MGMT425 Chapter 7

Which of the conditions prevail when an industry is at the end of its life cycle?

A. The level of process innovation reaches its maximum as firms attempt to lower cost.

Which of the following is true of a disruptive innovation?

A. It targets existing markets.

The four-step innovation process ends with:

D. imitation.

In the U.S., the time period for the right to exclude others from the use of a patented technology is _____ from the filing date of a patent application.

A. 20 years

In the context of the long tail phenomenon, what does the short head represent?

A. It represents products that appeal to the largest segment of the market with homogenous tastes.

A(n) _____ leverages new technologies to attack existing markets.

A. disruptive innovation

As a research scholar, Richard had built a helicam as part of his project. The helicam could capture aerial images. Realizing the potential use of this product in movie production and military and rescue operations, he started a new venture where he could customize these helicams to fit the specific needs of the buyers and sell them. Richard can be best described as a(n) _____.

A. entrepreneur

A factor favoring the success of disruptive innovation is that:

A. incumbent firms are slow to change.

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

A. patent

The strategic objective of a first mover during the introduction stage of the industry life cycle is to:

A. pursue a harvest strategy.

The compact disk (CD) industry is in the maturity phase of its industry life cycle. What conditions prevail for an industry in this stage?

D. The industry structure is an oligopoly with only a few large firms.

In developed economies, the electric car industry is in the introduction stage, and the industry for MP3 players is in the shakeout phase. What does this imply?

B. The industry for electric cars will focus more on product innovation, whereas in the MP3 player industry, the focus will be on process innovation.

Which of the following is a feature of the maturity stage of the industry life cycle?

B. The market reaches its maximum size.

Intel's Celeron chip and Atom chip are initiatives to:

B. guard the company against disruptive innovation by protecting the low end of the market.

The key objective for firms during the growth phase is to:

B. stake out a strong strategic position not easily imitated by rivals.

The strategic objective of businesses during the shakeout phase of the industry life cycle will primarily be to:

B. survive by drawing on "deep pockets."

The typical four-step innovation process begins with:

B. the presentation of an idea as findings derived from basic research

How is the early majority section of consumers different from the late majority section?

C. Although the early majority is confident in their ability to master a new technology, the late majority is not.

Which of the following is a feature of the shakeout phase of the industry life cycle?

C. Competitive intensity within the industry increases.

Which of the following statements is true of the early majority section of consumers?

C. They weigh the benefits and costs carefully when adopting a new product.

The customers entering the market in the growth stage are primarily _____.

C. early adopters

Which of the following is stated by the long tail phenomenon?

D. Almost 80 percent of sales in a given product category come from only 20 percent of the offerings in that category.

ModelLife Electronics Inc. is a company that builds diagnostic devices. It was the first company to develop a compact MRI scanner by reconfiguring the components of the MRI technology. This smaller and user-friendly version of the huge MRI scanner created demand from small hospitals, nursing homes, and private practice doctors who were earlier dependent on the scanning machines in large hospitals. Which of the following types of innovations does this scenario best illustrate?

D. Architectural innovation

Digital photography replacing film photography would be an example of a(n) _____.

D. disruptive innovation

FindFriend is an instant messaging application for smartphones. New smartphone users find it easier to connect with friends and relatives through this mobile app when compared to other similar instant messaging applications. Hence, it has the largest user base in the industry. Thus, FindFriend app's value has increased primarily due to its _____.

D. network effects

When a firm pursues a harvest strategy, it:

D. reduces investments in product support.

Which of the following customer segments as described in the chasm framework make up the mass market?

A. The early and late majority together

When a firm pursues a maintain strategy, it:

C. continues to support marketing efforts even if the demand for the product is declining.

Which of the following key assumptions are innovations like Procter & Gamble's "Connect + Develop" based on?

A. Combining the best of internal and external R&D will more likely lead to a competitive advantage.

As the inventor of hypertension medication, OneSure Pharmaceuticals (OSP) Inc. was able to reap the benefits of economies of scale due to a large consumer demand for the drug. Even when competitors later developed similar drugs after the expiry of OSP's patents, regular users did not want to switch because they were concerned about possible side-effects. Which of the following benefits does this scenario best illustrate?

A. First-mover advantages

Though Wave Electronics Inc. still sells its VCR players, a product in its decline stage, the investments made by the company on improving or marketing the product are very low. The company has allocated the least amount of human and financial capital to this department. Which of the following strategies has Wave Electronics adopted in this scenario?

A. Harvest strategy

Which of the following is a feature of the growth stage of the industry life cycle?

A. The consumer demand increases.

The market for 3D televisions is in the introduction stage of the industry life cycle. What does this imply?

A. There are only a few competitors in the 3D television market.

Which of the following statements accurately brings out the distinction between the introduction and growth stages of the industry life cycle?

A. There is more strategic variety in the growth stage when compared to the introduction stage.

Which of the following best illustrates a process innovation as opposed to product innovation?

B. An automobile company using computer-aided design in its production

In the context of industrial growth, which of the following statements is true of standards?

B. As the size of a market expands, a standard signals the market's agreement on a common set of engineering features and design choices.

