Capstone chapter 7
Which of the following is a competitive benefit experienced by the first mover firm in an industry? A) The first mover will be able to achieve a less steep learning curve. B) The first mover will be able to reduce the switching costs. C) The first mover will not have to patent its products or technology. D) The first mover will be able to reduce costs through economies of scale.
d
Which of the following is an example of social entrepreneurship? The committee approved the new formula for an all-purpose cleaner because it A) cleaned better than other cleaners and used easy-to-obtain ingredients. B) cleaned better than other cleaners and did not cost more to produce. C) cleaned as well as other cleaners and could be produced more efficiently. D) cleaned as well as other cleaners and used organic ingredients.
d
) A factor favoring the success of disruptive innovation is that A) incumbent firms are slow to change. B) new entrants have highly formal organizational structures and processes. C) the low end of the market is highly guarded. D) incumbent firms focus on radical innovation rather than incremental innovation.
a
A new product often has a high price when it is launched because of a A) large investment in designing a product while producing small quantities. B) large investment in marketing a product while producing small quantities. C) large investment in designing a product while producing large quantities. D) large investment in marketing a product while producing large quantities.
a
A(n) ________ leverages new technologies to attack existing markets. A) disruptive innovation B) incremental innovation C) radical innovation D) architectural innovation
a
Although Mountaintop Electronics still sells its DVD players, a product in its decline stage, the investments made by the company on improving or marketing the product are very low. The company has allocated the least amount of human and financial capital to this department. Which of the following strategies has Mountaintop Electronics adopted in this scenario? A) harvest strategy B) maintain strategy C) consolidation strategy D) differentiation strategy
a
As a research scholar, Denise had built a helicam as part of her project. The helicam could capture aerial images. Realizing the potential use of this product in movie production and military and rescue operations, she started a new venture where she could customize these helicams to fit the specific needs of the buyers and sell them. Denise can be best described as a(n) A) entrepreneur. B) category captain. C) franchisor. D) early adopter.
a
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 B) social benefits C) network externalities D) fringe benefits
a
On which of the following tenets is the crossing-the-chasm framework, suggested by Geoffrey Moore, based? A) The number and size of competitors remain constant throughout the industry life cycle. B) Each stage of the industry life cycle is dominated by a different customer group. C) Industries tend to follow an unpredictable industry life cycle. D) The supply and demand sides of the market remain constant irrespective of the phase of the industry life cycle
b
Canon was able to redesign the copying machine so that it didn't need professional service—reliability was built directly into the machine, and the user could replace parts, such as the cartridge. What Xerox had not envisioned was the possibility that the components of the copying machine could be put together in an altogether different way that was more user-friendly. This example describes A) architectural innovation. B) incremental innovation. C) radical innovation. D) disruptive innovation.
a
GoodGear is a mobile platform that matches independent fashion designers with consumers who want a personalized wardrobe. Which of the following initiatives would best allow GoodGear to fine-tune its offerings to better meet the needs of its consumers? A) allowing users to provide feedback to producers on the style and fit of clothing B) conducting anonymous phone surveys about consumers' fashion preferences C) hiring an outside consultant to evaluate the offerings of GoodGear's producers D) studying the financial records of various fashion design companies to determine trends
a
In the United States, 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 B) 25 months C) 15 months D) 25 years
a
Lillypad Toys is a manufacturer of educational toys for children. Six months ago, the company's research and development division came up with an idea for a unique touchscreen device that can be used to introduce children to a number of foreign languages. Three months ago, the company produced a working prototype, and last month the company successfully launched its new device on the commercial market. What should Lillypad's managers prepare for next? A) increased competition from imitators B) a prolonged period of uncontested success C) a sharp decline in demand for the product D) a difficult struggle to move from invention to innovation
a
Potomac Industries is a manufacturer of high-definition televisions. The industry has gone through a period of rapid growth and expansion, and has started to experience a decline in the rate of growth. Several smaller firms have been bought out by larger competitors, and competition for market share is intensifying. Which of the following strategies is most likely to give Potomac a competitive advantage? A) Implement process innovations that lower per-unit costs. B) Introduce product innovations that differentiate Potomac televisions from the competition. C) Imitate the features of the highest-selling television on the market. D) Increase spending on marketing and attempt to acquire a high-profile celebrity spokesperson.
