

In order to succeed at the introductory stage of the industry life cycle, it is important to have competency in ___________.

Marketing

1. How does Netflix leverage its data asset, even as it has shifted from atoms to bits?

Netflix uses its substantial data asset to: recommend movies; drive software redesign to improve the user experience; evaluate potential licensing deals; and tailor promotions of existing content.

Increases in the value of a product or service that result from a corresponding increase in the number of users are known as ____________.

Network effects

Attempting to address social or ecological issues when building a for-profit business is know as ________

Social entrepreneurship

A patent holder typically has a ____________

Temporary monopoly

True or False: Innovation can create value for one firm while destorying value for another.

True

True or False: Most industries often tend to follow a predictable industry life cycle.

True

The _____ determines whether an invention can be patented

U.S. Patent and Trademark Office

What is valuable proprietary information that is not in the public domain and where the firm makes every effort to maintain its secrecy called? Multiple choice question. An invention A patent A temporary monopoly position A trade secret

a trade secret

A firm's ability to integrate external technological developments into its own current products it known as _____ capacity

absorptive

The development of most industries follow

an S curve

1. The shakeout stage of the industry life cycle is dominated by a. The late majority b. Early adopters c. The early majority d. Laggards

c. The early majority

If costs are equal, when a firm has a higher value gap than its competitor, it can be inferred that the firm

can charge a premium price for its products and services.

The introductory stage of the industry life cycle is a ______-intensive process. Multiple choice question. leisure capital profit sales

capital

The introductory stage of the industry life cycle is a ______-intensive process. Multiple choice question. sales capital profit leisure

capital

stakeout stage

competitive intensity increases and weaker firms are forced out firms begin to cut prices and offer more services consolidations and acquisitions occur, weaker firms exit through bankruptcy winners often stake out a strong position as cost leaders few may implement a blue ocean strategy, combining differentiation and low cost

Benny Baos is in a decline industry, but Benny thinks he can still survive by buying his competitors. Which strategic option is he planning to use?

consolidate

The use of complementary software applications (apps) for smartphones has not only created a new "apps" industry but has also spurred market demand for smartphones themselves. Thus, apps for smartphones have largely

created a virtuous cycle reinforcing smartphones globally.

During the shakeout stage of the industry life cycle, process innovation

becomes more important

During the shakeout stage of the industry life cycle, process innovation __________

becomes more important

1. Which of the following represents an advantage enjoyed by the Netflix DVD-by-mail business over traditional video stores? a. Lower technology overhead b. Lower shipping expenses c. Larger entertainment selection d. Higher energy costs e. Higher churn rates

c

In the ___________ stage of the industry life cycle, falling demand leads to a reduction in market size

decline

25. The four strategic options that managers have in the decline stage are: exit, harvest, maintain, or a. Innovate b. Revive c. Consolidate d. Restart

c. Consolidate

A disruptive innovation is more likely to be successful if it

captures the low end of the market first

introduction stage

characterized by the innovator's core competency in R&D barriers to entry lead to be high innovators may also encounter first-mover disadvantages objective: achieve market acceptance and seed future growth

*During the decline stage of the industry life cycle product innovation efforts __________.

come to a halt

1. Even if Netflix gave Cinematch away to its rivals, they would still not be able to make the same kind of accurate recommendations as Netflix. This is because of Netflix's _____. a. technological superiority b. customer loyalty c. movie expertise d. data advantage e. large inventory

d

1. _____ refers to removing an organization from a firm's distribution channel. a. Disbarment b. Repudiation c. Annulment d. Disintermediation e. Revocation

d

market and technology framework

a conceptual model to categorize innovations along the market and technology dimensions

Which of the following is most likely to produce a radical innovation

a new sportswear company with a handful of employees that perform a number of loosely defined rolls

During the shakeout stage of the industry life cycle, profits degrade for ______. Multiple choice question. all but the most efficient firms the most efficient firms only a few of the weakest firms all firms in the industry

all but the most efficient firms

There exist important trade-offs between value creation and low cost because value creation and cost tend to be

positively correlated.