On which of the following tenets is the crossing-the-chasm framework, suggested by Geoffrey Moore, based?

B. Each stage of the industry life cycle is dominated by a different customer group.

Which of the following statements accurately describes social entrepreneurs?

D. Social entrepreneurs are those who consider financial, ecological, and social metrics to evaluate their firm's performance.

Which of the following statements is true of firms pursuing a closed innovation?

B. Firms in the closed innovation model are extremely protective of their intellectual property.

In which of the following stages of the industry life cycle is a standard first established?

B. Growth stage

SyncTouch Inc. is a manufacturer of cell phones. It has released an improvised version of its smartphone in markets in which the company already operates. Which of the following types of innovations does this scenario best illustrate?

B. Incremental innovation

Sara can be categorized under the late majority customer segment. Which of the following behaviors is she most likely to exhibit?

B. She will prefer to buy from well-established brands rather than unknown new ventures.

Which of the following reasons led to the launch of Procter & Gamble's "Connect + Develop," a web-based interface that connects the company's internal-innovation capability with the distributed knowledge in the global community?

B. The company was no longer able to generate adequate growth through closed innovation.

Which of the following is a drawback of using the industry life cycle as a framework to guide strategic choice?

B. The framework does not explain everything about changes in industries.

Which of the following is one of the reasons that led to CNN, an innovator, losing its leadership position in the 24-hour cable news industry?

B. The second movers imitated CNN's incremental innovation to continuously improve their offering.

Which of the following is a drawback of Wikipedia's business model?

B. The user-generated content may be unreliable and unauthoritative.

Which of the following statements is true of laggards?

B. They tend to enter the market frequently during the decline stage.

Which of the following statements accurately brings out the difference between technology enthusiasts and early adopters?

B. Unlike technology enthusiasts, early adopters' demand is fueled more by intuition and vision rather than technology concerns.

Which of the following statements accurately brings out the difference between closed innovation and open innovation?

B. While open innovation focuses on building an effective business model to commercialize R&D, closed innovation focuses on being first to market.

While the industry for 3D televisions is in the introduction stage of the industry life cycle, the CRT (Cathode ray tube) television industry is in its decline stage. Which of the following statements will be true in this scenario?

B. While product innovation will be at its maximum for the 3D television industry, process innovation will be more crucial for the CRT television industry.

While cell phones with holographic keyboards are currently in the introduction stage of the industry life cycle, tablet computers are in the growth stage. In the context of this scenario, which of the following statements is true?

B. While the industry for cell phones with holographic keyboards will focus on product innovation, the tablet industry will focus on process innovation.

After Jeff Bezos read about how the Internet was growing by 2,000 percent a month, he set out to use the Internet as a new distribution channel and founded Amazon, which is now the world's largest online retailer. This is clearly an example of a(n):

B. entrepreneur who commercialized invention into an innovation.

When TrueHeal Pharma Inc. released a new drug to treat insomnia, its chemical composition was disclosed at the back of the drug's cover. However, any attempts by competitors to copy the chemical composition would result in infringement of TrueHeal Pharma's intellectual property rights. Thus, the drug is protected by a _____.

B. patent

General Electric (GE) disrupted itself in the healthcare industry by:

B. introducing inexpensive and smaller diagnostic devices in developing countries.

By introducing Vscan, a small, wireless ultrasound device, GE Healthcare (General Electric) was primarily trying to: .

B. invade the healthcare market from the bottom up.

Norce Autos Inc. allows its customers, suppliers, researchers, and the community in general to contribute their ideas toward new product developments. Customers and other interested stakeholders can let the company know what new features they want to see in their next car. If the company faces any technical complexities that its internal R&D team cannot solve, it posts the problem on its website and allows people from the external community to provide solutions. In this scenario, Norce Autos Inc. is primarily leveraging its:

B. open innovation model.

Incumbent firms favor incremental innovation over radical innovation because:

B. radical innovation will disturb the existing power distribution within the firms.

When the market for photo film negatives declined with the arrival of digital cameras, Momento Films Inc., a manufacturer of film negatives, bought out most of its rivals that were planning to exit. This allowed the company to get rid of all the excess capacity and acquire a monopolistic market power in the declining industry. Which of the following strategies has Momento Films adopted in this scenario?

C. Consolidated strategy

The demand for video recorders has drastically reduced, and there are only a few consumer electronics companies selling them at extremely low prices. Also, the current buyers of video recorders are mainly categorized under laggards. Which of the following stages of the industry life cycle is the video recorder industry in currently?

C. Decline stage

_____ is best described as the commercialization of any new product, process, or the modification and recombination of existing ones.

C. Innovation

Which of the following statements is NOT true about innovation?

C. Innovation has to be high-tech in order to be a potent competitive weapon.

How has the long tail business model affected eBay as an online retailer?

C. It has helped overcome the problem of thin markets, at no cost to the buyer.

While the personal computer industry is flooded and growing with laptops and tablets, John recently bought a desktop, his first personal computer. He realized that a computer at home would be helpful for his children for their school projects, and he could use it to maintain the simple accounts of his plumbing business. Which of the following customer segments does John best represent?