a
The strategic objective of a first mover during the introduction stage of the industry life cycle is to A) pursue a harvest strategy. B) survive by drawing on deep pockets. C) achieve market acceptance. D) lower entry barriers.
a
What is an invention? A) the transformation of an idea into a new product or process B) a unique idea that has not been thought of before C) the transformation of an idea into a successful product D) a unique idea that has been patented
a
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. B) The industry structure is perfectly competitive with a large number of buyers and sellers. C) The strategic objectives of businesses will involve gaining market acceptance. D) The market reaches its maximum size at this stage.
a
Which of the following businesses is most likely to disrupt an existing industry? A) Closer Connex developed an earphone that receives emails and text messages and converts them to voice messages. The first models had poor reception, but they rapidly improved over time. B) Mega Technologies reconfigured the components used in its touchscreen tablets to create a new type of wearable device for use in restaurants and other service industries. C) Particle Inc. developed a teleportation technology that can transport physical materials instantaneously across great distances. D) Altrea added advanced camera technology to its premium line of smartphones so that they would take the highest-quality photos of all phones on the market.
a
Which of the following customer segments as described in the chasm framework make up the mass market? A) the early and late majority together B) the early adopters alone C) the technology enthusiasts and laggards together D) the technology enthusiasts alone
a
Which of the following is a feature of the growth stage of the industry life cycle? A) The consumer demand increases. B) The prices of goods begin to rise. C) The basis of competition moves away from process innovation. D) The number of competitors decreases.
a
Which of the following lists the stages of the industry life cycle in the correct order? A) introduction, growth, shakeout, maturity, and decline B) introduction, shakeout, growth, maturity, and decline C) introduction, growth, maturity, shakeout, and decline D) introduction, shakeout, maturity, growth, and decline
a
Which of the following scenarios would be characteristic of an entrepreneur? A) Rachel implemented a new and more efficient way to produce pottery. B) Mary imitated a new, more efficient method of producing pottery. C) Alissa scaled back the production of pottery because it wasn't cost effective. D) Ursula used a proven marketing method to advertise her pottery.
a
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. B) The number of competitors is more in the introduction stage than the growth stage. C) The market size for a new product or service is larger in the introduction stage when compared to the growth stage. D) While achieving market acceptance is the strategic objective during the introduction stage, the objective in the growth stage is to pursue a harvest strategy.
a
) Foot Friendly is a manufacturer of athletic shoes. It has released an improved version of its premier running shoe in markets in which the company already operates. Which of the following types of innovations does this scenario best illustrate? A) radical innovation B) incremental innovation C) architectural innovation D) disruptive innovation
b
) 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? A) The mode of competition in the electric car industry will be based on price, whereas in the MP3 player industry, the mode of competition will be non-price based. 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. C) The electric car industry will move to the growth stage, whereas the industry for MP3 players will enter the growth stage next. D) The industry for electric cars will primarily pursue an integration strategy, whereas in the MP3 players industry, the focus will be on differentiation.
b
) In which of the following stages of the industry life cycle is a standard first established? A) maturity stage B) growth stage C) shakeout stage D) introduction stage
b
) Which of the following is a drawback of using the industry life cycle as a framework to guide strategic choice? A) The framework believes that the life cycle of industries is unpredictable. B) The framework does not explain everything about changes in industries. C) The framework is based on the tenet that industries can be rejuvenated even in the declining stage. D) The framework believes that the number and size of competitors remain constant throughout the life cycle.
b
Dominic is the founder of an innovative "impromptu catering" business that provides elegant, healthy party food and decorations on less than 24 hours' notice. The company has grown by over 150 percent in the past year. Dominic credits some of the company's success to studying the strategies of prominent social entrepreneurs, such as Wikipedia's Jimmy Wales. What can Dominic do to exemplify the social entrepreneurship model? A) Launch a social media platform for food lovers. B) Provide free weekly catered meals for the homeless. C) Seek investments from venture capitalists. D) Buy out his closest competitors to ensure a competitive advantage.
b
General Electric (GE) disrupted itself in the healthcare industry by A) replacing the top levels of the executive hierarchy. B) introducing inexpensive and smaller diagnostic devices in developing countries. C) saturating the global market with multiple diagnostic devices. D) targeting the comparatively less price-sensitive sections of the market.
b
In the context of industrial growth, which of the following statements is true of standards? A) Standards emerge exclusively from bottom-up through competition in the marketplace. 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. C) Standards are exclusively imposed top-down by government or other standard-setting agencies such as the Institute of Electrical and Electronics Engineers. D) After a standard is established in an industry, the basis of competition tends to move away from process innovations toward product innovations.