A patent holder typically has a

temporary monopoly

A significant difference between the early majority and the late majority is that

the late majority is not confident in using new technology

A business model in which companies can obtain a large part of their revenues by selling a small number of units from among almost unlimited choice is referred to as _____.

the long tail

network effects

the positive effect that one user of a product or service has on the value of that product for other users

Entrepreneurship

the process by which people undertake economic risk to innovate -- to create new products, processes, and sometimes new organizations

According to the crossing the chasm framework, the largest difference in consumer expectations is between

early adopters and the early majority

A significant difference between technology enthusists and early adopters is that

early adopters are interested in how a new technology will improve their lives, rather than in the details of the technology itself.

A significant difference between technology enthusiasts and early adopters is that __________

early adopters are interested in how a new technology will iprove their lives

What are the four Is?

idea, innovation, invention, and imitation

Which are the four steps of the innovation process? Multiple select question. imitation invention instigation imagination innovation idea

imitation invention innovation idea

The customer segment known as the early majority tends to enter the market

in large numbers

The customer segment known as the early majority tends to enter the market __________.

in large numbers

A manufacturer that relies on an established network of suppliers to produce its goods is part of a(n) ___________ and is less likely to produce radical innovations.

innovation ecosystem

Which of the following is a primary factor in avoiding creative destruction.

innovations

Patent

intellectual property that gives inventor rights to benefit from the technology for a specific time, and becomes a temporary monopoly. Exposed after patent expires.

1. Firms with high churn rates are likely to be more profitable.

False

1. One of the benefits of Netflix moving internationally is that any title licensed from the United States also comes with the right to stream the title worldwide, regardless of customer geography.

False

At which stage of the industry life cycle does the size of the market expand rapidly?

Growth

Consolidate strategy

Buying rivals in a declining industry

1. By shifting to a streaming model, Netflix stands to eliminate shipping and handling costs.

True

1. Cinematch develops a map of user ratings and steers users toward titles preferred by people with tastes that are most like theirs.

True

1. Once Netflix became a public company, the firm was required to disclose its financial position and reveal it was on a profit march.

True

1. The high degree of customer satisfaction that Netflix enjoyed is tightly linked with the firm's sized-based advantages.

True

1. Within the DVD-by-mail segment, Netflix remained bigger than both Wal-Mart and Blockbuster.

True

Netflix's initial revenue model was based on a flat-rate monthly subscription fee rather than a per-disc rental fee

True

Cloud Computing

A real-time network of shared computing resources via the Internet -Rather than requiring the users to download the appropriate software on their computer, the software is maintained and updated in the cloud

The four step innovation process starts with _________.

An idea

A disruptive innovation typically requires a(n) ____________ approach to capturing the market.

Bottom-up

1. Relate your understanding of Netflix dominance in the DVD-by-mail business to what you learned in the Strategy and Technology chapter: what three resources for competitive advantage did Netflix create in this market that rivals Blockbuster and Walmart couldn't match?

Brand, scale, data asset

A disruptive innovation is more likely to be successful if it ______________.

Captures the low end of the market first

Intra-preneurs

Change agents within existing companies that pursue corporate entrepreneurship

What two customer segments make up the largest percentage of the market potential?

Early Majority & Late Majority

GE is disrupting itself by using reverse innovation to create low-cost health care diagnostic products in emerging markets (refer to Strategy Highlight 7.2 in the text). All of the following are true about this strategy except

GE is creating a new industry.

The Innovation Process ends with ________. Where competitors attempt to Imitate an innovation.

Imitation

Types of Innovation: Combining Markets and Technologies

New Market/Existing Technologies: Architectural Innovation Existing Market/Existing Technologies: Incremental Innovation New Markets/New Technologies: Radical Innovation Existing Markets/New Technologies: Disruptive Innovation

Radical innovations are usually introduce by __________

New entrepreneaurial ventures

Product Innovations

New or recombined knowledge embodied in new products -Such as the jet airplane, electric vehicles, smartphone, and wearable computer

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?

The market for LCD televisions has reached its maximum size, whereas the market for Ultra-High Definition televisions is still small in size.

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?