C. Laggards

A few efficient and strong firms in the laptop industry have remained and emerged successful from the shakeout stage. Which of the following stages of the industry life cycle will they move to next?

C. Maturity stage

In emerging economies, the LCD television industry is in that phase of the industry life cycle in which the previously increasing market demand becomes limited. The competitive intensity within the industry is high, and inefficient firms have begun to exit the industry. This has allowed only a few major companies to come out as cost leaders and hold the shrinking market. Which of the following stages of the industry life cycle is the LCD television industry currently in?

C. Shakeout stage

Georgia Ray is the founder of the departmental stores chain, Ether Inc. She ensures that the products in her stores are ethically and responsibly sourced. Most products are therefore 100 percent organic and manufactured from recycled material. Also, her company purchases handicrafts from non-profit organizations supporting the aged. Georgia's belief is that her company should be able to support the community at large. Which of the following terms best describes Georgia Ray?

C. Social entrepreneur

Globe Source Inc. is a consumer electronics company that follows an open innovation model. Which of the following can be concluded about this firm?

C. The firm will buy others' intellectual property whenever it advances its own business model.

_____ is a situation in which transactions are likely not to take place because there are only a few buyers and sellers who have difficulty finding each other.

C. Thin markets

Why is it easier for new entrants to involve in radical innovations when compared to incumbent firms?

C. Unlike incumbent firms, new entrants do not have formal organizational structures and processes.

When does a firm fall into the large competitive chasm between early adopters and early majority?

C. When it fails to successfully launch a mass-market version of its product

While the domestic airline industry is in the maturity stage of the industry life cycle, the pet clothing industry is in its growth stage. Which of the following can be inferred from the given data?

C. While the domestic airline industry is free from excess capacity, the pet clothing industry will have new entrants.

When firms innovate by leveraging existing technologies into new markets, they are said to be involved in _____.

C. architectural innovations

When Japanese carmakers attacked the existing U.S. automobile market by first offering small fuel-efficient cars, and then leveraging their low-cost and high-quality advantages into high-end luxury segments, they were engaging in _____.

C. disruptive innovation

It is important for a firm to win over the early majority section of the market to ensure the commercial success of an innovation because they:

C. enter into the market in large numbers, creating a herding effect.

To be successful and to survive the shakeout stage of the industry life cycle, a firm should:

C. gain economies of scale.

A. G. Lafley at Procter & Gamble (P&G), had implemented an open-innovation model, which had greatly benefitted the company. In the light of this information, we can conclude that A. G. Lafley is a(n):

C. intrapreneur.

In a radical innovation, a firm targets:

C. new markets by using new technologies

A firm's resistance to changes in the status quo is referred to as _____.

C. organizational inertia

How was Wikipedia able to outperform both Encyclopedia Britannica and Microsoft Encarta?

D. By allowing any person, expert or novice, to generate and edit content

How has Apple been able to sustain its competitive advantage in the smartphone industry?

D. By regularly introducing incremental improvements in its products

As a start-up company, Virtue Mobiles Inc. entered the low end of the highly competitive cell phone industry with its low-cost smartphones. Initially, the company was able to sell its inferior technology due to its low prices. Over the years, however, its rate of technology improvements increased above the industry standards. This helped the company to create a strong strategic position for its smartphones in the high-end segment and claim a premium price. Which of the following types of innovation does this scenario best illustrate?

D. Disruptive innovation

At the time when Kevin decided to purchase a tablet computer, the product had just become accessible to the mass market. He purchased the tablet only after he was completely convinced that the benefits it would offer him would far exceed its price. Also, he waited for his friends to try the product and popular gadget television shows to endorse it. Which of the following customer segments does Kevin best represent?

D. Early majority

Which of the following statements is true of a disruptive innovation?

D. It invades the market from the bottom up, by first capturing the low end.

Which of the following has been a primary reason for increases in the Apple iPhone's installed base?

D. The decision to target laggards, the most profitable customer segment

Which of the following is a competitive benefit experienced by the first mover firm in an industry?

D. The first mover will be able to reduce costs through economies of scale.

While the industry for e-book readers is in its growth stage, the industry for landline telephones is in the decline stage of the industry life cycle. Which of the following can be inferred from this?

D. The number of competitors in the e-book reader industry will be larger when compared to the landline telephone industry.

Why is the phase after the growth stage of the industry life cycle referred to as the shakeout stage?

D. The weaker firms are forced out of the industry in this stage.

Which of the following statements is true of technology enthusiasts?

D. They enjoy using beta versions of products and providing feedback to companies.

Process innovation is more important than product innovation during the growth stage because:

D. a standard, in terms of engineering features and design choices, has been set across the industry.

Large companies, such as AT&T, IBM, and GE, have been shifting their knowledge landscape from closed innovation to open innovation because of the:

D. increasing supply and mobility of skilled workers.

An intrapreneur is described as a person who:

D. invests funds in the ideas of another person in the same organization.

The _____ business model is best described as one in which companies can obtain a large part of their revenues by selling a small number of units from among almost unlimited choices.

D. long tail