b
In the decline stage, which of the following strategies involves a reduction of investments in product support? A) exit strategy B) harvest strategy C) maintain strategy D) consolidate strategy
b
Incumbent firms favor incremental innovation over radical innovation because A) their business decisions are independent of the other parties in their innovation ecosystem. B) radical innovation will disturb the existing power distribution within the firms. C) incumbent firms do not have formal organizational structures and processes like the way new entrants do. D) incremental innovations help firms sustain a permanent competitive advantage, whereas radical innovations only help gain a temporary advantage.
b
Intel's Celeron chip and Atom chip are initiatives to A) introduce a new product in a new market to extend its leadership. B) guard the company against disruptive innovation by protecting the low end of the market. C) stall its own disruption strategies and wait for its rivals to introduce disruptive forces. D) target that section of the market that is not particularly price sensitive.
b
Ira can be categorized under the late majority customer segment. Which of the following behaviors is he most likely to exhibit? A) He will be confident in her ability to master any new technology. B) He will prefer to buy from well-established brands rather than unknown new ventures. C) He will not rely on endorsements by the early majority or early adopters. D) He will buy beta versions of new products and technology.
b
The key objective for firms during the growth phase is to A) invest as many resources as possible in product innovations. B) stake out a strong strategic position not easily imitated by rivals. C) pursue a harvest strategy. D) reduce their network effects.
b
The leading producer of cell phone backup batteries, Jumpstart, has achieved great success because they produce high-quality battery backups that are not too expensive. Even so, another company that produces lower-quality batteries at the same price has also achieved some success, but not as much as Jumpstart. Also, in general, the price of backup batteries has declined because of economies of scale and learning. In addition, Jumpstart has added complementary assets, such as a carrying case. Considering all of these factors, the backup battery industry is most likely in the A) introduction stage. B) growth stage. C) shakeout stage. D) maturity stage
b
The typical four-step innovation process begins with A) the modification and recombination of an existing product or process. B) the presentation of an idea as findings derived from basic research. C) the commercialization of an invention by entrepreneurs. D) a competitor's attempt to imitate an innovation.
b
When ReGen Pharmaceuticals 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 ReGen Pharmaceuticals intellectual property rights. Thus, the drug is protected by a A) promissory bill. B) patent. C) franchise. D) royalty.
b
Which of the following accurately describes how Netflix used innovation to gain a competitive advantage? A) Netflix moved from content development to upgrading its data analytics to provide faster online streaming. B) Netflix applied big data analytics to its user preferences to provide highly personalized viewing recommendations. C) Netflix moved from online streaming to online DVD rentals via the Internet. D) Netflix applied first mover advantages to lock up talent needed to produce original content for DVD rentals and online streaming.
b
Which of the following is a feature of the maturity stage of the industry life cycle? A) The competitive intensity within the industry is at its peak. B) The market reaches its maximum size. C) The industry structure is more monopolistically competitive. D) The focus on product innovation is higher than that on process innovation.
b
Which of the following scenarios best exemplifies a platform business? A) Devin purchases electronic parts from a variety of vendors and assembles them into inexpensive MP3 players that he sells to consumers. B) Myra operates an industrial test kitchen in which local growers bring their produce to local chefs, who use the kitchen to try new recipes and determine which produce to buy. C) Raul operates a consulting firm in which businesses hire him to assess deficiencies in their organizational culture. D) Gena founded a bike-based transportation company that offers environmentally-friendly rides to customers within a 25-mile radius.
b
Which of the following statements accurately brings out the difference between technology enthusiasts and early adopters? A) While the customer segment in the introduction stage consists of early adopters, the customers entering the market in the growth stage are technology enthusiasts. B) Unlike technology enthusiasts, early adopters' demand is fueled more by intuition and vision rather than technology concerns. C) While early adopters make up the smallest market segment, technology enthusiasts make up the mass market. D) Firms need to communicate products' potential applications in a more direct way when attracting technology enthusiasts rather than early adopters.
b
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? A) The industry for cell phones with holographic keyboards will face greater competition than the tablet industry. B) While the industry for cell phones with holographic keyboards will focus more on product innovation, the tablet industry will focus more on process innovation. C) While the industry for cell phones with holographic keyboards can reap the benefits of economies of scale, the tablet industry will experience no such benefits. D) The industry for cell phones with holographic keyboards will face price competition, whereas, in the tablet industry, the mode of competition will be non-price.