The market for LCD televisions has reached its maximum size, whereas the market for Ultra-High definition televisions is still small in size.

Ways to categorize innovation

Measure the degree of newness in terms of technology and markets

Disruptive innovation

Leverages new technologies to attack existing markets from the bottom up

What are characteristics of early majority

they have a strong sense of practicality, they rely on reviews by reputable magazines and weigh the benefits and costs carefully

1. _____ is a classification of software that monitors trends among customers and uses this data to personalize an individual customer's experience.

Collaborative filtering

An Invention turns into an innovation only when it is successfully ________.

Commercialized

Types of Innovation

Architectural Radical Incremental/Innovation Disruptive

What can incumbent firms do to counter disruptive innovations?

1. Continue to innovate in order to stay ahead of the competition 2. Guard against disruptive innovation by protecting the low end of the market 3. Disrupt yourself, rather than wait for others to disrupt you

1. The term _______________ refers to the rate at which customers leave a product or service.

Churn

1. ___________ refers to the rate at which customers leave a product or service

Churn Rate

Why can't many innovators successfully transition from one stage of the Industry life cycle to the next?

Each stage of the ILC is dominated by a different customer group.

Because Lorraine wants to introduce innovative new production processes to the local restaurant industry, she is considered an ________.

Entrepreneur

1. At Netflix, the marginal cost for digital goods is zero for all licensees.

False

1. Brand and advertising are synonyms for the same concept.

False

In the shakeout stage of the industry, competitive characteristics in the industry change. Which of the following is not a change expected during this stage?

New firms enter with features that shakeup the incumbents.

1. For traditional retailers selling physical goods, _____ is the biggest constraint limiting a firm's ability to offer customers what they want and when they want it. a. shelf space b. video piracy c. shipping costs d. distribution rights e. disintermediation

a

A firm that successfully leverages network effects can ___.

push its industry into the growth stage

If a pharmaceutical company develops a first-of-its-kind vaccine to prevent HIV/AIDS and thus creates a whole new market for the product (non-infected civilians), it would be a(n) _________ innovation. - radical - incremental - disruptive - architectural

radical The innovation explained in this scenario would fall in the category of radical innovations. A radical innovation draws on novel methods or materials, is derived either from an entirely different knowledge base or from a recombination of existing knowledge bases with a new stream of knowledge, or targets new markets by using new technologies.

During the introductory state of the indursty life cycle, an innovator will likely devote most of his time, money, and effort to ____________

research and developement

A significant difference between the early majority and the late majority is that ______.

the late majority is not confident in using new technologies

entrepreneurship

the process which change agents undertake economic risk to innovate - to create new products, processes, and sometimes new organizations introduce change into the competitive system

Innovation

the successful introduction of a new product, process, or business model -- is a powerful driver in the competitive process.

Radical innovation

An innovation that draws on novel methods or materials, is derived either from an entirely different knowledge base or from recombination of the existing knowledge bases with a new stream of knowledge -Occurs in new markets with new technology

1. Provide a brief description of the basics of the Netflix DVD-by-mail business model.

Netflix was started as a DVD-by-mail service that charged a flat-rate monthly subscription rather than a per-disc rental fee. Customers do not pay a cent in mailing expenses, and there are no late fees. Videos arrive in red Mylar envelopes which contain the requested DVD, prepaid postage, and return address. When done watching videos, consumers just slip the DVD back into the envelope, and drop the disc in the mail. Users make their video choices in their "request queue" at Netflix.com. If a title is not available, Netflix simply moves to the next title in the queue. Consumers use the Web site to rate videos they've seen, specify their movie preferences, get video recommendations, check out DVD details, and even share their viewing habits and reviews. This model helped Netflix grow into a giant, but Hastings knew that if his firm was to remain successful, it would have to transition from mailed DVDs to streaming video.

Which of the following statements about the industry life cycle is true?

Only a few large firms remain

T/F: Platform businesses often outperform pipeline businesses

True

True or False: The chasm seperating the early adopters from the early majority is the largest.

True

absorptive capacity

a firm's ability to understand external technology developments, evaluate them, and integrate them into current products or create new ones

True or false: Platform businesses are organized as traditional linear pipelines.

