MIS chapter 8

The natural state of a market where network effects are present is for there to be intense competition between several rivals that come to an equalibrium where their respective market shares are roughly identical.

false

A market is said to be _____ if it derives most of its value from a single class of users. a. a pure play b. a long tail c. core competent d. one-sided e. convergent

d

Many firms attempt to enhance their network effects by creating a platform for the development of third-party products and services that enhance the primary offering.

true

Moving first plays a significant role in markets influenced by network effects.

true

Staying power is important for consumers of technology products because investment over time usually greatly exceeds the initial price paid for a product or service

true

A firm can spend no money and time, yet expect to enhance its offerings, by: a. allowing other firms to contribute to its platform. b. going public through an initial public stock offering. c. outsourcing critical processes to third parties. d. adopting an envelopment strategy. e. preannouncing a forthcoming product to lower sales of current offerings.

a

A market dominated by a small number of powerful sellers is known as a(n) _____ . a. oligopoly b. pure play c. short tail d. blue ocean e. greenfield

a

Which of the following terms is used as an alternative to switching costs? a. Lock-in b. Complementary benefits c. Exchange benefits d. Straddling costs e. Network impedance

a

The video game console market offers important lessons for the strategist. The video game console market is a network market in which Sony's PlayStation 2 (PS2) dominated over Microsoft's Xbox offering. This has been possible due to: a. the low pricing of Xbox which eroded users' confidence in the product. b. game developers favoring PS2 for its larger user base obtained because the PS2 was launched months before the Xbox. c. the presence of several cheap, rival imitations which ate into Xbox's market share. d. PS2's technical superiority over the Xbox. e. the straddling strategy adopted by Microsoft to expand in both video game and DVD player markets.

b

Which of the following products or services is not subject to network effects? a. Banking services b. Snack chip manufacturing c. Video game consoles d. Social networks e. Cell phone services

b

Which statement best describes the relationship between network effects and innovation? a. Network effects decrease innovation within a standard but increase the number of innovative offerings that compete against a strongly established standard. b. Network effects increase innovation within a standard but decrease the number of innovative offerings that compete against a strongly established standard. c. More often than not, network effects foster innovation d. More often than not, network effects limit innovation

b

Windows OS, the iPhone, the Wii, and Facebook's application programming interfaces allow for the development and integration of complementary goods by third parties. Based on this evidence, all these products or services are said to be _____. a. pure plays b. coopetitors c. adaptors d. platforms e. venture capitalists

d

Metcalfe's Law is also known as: a. systemic events. b. cluster effects. c. group impressions. d. herd instincts. e. network externalities.

e

A Blue Ocean strategy often works best when combined with operational effectiveness.

false

Almost all networks derive most of their value from a single class of users.

false

Cross-side benefits arise due to interaction among members of a single class of participant.

false

Envelopment is a management strategy where a dominant firm acquires all the layers in its value chain to increase profitability.

false

High switching costs serve to weaken the value of network effects as a value asset.

false

In a market influenced by network effects, the winning product or service is often determined by its technical superiority, with technically strong newcommers able to unseat the dominant incumbents.

false

In the absence of network effects, the value of a product or service increases as the number of users grows.

false

An instant-messaging standard is an example of a one-sided market.

true

Every product or service subject to network effects fosters some kind of exchange.

true

Which of the following factors represents one of the sources of value derived from network effects? a. Congestion b. Price transparency c. Information symmetry d. Staying power e. Complementary costs

D

The higher the value of a user's overall investment, the more they are likely to consider the staying power of any offering before choosing to adopt it.

true

Apple, which controls over 75 percent of digital music sales, was able to dictate song pricing for years, despite the tremendous protests of the record labels. This implies that: a. despite the presence of network effects, the music industry is not dominated by any single leader. b. the presence of multiple new entrants forces leading firms to drop prices of their offerings. c. firms with strong market dominance can enjoy substantial bargaining power over partners. d. a dominant market share does not necessarily translate to greater profitability for a firm. e. there were cross-side network effects between the various music labels.

c

_____ are products or services that add additional value to the primary product or service that makes up a network. a. Quantum efforts b. Substitute components c. Complementary benefits d. Orthogonal gains e. Standby additions

c

Staying power refers to the: a. relative abilities of parties in a situation to exert influence over each other. b. energy demands required to run a product or service. c. ability of a firm to produce a good or service at a lower opportunity cost than a rival. d. long-term viability of a product or service. e. ability to take advantage of complementary products developed for a prior generation of technology.

d

In the context of network effects, the term "network" refers to either wired or wireless systems that connect computing components.

false

Mobile software developers often find iOS more attractive than the Android operating system, because Android runs on many more types devices than iOS and the Android operating system is fragmented into differnet versions, each combination of which needs to be tested.

true

Network effects do not influence all consumer products or services.

true

Regional anti-trust authorities may consider product bundling by dominant firms to be anticompetitive.

true