b
) The customers entering the market in the growth stage are primarily A) technology enthusiasts. B) laggards. C) early adopters. D) late majority.
c
A firm's resistance to changes in the status quo is referred to as A) organizational parity. B) organizational liquidity. C) organizational inertia. D) organizational efficacy.
c
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) A) venture capitalist. B) category captain. C) intrapreneur. D) early adopter
c
Assume that the market for print book publishing has entered the maturity stage. Which of the following would most likely exist during this stage? A) a few start-up publishers B) many small to midsized publishers C) a few large publishers D) one large publisher
c
CordKing Electronics has entered a stage in which the demand for their innovative fax machines has declined. Now most customers are buying replacement parts or buying their second fax machine from the firm. What stage in the industry life cycle does this scenario describe? A) growth stage B) maturity stage C) shakeout stage D) decline stage
c
Edna Gomez is the founder of the restaurant chain Good and Green. She ensures that the products in her stores are ethically and responsibly sourced. Most products are therefore 100 percent organic and all packaging is manufactured from recycled material. Also, her company sources ingredients from farms within 100 miles from her locations. Edna's belief is that her restaurants should be able to support the community at large. Which of the following terms best describes Edna Gomez? A) headhunter B) category captain C) social entrepreneur D) trade creditor
c
In a radical innovation, a firm targets A) existing markets by using new technologies. B) new markets by using existing technologies. C) new markets by using new technologies. D) existing markets by using existing technologies.
c
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 A) are driven by technology concerns rather than the practicality of a new product. B) influence the purchase decisions of early adopters. C) enter into the market in large numbers, creating a herding effect. D) have the highest purchasing power when compared to the other customer segments.
c
The demand for flip phones has drastically reduced, and there are only a few consumer electronics companies selling them at extremely low prices. Also, the current buyers of flip phones are mainly categorized under laggards. Which of the following stages of the industry life cycle is the flip phone industry in currently? A) growth stage B) maturity stage C) decline stage D) commercialization stage
c
To be successful and to survive the shakeout stage of the industry life cycle, a firm should A) charge higher prices than its competitors. B) focus on product innovation rather than process innovation. C) gain economies of scale. D) shift from price to non-price competition.
c
When Japanese carmakers entered 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 A) regressive innovation. B) radical innovation. C) disruptive innovation. D) architectural innovation.
c
When a firm pursues a maintain strategy, it A) exits a declining industry to maintain the goodwill of its overall brand name. B) reduces investments in product support and allocates only a minimum of human and other resources. C) continues to support marketing efforts even if the demand for the product is declining. D) chooses to consolidate the industry by buying rival firms, those who plan to exit.
c
When does a firm fall into the large competitive chasm between early adopters and early majority? A) when it cannot attract technological enthusiasts to try the beta versions of its products B) when it creates strong network effects during the growth stage C) when it fails to successfully launch a mass-market version of its product D) when the early majority create herding effects for its products
c
When firms innovate by leveraging existing technologies into new markets, they are said to be involved in A) incremental innovations. B) radical innovations. C) architectural innovations. D) disruptive innovations.
c
When the market for standalone Global Positioning System (GPS) devices declined with the arrival of GPS-enabled mobile phones, Magnet Inc., a manufacturer of GPS devices, 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 Magnet adopted in this scenario? A) harvest strategy B) maintain strategy C) consolidation strategy D) differentiation strategy
c
Which of the following is a feature of the shakeout phase of the industry life cycle? A) There is rapid industry growth during this stage. B) Market demand in this stage primarily consists of first-time adopters. C) Competitive intensity within the industry increases. D) The mode of competition shifts from price to non-price in this stage.
c
Which of the following most accurately describes a difference between incremental innovation and radical innovation? A) Incremental innovation researches new materials; radical innovation researches new processes. B) Incremental innovation targets new markets and technologies; radical innovation reinvents markets and technologies. C) Incremental innovation builds on an established knowledge base; radical innovation uses an entirely different knowledge base. D) Incremental innovation draws on novel methods; radical innovation draws on proven methods.
c
Which of the following statements is true of the early majority section of consumers? A) They come into the market during the introduction stage. B) They are unaware that many hyped new product introductions will fade away. C) They weigh the benefits and costs carefully when adopting a new product. D) They make up the smallest market segment.