False

Redwood Corp. follows a business model in which the performance of the company is not only based on how much profits were generated, but also on how the community in general benefited from its operations. Thus, the company under its "Plant a Life" campaign promises to plant a tree with every customer purchase. Which of the following terms best describes the performance valuation model of Redwood Corp.? - crowdsourcing - social entrepreneurship - offshoring - corporate intrapreneurship

social entrepreneurship Redwood Corp. uses the performance valuation entrepreneurship business model. Social entrepreneurship describes the pursuit of social goals by using entrepreneurship. Social entrepreneurs evaluate the performance of their ventures not only by financial metrics but also by ecological and social contribution.

Simone was the first among her peers to try the new unicorn hair dye. For months she was the only person with unicorn hair. After some time, though, the product became available everywhere, and nearly every other person began sporting unicorn hair, even Simone's mom. This situation describes which of the following? Multiple choice question. the shakeout stage of the industry life cycle the exit strategic option of the industry life cycle process innovation the crossing-the-chasm framework

the crossing-the-chasm framework

The primary Reason incumbent firms are vulnerable to disruptive innovations is that _______________

they are too committed to existing products to make rapid changes in the face of disruptive innovations

true or false: a firm's absorptive capacity is its ability to apply internal technology development to new products

False

Maturity Stage "Late Majority" (Industry Life Cycle)

Objective: Maintain a strong strategic position. Demand now consists of replacement or repeat purchases. Industry growth is at zero or decline. Few firms remain (oligopoly) & most enjoy economies of scale. EX) the smartphone industry is at Maturity stage. Competition is increasing even more.

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?

an intrapreneur

The four generic business strategies are generated by comparing the strategic position with the scope of competition. Tesla, an electric car manufacturer, is presented in the text as fitting into which of these categories?

focused differentiation

Industry Life Cycle

As an industry evolves over time, we can identify five distinct stages: introduction, growth, shakeout, maturity, and decline.

industry life cycle

industries tend to follow a predictable life cycle with five stages introduction stage growth stage stakeout stage maturity stage decline stage

During which stage does a standard develop?

growth

SHAKEOUT stage. "Early Majority" (Industry Life cycle)

Objective: Surviving by drawing on "deep pockets." Market growth delcines. Firms compete directly for market share. Cost leaders thrive, weaker firms drop out. Product innovation begins to decline.

According to the crossing-the-chasm framework, a firm's transition between the different parts of the industry life cycle is difficult because - the number and size of competitors change throughout the industry life cycle. - the firm tends to follow a predictable industry life cycle. - there are frequent changes in the supply and demand sides of the market throughout the industry life cycle. - there is a big gulf separating the early adopters from customer segments that make up the mass market.

there is a big gulf separating the early adopters from customer segments that make up the mass market. Significant differences exist between the customer groups that enter early during the introductory stage of the industry life cycle versus customers that enter later during the growth stage. These differences make a firm's smooth transition between the different parts of the industry life cycle difficult. These distinct differences between customer groups lead to a big gulf or chasm into which companies and their innovations frequently fall.

Which of the following statements is true? - Platform businesses have a major weakness: they are not very successful at value creation. - A platform business exists to help make matches among users and facilitate the exchange of goods, services or social currency. - A platform business usually must rely on pipeline businesses to connect it with consumers. - Platform businesses are dependent on electronic media and thus are a new development in the business world.

A platform business exists to help make matches among users and facilitate the exchange of goods, services or social currency. Platforms can be defined along three dimensions: 1. A platform is a business that enables value-creating interactions between external producers and consumers. 2. The platform's overarching purpose is to consummate matches among users and facilitate the exchange of goods, services, or social currency, thereby enabling value creation for all participants. 3. The platform provides an infrastructure for these interactions and sets governance conditions for them. The business phenomenon of platforms, however, is not a new one.Platforms,often also calledmulti-sided markets, have been around for millennia.

Walmart and Blockbuster were well-known firms. Why weren't they able to leverage their brands to compete against Netflix

Blockbuster and Walmart, discovered that their strong consumer awareness didn't translate into any advantage when competing with Netflix. While both firms were well known, neither name was synonymous with a DVD-by-mail subscription service. Reed Hastings's early market entry and effective execution made Netflix the first firm consumers thought of. Everyone else in the space had to spend big to try to create awareness alongside the mindshare leader. Durable brands are built through customer experience. This is especially critical online, where opinion spreads virally and competition is just a click away. During the firm's ascendency in the DVD-by-mail business, Netflix wasn't simply considered to provide a good customer experience; it was often ranked the best. The firm was top in the American Customer Satisfaction Index (ACSI) and Nielsen rankings, while ratings agency ForeSee named Netflix the number one e-commerce site in eleven out of twelve surveys conducted (placing it ahead of Apple and Amazon).

1. In context to Netflix, what are the scale advantages associated with streaming?

Despite rising costs, a difficult-to-control cost structure, and increased competition, there are still key advantages that can be created by a leading player in the streaming business, and Netflix hopes that its advantages will be large enough to sustain it as the dominant firm for years to come. First on scale—while studios may charge more for deals involving more users, the firm with more users is likely to be able to pay far more than smaller rivals. A studio would rather accept a $200 million check from Netflix than three $50 million checks from smaller players. Start talking exclusives, and advantage once again goes to the biggest player. Size-based advantages come from both the scale of a firm's streaming library (a longer tail), and the scale of the customer base (the ability to pay for that tail). Once a firm gets big, there's a virtuous cycle where more titles attract more customers, and more customers increase a firm's ability to bid on attractive content. Netflix doesn't just see growth as a way to advance profitability; it sees it as a vital competitive asset to keep competitors at bay.

1. How does Netflix use collaborative filtering software to match movie titles with customer tastes? In what ways does this software help Netflix garner sustainable competitive advantage?

Netflix has proved that there is both demand and money to be made from the vast back catalog of film and TV show content by addressing the biggest inefficiency in the movie industry—"audience finding." To do this, Netflix leverages some of the industry's most sophisticated technology—a proprietary recommendation system that the firm calls Cinematch. Using Cinematch, the Netflix Web site gathers user ratings of movies that are viewed by its customers, and also prompts new users with a list of movies. Cinematch data also offers Netflix operational advantages. The firm examines inventory availability in the warehouse closest to a given customer, and tailors recommendations to favor movies that are in stock so that users aren't frustrated by a wait. Netflix has also learned to make studios happy, by leveraging Cinematch to help them find an audience for their back catalog of movies and TV shows. The firm developed a revenue-sharing system where studios could offer Netflix their DVD catalog at a wholesale price in exchange for a cut of Netflix subscriber revenues each time someone requests a given DVD. This was huge for studios—suddenly they had a way to extend the profit-earning life of their movie and TV catalogs, and all without requiring a dime extra in additional marketing.

1. Netflix, the one-time "dot-com" upstart managed to achieve scale economies despite the fact that it faced two massive rivals: Blockbuster, a name synonymous with home video rental, and Walmart, not just a large firm, Fortune One, the largest firm in the US ranked by revenues. In what ways did Netflix offer size advantages over these rivals?

Netflix's scale in DVD-by-mail is based on three advantages where the firm's size outstripped all rivals: the size of the firm's distribution network, the size of the firm's customer base (which gave it economies of scales, or efficiencies to spread the cost of its massive network across lots of paying subscribers) and the size of the firm's long-tail. Walmart had the cash to compete with Netflix but decided doing so would require a massive investment and extended periods of loss to unseat the early-moving leader, so Walmart pulled the plug on their DVD-by-mail effort. Blockbuster decided to fight to the death—and lost. The firm never had the necessary threefold scale advantages (distribution centers, selection, and customers) needed to create a competitive DVD-by-mail business.

During the introductory stage of the industry life cycle, an innovator will likely devote most of his time, money and effort to ___________.