c
While the domestic airline industry is in the maturity stage of the industry life cycle, the internet-enabled appliance industry is in its growth stage. Which of the following can be inferred from the given data? A) The number of competitors will be greater in the domestic airline industry than the internet-enabled appliance industry. B) The internet-enabled appliance industry is ahead of the domestic airline industry in the industry life cycle. C) While the domestic airline industry is mostly free from excess capacity, the internet-enabled appliance industry will have new entrants. D) The mode of competition will be price-based in the internet-enabled appliance industry and will be non-price-based in the domestic airline industry.
c
While the personal computer industry is flooded and growing with laptops and tablets, Malik 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 Ivan best represent? A) early adopters B) category captains C) laggards D) early majority
c
Why is it easier for new entrants to get involved in radical innovations when compared to incumbent firms? A) Unlike incumbent firms, new entrants do not have to face the high entry barriers, initially. B) New entrants are embedded in an innovation ecosystem, while incumbent firms are not. C) Unlike incumbent firms, new entrants do not have formal organizational structures and processes. D) Incumbent firms do not have the advantages of network effects that new entrants have.
c
As a start-up company, DigiWrist entered the low end of the highly competitive smartwatch industry with its low-cost smartwatches. 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 smartwatches in the high-end segment and claim a premium price. Which of the following types of innovation does this scenario best illustrate? A) radical innovation B) incremental innovation C) architectural innovation D) disruptive innovation
d
At the time when Ellen decided to purchase a tablet computer, the product had just become accessible to the mass market. She did not purchase the tablet until after she was convinced that the benefits it would offer her would far exceed its price. Also, she waited for her friends to try the product and popular gadget television shows to endorse it. Which of the following customer segments does Ellen best represent? A) laggards B) technology enthusiasts C) early adopters D) early majority
d
DigitalHealth 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? A) disruptive innovation B) incremental innovation C) radical innovation D) architectural innovation
d
How has Apple been able to sustain its competitive advantage in the smartphone industry? A) by reducing its network effects B) by targeting its new products and services toward laggards C) by driving the price for the end user to zero D) by regularly introducing incremental improvements in its products
d
Marble Inc. is a new firm that entered the smartwatch industry during the growth stage of the industry life cycle. It managed to become one of the top-three smartwatch manufacturers during the shakeout stage due to its low-cost structure. What features should Marble emphasize in its product marketing to ensure it successfully crosses the chasm into the maturity stage? A) advanced capabilities B) the company's outsider status C) sleek and trendy design D) ease of use
d
Streaming video services replacing brick-and-mortar video rental stores would be an example of a(n) A) regressive innovation. B) radical innovation. C) architectural innovation. D) disruptive innovation.
d
Sunshine Technologies introduced a tablet that could run completely on solar energy and was less expensive than competitors' tablets. On the downside, it required more frequent charging than the competition's tablets. However, the technology of the Sunshine tablet improved rapidly, thereby improving its recharge frequency. This example describes A) architectural innovation. B) incremental innovation. C) radical innovation. D) disruptive innovation.
d
The four-step innovation process ends with A) idea generation. B) invention. C) idea testing. D) imitation.
d
Which of the following business models in the landscaping industry is likely to scale most efficiently? A) a company that offers three different bundles of services at a low, medium, and high price point depending on the level of care required by the customer B) a company that deploys a team of both skilled and unskilled landscapers to each customer's location regardless of their needs C) a company that charges the same hourly rate for landscaping services no matter what the situation requires D) a company that allows users of its website to schedule appointments with landscapers who specialize in the exact service required
d
Which of the following businesses is most susceptible to negative network effects? A) Moonglow Shoes produces a line of lightweight running shoes that are endorsed by an Olympic gold medalist. B) Clover Technologies produces computer processing chips and sells them to a variety of manufacturers for use in smartphones and other devices. C) Green Tools manufactures solar powered gardening implements and sells them online. D) Pics Match is a social media platform where users upload photos to the site and are matched with other users who have taken similar photos.
d
Why is the phase after the growth stage of the industry life cycle referred to as the shakeout stage? A) The barriers to entry increase during this stage. B) The firms in the industry yield the highest profits during this phase. C) Rivalry among competitors decreases in this stage. D) The weaker firms are forced out of the industry in this stage.
d