Research and development

While the industry for 5G compatible devices is in the introduction stage, the industry for 3G compatible devices are in the maturity stage. What does this imply? - The market for 3G compatible devices has reached its maximum size, whereas the market for 5G compatible devices is still small in size. - The 5G compatible devices industry will focus on process innovation, whereas the 3G compatible devices industry will focus on product innovation. - The 3G compatible devices is likely to focus on achieving market acceptance, while the 5G compatible devices industry is likely to focus on the harvest strategy. - The 5G compatible devices industry will focus on pursuing an integration strategy, while the 3G compatible devices industry will focus on pursuing a differentiation strategy.

The market for 3G compatible devices has reached its maximum size, whereas the market for 5G compatible devices is still small in size. The market for 3G compatible devices has reached its maximum size, whereas the market for 5G compatible devices is still small in size. During the fourth stage of the industry life cycle, the industry structure morphs into an oligopoly with only a few large firms. The market has reached its maximum size, and industry demand is likely to be zero or even negative going forward. In the introduction stage, however, the initial market size is very small.

1. Although Netflix had a larger distribution network than rivals, other firms could build a similarly large warehouse network. Why was the size of the Netflix DVD-by-mail customer base critical to repelling rivals?

While Netflix's warehouse network and product selection were greater than those of rivals, these assets could be bought by a competitor with a big wallet. But if one firm has far more customers than the other, then the bigger firm has a better cost structure and better profit prospects and should be able to offer better pricing. Scale economies are achieved by firms that leverage the cost of an investment across increasing units of production. In Netflix case the warehouse network is a big part of the cost behind scale economies, while a unit of production is a subscriber. More subscribers mean more revenue divided by the infrastructure cost.

In developed countries, the industry for thumb drives is in the maturity stage, and the industry for floppy disks is in the decline stage. What does this imply? - While the thumb drive industry has reached its maximum market size, the market size for floppy disks is small and contracting. - The industry structure for floppy disks is that of perfect competition, whereas the industry structure for thumb drives is monopolistically competitive. - The number of new entrants in the floppy disks industry will be more when compared to the industry for thumb drives. - While the buyers of floppy disks can be categorized under early majority, the customers of thumb drives can be categorized under late majority.

While the thumb drive industry has reached its maximum market size, the market size for floppy disks is small and contracting. Changes in the external environment often take industries from maturity to decline. In this final stage of the industry life cycle, the size of the market contracts as demand falls.

In the maturity stage of the industry life cycle, industry growth

flattens or even declines

9. During the shakeout stage of the industry life cycle, profits degrade for a. All but the most efficient firms b. The most efficient firms only c. A few of the weakest firms d. All firms in the industry

a. All but the most efficient firms

19. Applying concepts from strategic management to the innovation process is known as a. Strategic entrepreneurship b. Animated innovation c. Leverage invention d. Consolidation

a. Strategic entrepreneurship

First-mover disadvantages can include which of the following

- The need to educate potential customers about the products benefits -The need to continuously perfect a product. -the need to find distribution channels

Which of the following characteristics change as the industry life cycle progresses?

-Types of customers - Type and level of innovation - Number and size of competitors

What can incumbent firms do to counter disruptive innovations

-continue to innovate -disrupt themselves -protect the low end of the market

Which of the following are characteristics of the early majority?

-they rely on reviews by reputable magazines -They weigh benefits and cost carefully -They have a strong sense of practicality

Which of the following are advantages of platform businesses compared to pipeline businesses.

-they unlock new sources of value creation and supply -they scale more efficiently by eliminating gatekeepers

Which of the following are stages of the industry life cycle?

1. Growth 2. Introduction 3. Maturity 4. Decline 5. Shakeout

Which of the follwoing is an example of invention?

Apple combining smart phone and wristwatch technologies to create the Apple Watch

The tendency of customers to enter the market in large numbers during the growth stage of the industry life cycle is known as the __________ effect.

Herding

8. An innovation that targets existing markets with new technologies, is called a. An incremental innovation b. A disruptive innovation c. An architectural innovation d. A radical innovation

b. A disruptive innovation

11. According to the crossing-the-chasm framework, the largest difference in consumer expectations is between a. The late majority and laggards b. Early adopters and the early majority c. Technology enthusiasts and early adopters d. The early majority and the late majority

b. Early adopters and the early majority

26. The commercialization of an invention by entrepreneurs is called: a. Invention b. Innovation c. Patenting d. Imitation

b. Innovation

6. A large incumbent firm that has established a number of formalized practices and procedures may have a difficult time producing radical innovations due to its a. High labor costs b. Organizational inertia c. Competitive complacency d. Conflicting investor interests

b. Organizational inertia

31. Innovations that target NEW markets and represent a major break from existing technologies or ways of thinking, such as the digital camera, the touch-screen smart phone, or the decoding of the human genome, are examples of a. Incremental innovations b. Radical innovations c. Architectural innovations d. Disruptive innovations

b. Radical innovations

Most firms consider laggards to be a. The most likely to purchase innovative products b. A valuable source of product feedback c. Not worth the effort of pursuing d. The most prized customer segment

c. Not worth the effort of pursuing

A disruptive innovation is more likely to be successful if it __________

captures the low end of the market first

The process by which word-processor manufacturer Wang Laboratories captured the market from typewriter manufacturers, and which ecplains how it was later replaced by PC manufacturers and mobile-phone companies, is known as ____________

creative destruction

5. GE's decision to let a GE team in China develop an inexpensive and portable ultrasound machine for developing markets is an example of _______ a. A top-down innovation strategy b. A failure to innovate c. A roundabout innovation strategy d. A bottom-up innovation strategy

d. A bottom-up innovation strategy

3. Which of the following is most likely to produce a radical innovation? a. An established restaurant chain with a clear organizations structure and strictly defined roles for employees b. A financial services firm that has been in business for 75 years and has longstanding customer relationships c. A leading toy manufacturer with a significant interest in maintaining the status quo d. A new sportswear company with a handful of employees that perform a number of loosely-defined roles

d. A new sportswear company with a handful of employees that perform a number of loosely-defined roles

20. Which of the following is an example of innovation? a. Walmart increasing the number of local and organic products in its stores b. McDonald's cutting items from its dollar menu c. Nike re-releasing an exact replica of a popular sneaker from the 1980's d. Apple combining smart phone and wristwatch technologies to create the Apple Watch

d. Apple combining smart phone and wristwatch technologies to create the Apple Watch

4. The invention of small desktop copiers out of the same technology used to create large, standalone copiers, is an example of a(n) a. Incremental innovation b. Disruptive innovation c. Radical innovation d. Architectural innovation

d. Architectural innovation

23. In the _____ stage of the industry life cycle, falling demand leads to a reduction in market size a. Introduction b. Growth c. Consolidation d. Decline e. Shakeout

d. Decline

14. A significant difference between technology enthusiasts and early adopters is that a. Early adopters dominate the decline stage of the industry life cycle b. Technology enthusiasts have much more disposable income c. Early adopters are primarily interested in technical details rather than practical applications d. Early adopters are interested in how a new technology will improve their lives, rather than in the details of the technology itself

d. Early adopters are interested in how a new technology will improve their lives, rather than in the details of the technology itself

27. It is common for firms to start by introducing a(n) _____ innovation a. Incremental b. Disruptive c. Entrepreneurial d. Radical

d. Radical

16. An agreed-upon solution about a common set of engineering features and design choices is known as a _______ a. Strategic objective b. Dominant currency c. Link d. Standard

d. Standard

30. A significant difference between the early majority and the late majority is a. The early majority enjoys providing voluntary feedback to producers b. The late majority is comfortable purchasing from new or unknown firms c. The late majority is more adept with technology d. The late majority is not confident in using new technologies

d. The late majority is not confident in using new technologies

Establishing a solid stragegic position that competitors cannot easily imitate is the key objective of a company in the ________ stage.

growth

The innovation process is a four-step process that consists of idea, invention, innovation. and ____________

imitation

the type of innovation that focuses on improving an existing product by using existing technology and targeting existing markets is a ___________________

incremental

Which of the following allows a firm to redefine a market in its favor?

innovation

In the __________ stag of the industry life cycle, a moderate number of large firms compete for a share of a market that has reched its maximum size

maturity